We’ve already broken down why the novel coronavirus brings novel demands to the office of the CFO. But now, with a vaccine in sight, what’s the forecast for CFOs in the next 12 months? What initiatives and priorities will they be keen to execute? And how can they most concretely help their organizations handle adversity?
Scenario planning. Supply chain diversification. Unforeseen swings in liquidity. There’s no shortage of good answers. So if you thought CFOs were busy in 2020, just wait for the year ahead.
In fact, CFOs have never had such broad scope or capacity for impact. Here are three reasons why.
1. best practices are still emerging
As the majority of companies failed to deliver on revenue targets in 2020, CFOs sure have their work cut out for them this year. What, exactly, that looks like in practice is naturally going to vary from one organization to the next, of course, but a few themes seem likely.
Tactically, for starters, a recent McKinsey survey that suggests two changes are already afoot for many of these finance leaders. According to their survey:
- Close to half (43%) of CFOs think streamlining their overall budgeting processes — with the goal of acting and reacting faster going forward — should be the number-one priority for the next 12 months.
- The majority — a full 65 percent of those surveyed — anticipate that they’ll begin making greater use of rolling forecasts in the year ahead.
Zero-sum budgeting is also likely going to be a popular option for CFOs whose primary worry in 2021, above all else, is answering to the question: What’s the worst-case scenario? In that vein, stress testing will be key, as well.
2. scenario planning is a huge focus
For the moment, CFOs, alongside other key C-suite officers, are undertaking the messy roulette called “scenario planning.” That is, they’re mapping out a range of organizational responses to a huge number of possibilities. But no matter where leadership ultimately lands, the following five considerations will have to take precedence:
- core resilience, reliability and diversity of existing supply chains
- depth and breadth of changes to behavior patterns and preferences among consumers as part of our evolving “new normal”
- speed and efficacy of testing, social distancing and vaccination efforts in flattening the infection curve, not only domestically but also abroad
- effectiveness of coordination between government and public officials — at all levels — in addressing key COVID-19 concerns, namely vaccination, testing and treatment
- how harmonious — or chaotic — the transition to a new presidential administration proves to be
Any one of these levers could have a cascade of implications for financial leaders. Taken together, they’re going to have a make-or-break impact on overall economic recovery. So it’s only too bad clairvoyance isn’t an allocated budget item. For now, CFOs will have to rely on their wisdom and insight — and put in place robust game plans that account for the unpredictable.
3. change management and agility remain essential focus areas
The daunting scale and scope of COVID-19-inflected disruption may have finally subsided, but the crucial organizational imperatives it brought to light — namely, the ability to manage change, and adapt accordingly — remain with us. And from the standpoint of a CFO, that means increasing agility, adaptability and decision-making speed will be critical priorities in 2021.
Salient questions for CFOs include:
- Are we appropriately allocating resources, given what various business continuity and disaster recovery planning scenarios really entail?
- How can we adopt more agile workforce models without escalating risks, increasing costs or compromising our identity? For that matter, where do current gaps exist — and do we have the talent on hand today to execute on our strategy?
As all of these questions clearly suggest, the emerging role of the CFO is increasingly contingent on their ability to make the case for change, build effective partnerships and bring that change to life in destabilized environments.
Needless to say, if there’s one thing that experience reliably teaches, it’s the fact that meaningful change rarely comes about easily. So business leaders should be forewarned: Failure to adapt will be fodder for your competitors.
2020 has been a wild ride, and for many of us, the year ended with a sense of “good riddance.” Yet, certainly from the CFO’s perspective, any sense of relief is premature. While the approval of highly effective vaccines might have many Americans thinking the worst is behind us, savvy finance heads know that there’s much work to be done — and much uncertainty to be navigated.