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Chief financial officers have more to juggle than ever before, as economic uncertainty and geopolitical tensions create a challenging environment in which to manage financial risk and strategy.
Many companies’ revenue has come under pressure from falling sales, with consumer spending power dampened by higher interest rates while rising costshave squeezed margins.
Tax Traders co-founder Nicola Taylor
Nicola Taylor, co-founder of Tax Traders, said CFOs were still charged with managing financial risk and leading financial strategy, but were doing it in an ever-changing business environment and amid geopolitical uncertainties and fluctuating market conditions.
“CFOs are tasked with safeguarding their organisations against potential disruptions and mitigating the impact of unforeseen events on their bottom line. A good CFO recognises that the traditional linear approach to business planning may no longer suffice in highly dynamic and unpredictable circumstances,” she said.
Taylor spoke to the Herald ahead of this year’s annual Deloitte Top 200 awards. The finalists for the CFO category are Xero’s Kirsty Godfrey-Billy, Beca’s Mark Fleming and Mike Roan from Meridian Energy.
Taylor said CFOs were embracing agility and flexibility, and adopting a mindset that allowed them to quickly respond to unexpected events and adjust financial strategies accordingly.
“By leveraging data analytics and scenario planning, CFOs can do a much better job of anticipating potential risks and develop robust financial models that can withstand volatility.”
Moving on from Covid, sustainability concerns are once again front and centre for the financial world.
Taylor said that meant CFOs had to work sustainability practices into financial strategies, ensuring their organisations strive for both profitability and positive societal impact.
On top of that, new technology in the form of artificial intelligence AI) also has the potential to have a big impact on business.
Taylor said AI presented a huge opportunity for accountants and CFOs to streamline operations and enhance forecasting capabilities.
“We should absolutely be asking AI-powered software and tools to automate anything repetitive or rule-based (including financial reporting) to improve overall efficiency.
“AI also has the potential to revolutionise financial forecasting by leveraging vast amounts of data for accurate predictions and scenario analysis.”
Taylor said by analysing historical trends, market conditions and relevant external factors, AI algorithms could provide CFOs with invaluable insights for making informed and precise financial decisions.
“However, it is important for accountants and CFOs to maintain a balance between automation and human judgment, using AI as an augmentation tool and ensuring that AI outputs are carefully analysed, validated and incorporated into a comprehensive decision-making framework.”
She said it was critical that CFOs actively monitor and address potential biases in AI algorithms, striving for fairness and equity.
Like AI, the rise in hybrid working could be a useful tool if used well.
Taylor said good leaders recognised the value of remote work as a tool in their leadership toolbox for bringing out the best in their people and achieving the organisation’s goals.
“Blanket policies usually don’t work for teams of people, regardless of their function, because people are different, have different roles and will work best under different scenarios. Being together in an office can play an important role for some kinds of work for some kinds of people and can be less important for other kinds of work and other kinds of people.
“It’s about having a deep empathy for your team and a deep understanding of how the work that is required will most effectively be completed. Good leaders empower their teams to determine the best way to work and deliver results for the organisation.”
On top of the shifting economic environment, CFOs were also having to deal with rising compliance and risk management demands.
Taylor said to effectively navigate this landscape, CFOs needed to adopt a proactive and holistic approach.
“Understanding the ‘why’ to compliance and risk management and being able to communicate this well internally and externally is key. Establishing a culture of compliance is also important, with robust internal controls, regular audits and a compliance-oriented mindset.”
The Deloitte Top 200 Awards were established in 1990 and are held annually to recognise and applaud outstanding individual and management team performances among New Zealand’s largest companies and trading organisations.
All the Deloitte Top 200 winners will be revealed at a gala event on Wednesday, December 6. The event will be livestreamed from 7pm on the Herald website.
