CFO - A Transformation Agent

Neeraj Basur, Chief Financial Officer, Blue Star Ltd.

In the last few years, global business environ­ment have undergone rapid changes, quite consistently. An environment where volatility, uncertainty, complexity and ambiguity are the new buzzwords and also new realities, the businesses are required to transform at a pace never experienced before. In the Indian context, demonetization of currency in Nov’16 and the transition to GST environment have exacerbated the need to transform business processes. Almost all busi­ness enterprises are touched and impacted by these new external and economic and market realities.

Who would have imagined that crude oil prices would fall from the high of US$120 per barrel in April 2012 to around US$50 per barrel in December 2016? Geopolitical volatil­ity in several countries has only contributed to making business environment more complex. Predicting consis­tent flow of capital is no longer an easy task. Globally the banking system is still recovering from the aftermath of the economic tsunami that followed the subprime crisis of 2008. The change of political leadership in the US is likely to cause equilibrium shifts in the global economic sphere.

Governance requirements, norms and expectations of the investor community and regulators from the Boards and management teams have changed exponentially. Business transformation in this environment is inevitable and the CFOs are increasingly being expected to transition from the role of a mere ‘change’ agent to becoming a ‘transfor­mation’ agent for the business.

CFOs are increasingly looked upon to shoulder greater responsibilities to help sharpen business strategy execu­tion, enable business growth and at the same time drive risk management, compliance and governance agenda. Company Board and Shareholders now expect CFOs to play a far more evolved role, wear multiple hats and guide the business diligently in a volatile and uncertain environment.

CFO’s can focus on the following 10 point agenda to pursue transformation and partner with the business.

1. Funding sources – While raising funds and capital is a basic function, it is important for the CFO to ensure that there is proper balance between expected returns and ability of the underlying investment to deliver. The CFO needs to moderate investment plans in line with the external capital market realities on the one side and business performance abilities on the other.

2. Embedding risk assessment based decision mak­ing across the business – The CFOs are in a unique posi­tion to help key decision makers understand and assess the risk impact of decisions. By making risk assess­ment at the core of all business decisions, the CFOs can usher in transformative resilience in the business.

3. Usage of analytics for strategy validation – T here i s n o d earth o f data availability with most business­es. Strategy formulation and valida­tion based on a deep understanding of past performance and trends, both within the business and also at an in­dustry level would adapt to the shift­ing environment in a nimble manner. CFOs need to deploy data analytics capability to validate hypothesis and potential impact of strategic shifts. The key here is to move away from reactive changes to a proactive strategy evolution.

4. Segmenting markets to play – Each business needs to identify and play in those markets where sus­tainable growth opportunities can be identified. In addition to general market research, the CFOs can con­tribute by helping specify and define various performance parameters for market segmentation. Continuous review of segmental performance would help the business optimally deploy capital and resources.

5. Predicting performance accu­rately – In the current business en­vironment, it is no longer sufficient to rely only on MIS to understand the business performance. Using predic­tive analytics along with an analysis of current performance by the CFO would help draw insights that can provide a business sufficient early warning signals and avoid sudden shocks and surprises. The CFOs need to transform the performance mea­surement, monitoring and report­ing systems to make them deliver proactive outcome.

6. Benchmarking performance - It is no longer good enough for busi­nesses to gloat over achieving their own plans or registering year-on-year growth. Benchmarking various performance parameters with the industry best would help identify improvement opportunities continu­ously. The onus is on the CFO to identify and establish norms for rel­evant benchmarks and ensure that the internal performance trends not only get compared but improve­ment opportunities established as a continuous process.

7. Productivity focus – T he C FOs would do well to own the produc­tivity improvement agenda across the business. Their role is no lon­ger about executing cost reduction plans in the businesses. In a volatile environment, the business can least afford wastages or inefficiencies. Productivity improvements need innovation and creative thinking to be at the core of all such initia­tives and the CFOs need to identify and sponsor innovative projects in the organization.

8. Raising the bar on governance standards – In the new age, inves­tors, board members, government authorities, financial institutions, customers, suppliers, employees ex­pect an enhanced level of transpar­ency, adequate disclosures and ethi­cal play by business enterprises. The CFOs need to own the governance agenda and provide all stakehold­ers confidence and comfort around quality and standard of corporate governance and compliance.

9. Grooming finance talent – It is no longer sufficient for the CFOs to develop talent in their own team to meet the current business needs only. The finance talent needs to be made future ready as well and ac­cordingly imparted with skills and competencies to be able to handle increasing business complexities and ambiguities.

10. Act as the conscience keeper – Lastly, the CFO has to play the role of a conscience keeper of the business with great diligence. While continu­ing to be an integral part of the man­agement team, the CFO needs to call out decisions or short term actions that might boomerang in the long term. This is not an easy part of the role. Transformation and change can be painful. It is the CFO’s job to ease the pain and provide the business a safety and security net for sustain­able and profitable growth.