Transformations in finance and what’s at stake for the new-gen CFO

The last two decades have witnessed some of the most radical changes in business models and environments they operate in, and all for good reason. While in some ways, the changes have made it tougher for larger organisations to drive sustainable growth, there is increased viability for micro businesses. The growing trend of localisation vs. globalisation across the world has also brought businesses to crossroads, where their decisions, how they make them, and how they adapt, have become paramount.

Increasing cost, competition, complexity, and accelerated rate of change only means that the role of finance is no longer an operation at the backend. Today, it has emerged to one driving proactive thinking, planning and speedy decision-making with real-time analytics. However, that does not put our new-gen CFOs totally off the hook for base deliverables of stewardship and governance. Each change has made businesses vulnerable to compliance issues, raising the bar on the efforts and kind of governance needed to navigate a company through the new environment. In a nutshell, a new-gen CFO needs skills to influence the larger organisation through strong communication and leadership methods, aimed toward value creation and compliance. The trick is to strike a fine balance between the two.

One of the key changes that a CFO deals with today is ambiguity. Finance, which earlier influenced accounting, planning and reported data analytics, today needs to embrace qualitative inputs and steer predictive data analytics or business and financial modelling. Looking into the future means embracing key business skills that will help a CFO partner with the CEO and other functional heads and drive financially viable decisions to help businesses adapt to transformations.

Driving sustainable business and business models and nurturing talent are two key imperatives for the new-age CFO.

Sustainable businesses

Scale may not be the only thing driving sustainable growth: With changing routes to market, omni channels and an agile business model are critical for businesses. Industries are adapting and evolving rapidly, effectively ensuring that scale loses relevance, not only in manufacturing but in logistics and distributions too. Several large-scale e-commerce players, and even manufacturers, are moving back into micro-distribution centres in cities -a practice that they had moved away from and consolidated into mega distribution hubs in the last decade. While it may seem financially daunting to make this work, re-engineering supply chains, finding symbiotic relationships in the industry to reduce costs, and driving meaningful negotiations are now needed to sustain market shares. Leading alco-bev players such as Pernod Ricard India are deeply invested in growing their portfolio in India, especially the most promising segments and brands, by enhancing organisational capabilities in the supply chain, data & analytics, digitizing internal & external journey and plant automation.

A compelling go-to-market strategy is imperative to complement product superiority: Lower entry barriers give local players a significant advantage in cost-to-serve and taxes. Significant market shares, which were a simple solution earlier for financial viability, are being reevaluated. Financial viability requires a differentiated product-channel-market strategy to keep businesses viable and financially lucrative.

Immersive consumer experiences vs high share of voice: The media landscape has completely changed today. What CFOs earlier knew about their marketing counterparts on GRPs, the share of voice and so on has less or no relevance today. Consumers are vastly scattered over media platforms with a choice to completely block out or avoid communications. Companies are leveraging micro-influencers, attracting consumers with more interactive options like NFTs, instead of just having a voice or communication sent out. While changing route-to-markets and erosion of price premiums is squeezing profitability, a new lens is needed to realign budgets and find ways of working that will yield higher ROIs.

While these are all portent observations, they need strong networking, learning and social skills to realise quick and effective decisions that will drive profitable growth and influence key stakeholders. A CFO cannot do this alone – a strong buy-in from the CEO on the dynamic nature of business, a significant shift in managing budgets and making hard choices will be critical to success. The agenda is tough, but a new-gen CFO cannot ignore the need for developing a strong, agile, and motivated talent pool that will help drive this agenda across the organisation.

Nurturing talent

Hire and retain tech and data-savvy young talent: This will not only help drive quick digital transformation, but also provide a rich orientation ground for the CFO and others on new ways of working.

Upskilling of existing talent: Changing business requirements does not mean looking for new talent across levels. It is always better to upskill people where possible, so the team that understands the core values of the business can continue to guide the new talent that is coming in.

Build a happy workplace and an inclusive culture: Fixed work hours or a fixed definition of work-life balance is a thing of the past. With work from home, 24-hour access for consumers and multiple priorities can leave employees burnt out, or quickly hunting for happier havens. An inclusive and collaborative working environment reduces the chances of burnout and helps retain talent. As ‘creators of conviviality’, CFOs need to unlock the magic of human connections, and build a community that celebrates togetherness, focusing on inclusivity, friendliness and being responsible, everyday!

In the end, the CFO’s job is to reinvent themselves and retain the best finance talents in the organisation. This means the position holder must be able to step beyond pure accounting, reporting and finance, to understand how the sales and marketing landscapes have evolved, and what drives consumer behaviour today.

This is important to drive relevant analytics in-house and set up compliance systems based on the risks using new emerging models. When models in B-school or accounting books are no longer relevant, it might be good to get into sales, marketing, or operations workshops, or simply roll up your sleeves and hit the shop floor.

The author is Chief Financial Officer, Pernod Ricard India. Views are personal.

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