The CFO’s role in enhancing organisational resilience

Authored by Heidrick & Struggles and 麦肯锡 : Giulia Iuticone , Niccolo Calabresi , Susie Clements , Cristina Catania , Enrico Muti , Davide Grande , Alfonso Natale , Aleksander Petrov .

?The volatility and uncertainty – and even ambiguity – of the current economic and business landscape have imbued the concept of resilience with a heightened importance. ‘Resilience’ is no longer a generic, sometimes undefined, business goal connected to long-term stability and growth. It has evolved into a complex map of strategies and outcomes, designed to enable organisations to weather the impacts of today’s business challenges.

Those challenges include existing and potential geopolitical upheavals, climate change issues, supply chain disruptions, cybersecurity threats, regulatory and political risks, shifting workforce demographics, and tech disruption. And as the complexity of these topics increases, it’s becoming increasingly difficult to forecast which elements will have the greatest repercussions for organisational resilience.

Against this backdrop, resilience has evolved into a key priority for CFOs. The organisation’s financial health – their core responsibility – is complicated to maintain without company-wide resilience. Reflecting this, at a recent gathering of Italian group CFOs, attendees rated organisational resilience alongside financial resilience as their equal top priorities.

What resilience means for the CFO

The CFO’s role in the maintenance of a resilient organisation lies in first understanding the company’s requirements, and then in committing flexible resources to meet the challenges presented by an environment of constant change. The wider responsibilities held by today’s CFOs beyond financial management give them greater influence over organisational resilience. With areas including risk management and value protection, portfolio management, M&A, funding and value communication all falling within their remit, they have the ability to either shore up or negatively impact resilience.

Risk management in particular is increasingly coming under the auspices of the CFO. While risk management has traditionally been run on the defensive, growing complexity and pervasive digitisation mean that organisations need to get ahead of potential risk. In this arena, the CFO can supply foresight on risk, as they have the capability to anticipate scenarios and predict their effects.

In today’s fluid environment, managing risk can extend even to the transformation of entire business models. Such transformations require the oversight and input of the CFO to ensure financial stability. The balance for the CFO here is between the need to protect the company while also fostering growth.

Supporting organisational resilience also extends beyond the CFO’s individual remit. Rather than working within a silo, CFOs can help organisations thrive by engaging with their CXO colleagues to foster a mutual culture of resilience awareness, partnering with other functions to share information and best practice.

Key resilience enablers: Talent and data

It’s clear that organisations should look into taking a systematic approach to managing resilience – resilience resides in many areas, including financial and operational, but also digital and tech, business model and innovation capabilities, and societal alignment and purpose. The CFO is well positioned to influence all of these areas, but in order to do so, must have access to the right tools. At the aforementioned gathering of Italian group CFOs, attendees were asked to name the key enablers for increasing business resilience. Their responses listed talent as the most significant factor, followed closely by data.

This presents a challenge. The right talent is scare, not least because CFOs require a broad range of competencies within their teams to navigate the complexities their current role entails. Time and resources therefore need to be dedicated to the development of potential and attraction of outside talent, and should include a focus on flexibility and adapting soft skills to complex situations.

Data is also a core component of the resilience model, with data governance, tech development and delivery, and implementation all important resilience levers, helping to identify risk exposure and opportunities for growth. CFOs have a responsibility to ensure the proper utilisation of financial and non-financial data across functions to help the business anticipate disruptive trends and monitor progress in building resilience. Monthly rolling forecasts, for example, have become necessary as annual forecasts are too general to be useful. The forecast period decreases in direct relation to the increase of uncertainty.

?A CFO’s guide to building resilience

CFOs are fundamental to building resilience within their organisation, and a successful resilience transformation relies on them:

? Taking a holistic view: Keeping all dimensions in mind even if those dimensions have different weightings, assessing and improving the CFO’s capabilities in all areas.

? Fostering talent: Developing internal talent, evolving the finance function to acquire the capabilities it needs, and then allocating that talent in the most effective way.

? Taking a forward-looking perspective: Anticipating risks and opportunities, expecting and embracing continuous transformation, and adapting to new economic scenarios.

? Building ecosystems: Partnering with other functions to advance resilience, rather than working in a finance silo.

? Communicating the transformation journey: Speaking with conviction to all stakeholders, both internal and external, from the finance team to investors and regulators.

For more insight into the role of the CFO is today’s business landscape, see Heidrick’s thought leadership and McKinsey’s Strategy and Corporate Finance Insights or contact the team: Giulia Iuticone , Niccolo Calabresi , Susie Clements , Cristina Catania , Enrico Muti , Davide Grande , Alfonso Natale , Aleksander Petrov .

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