While disruptive changes take place at an unprecedented rate, disruptive trends, when viewed positively, can bring about CFO opportunities.
These disruptive trends, according to Gartner, include business transformation, market competition, economic uncertainty, employee power in labor market, capital inefficiency, and executive confidence, according to the research firm.
CFOs can start to turn these trends into opportunities to grow their companies’ businesses by understanding the characteristics of their high-performing peers.
“Investing for scale, preventing scope creep from destroying margins, and customer centricity are CFO qualities that are significantly related to the best performing organisations,” said Jason Boldt, research director in the Finance practice at Gartner.
The CFO opportunities that disruptions bring
Business transformation.The number of global M&A deals have reached a 10-year-maximum, and so has the number of times that Fortune 500 companies mention terms related to ‘business transformation’ in their earnings calls, said Gartner.
“Top CFOs deliberately pursue scale-additive transactions. However, CFOs need to be careful of following the herd and overpaying for acquisitions that unintentionally undermine competitive positions,” said Boldt.
Market competition.Not only do companies face more entrenched incumbent firms in every industry, but they must also contend with well-financed, privately-held startups, Gartner pointed out.
“It's critical for CFOs to have a thorough and objective view of competitive advantage, and honest appraisal of where their firms are falling short,” Boldt advised.
Economic uncertainty.Never in recent times have executives faced such levels of policy and economic uncertainty simultaneously, said Boldt.
“The key to profiting from such uncertainty lies in ensuring costs are appropriately optimized for the operating environment to shore up liquidity and keep dry powder to enable rapid investment in suddenly attractive opportunities,” he noted.
Employee power in labor market.With unemployment at historic lows and employee disengagement at record highs, organisations face these turbulent times without the levels or employee certainty they have enjoyed in the past, according to Gartner.
“However, looking at this trend through a positive lens, it may be easier than ever before to poach key personnel from competitors,” said Boldt. “Employees are likely to benefit in the form of higher wages which will pressure CFOs to oversee investments that increase productivity at least at the rate of labor cost growth.”
Capital inefficiency.In the current low-interest-rate environment, companies have plenty of cash yet few opportunities to spend it, Boldt pointed out.
While it may be harder to identify profitable investment opportunities, the CFOs whose companies perform best tend to focus investments on a limited number of big growth bets, concentrated customer bases, and tightly coordinated product and service lines, he added.
Executive confidence.Executive confidence is arguably a red flag as it could seem like the kind of overconfidence that has preceded major market corrections in the past, but nevertheless the CEO confidence index hit its highs in 2018, although it has waned in 2019, said Gartner.
Top CFOs will see this as a warning that given the volume and significance of current market changes, executives could be vastly underestimating the headwinds their companies face, said Boldt.
“We’ve found that leading CFOs are building their own viewpoints of the customer, spending time one-on-one with key customers, with the aim of linking that theory of the customer back to financial considerations,” he noted.