How CFOs can step up during an economic downturn

CFOs must be able to adapt and make quick decisions in 2023, in order to effectively mitigate risks and manage their businesses financials in what will likely be a turbulent year.

Rising geopolitical risks, high energy prices and fuel disruptions, labour shortages, and the long-term impact of climate change, will be top of mind for senior business officials.

Given the expanded role of the CFO, agility is now a key job requisite. Finance teams will need to ensure they are able to anticipate changes in the market and develop strategies to address forthcoming challenges.

But being adaptable is not always easy, notes former ASOS CFO founder of retail consultancy Shape Beyond, Helen Ashton. “All businesses go in cycles, and as a CFO, it is quite hard when you are in a business that is performing really well to make significant change,” she says.

“Often, I think in periods of crisis, there is a really good opportunity for CFOs to really prove their worth and actually bring a good amount of confidence.”

Ashton’s sentiments are echoed by Ian Stewart, chief economist at Deloitte. In his latest CFO UK quarterly survey, he states that the challenging backdrop has not deterred CFOs, with over a third of CFOs seeing a more competitive environment as a significant opportunity for their business.

“Similarly, almost three in ten CFOs see this downturn as an opportunity to implement or accelerate structural change within their businesses,” states Stewart in the report.

According to the report, 34% of CFOs said a more competitive environment would allow stronger businesses to grow market share. Meanwhile, a further 29% said the coming downturn could result in the implementation or acceleration of structural change within their business.

Using the downturn as an opportunity

There is no doubt the current economic downturn can be an opportunity for CFOs; a chance for the finance function to reassess and optimise their business operations.

At the outset, CFOs can use financial data to identify areas of inefficiency and make necessary cutbacks. They can also use this time to evaluate their supply chain and negotiate better deals with vendors.

Deloitte’s survey, which gathered insights from 78 CFOs, revealed 26% see the current downturn as an opportunity to optimise pricing, while 23% said there was potential to acquire distressed or low-priced assets.

Moreover, CFOs can explore new business models and diversify their revenue streams to mitigate the impact of the downturn and position their business for growth. Deloitte noted 19% of survey respondents said the economic downturn could ease the hiring environment for businesses, allowing them to expand their talent pool, while a further 10% believed there was an opportunity for the consolidation of product or service offerings.

Leveraging a new toolkit

Additionally, CFOs can use the downturn as an opportunity to invest in digital technologies such as automation, artificial intelligence, and analytics that can help improve the efficiency and effectiveness of their operations.

Ashton, who is also the audit chair at JD Sports, says the looming economic downturn is a big opportunity for CFOs to undergo a “real shift” and utilise new data analytics tools to improve scenario planning.

“I talk a lot about how we use data to understand our options well enough to make an informed decision,” she says.

Data analytics tools can leverage real-time financial data to make better-informed business decisions. CFOs can use these tools to monitor key financial metrics, such as revenue and expenses, and identify trends or patterns that may indicate areas for improvement.

Deloitte notes 48% of CFOs want to reduce costs over the next 12 months – leveraging these new data insights will likely highlight where cuts can be made, and where processes can be automated.

CFOs can also use data analytics to create forecasting models that help them anticipate future trends and make proactive decisions to mitigate risks.

Additionally, data analytics can be used to automate financial processes and reduce manual errors, making the finance team more efficient and productive.

Overall, data analytics tools provide CFOs with the data and insights they need to make better decisions, respond quickly to changes in the market, and drive business growth.

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