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Reshaping business resilience: CFOs as architects of sustainable growth

New study says CFOs should be the catalysts for business resilience amid uncertainty

A large share of global business leaders believe their organisations are ill-equipped to respond to future shocks, according to new research.

More than 2500 senior decision-makers were surveyed as part of McKinsey’s State of Organisations Report; only half say their organisations would be able to anticipate and react to external volatility.

A further two-thirds go on to admit their organisations are too complex and inefficient.

According to the report, companies that possess the strategic trifecta of people, processes, and technology are uniquely positioned to not only weather unexpected shocks but also convert them into opportunities for sustainable and inclusive growth. The onus falls on CFOs to champion these capabilities within their organisations.

“Companies with capabilities in both adaptability and resilience are better able than others to absorb shocks and turn them into opportunities for capturing sustainable, inclusive growth,” the report says.

When asked what was preventing their businesses from responding to future bouts of uncertainty, business leaders listed limited funds, unclear priorities, and a lack of direction as core concerns.

The no-regrets move

According to McKinsey’s research, “resilient companies” [at the peak of the Covid-19 pandemic] generated about 20% more total shareholder return (TSR) than their peers did.

Also, during the height of the COVID-19 pandemic, McKinsey research shows that resilient companies generated 10% more in TSR than less resilient peers did during the economic downturn between the fourth quarter of 2019 and the second quarter of 2020.

In the ensuing economic recovery, from the second quarter of 2020 to the third quarter of 2021, the differential grew to as much as 50%.

CFOs play a pivotal role in building organisational resilience.  As guardians of a business’s cash pot, they will be charged with deciding when to invest in people, processes, and technology – all of which are required to allow businesses to flex in times of uncertainty.

“Investing in resilience through adaptability would seem to be a no-regrets move,” McKinsey’s report says.

With the pace of change accelerating, organisations must possess the ability to adapt rapidly. “I’m in the firm belief that especially in the downturn, the CFO needs to put their COO hat on,” says Ruben Arnbert, VP of finance at tech company Juni.

“That is [what is] needed to steer the business in a different direction or take action due to the downturn,” he says.

Leading by example

In an unstable environment plagued by uncertainty, Arnbert also suggests they lead by example on the adaptability front and move away from the mindset of forecasts being a crystal ball.

“Accept that a forecast is directional, and the forecast should give you the bookends of scenarios,” he says.

If CFOs are to enable swift action, timely insights are essential, and data serves as a potent tool for making informed decisions.

CFOs can enhance data utilisation by investing in data analytics and visualization tools, facilitating better decision-making.

Arnbert warns that having thousands of dashboards and Key Performance Indicators (KPIs) could prove futile if CFOs cannot condense the data into something tangible, they can communicate with the rest of the business.

People investment should not be understated

In the current competitive market landscape, talent is a crucial distinguishing factor for businesses looking to stay agile – but the right talent is not easily come by.

Previous research from McKinsey shows that, in many organisations, between 20-30% of critical roles are not filled by the most appropriate people. In addition, people are revising their attitudes both to work and at work.

McKinsey’s latest report recommends organisations respond by tailoring employee value propositions to individualised preferences in ways that can help close the gap between what today’s workers want and what companies need.

“I think we’re offering different things, the opportunity to focus on something that’s intellectually interesting,” says Globality CFO Jared Hyatt.

Globality, an AI software developer, was one of the few businesses that managed to continue to expand its teams during the pandemic. But the business was not immune to the massive layoffs that hit the tech sector earlier in the year.

“I think we’ve done an excellent job, and that’s why I feel so competent to go back to the workforce reduction employees, and offer them an opportunity to come back, and I’m very proud of that,” says Hyatt.

In the hands of the CFO

Now more than ever, organisations must prioritise building resilience to navigate the ever-changing business landscape.

CFOs have a critical role in this endeavour as finance leaders possess the unique position of overseeing financial strategies and decision-making processes within organisations.

By recognising the significance of investing in people, processes, and technology, CFOs can build organisational resilience and steer the organisation to success during the most turbulent times.

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