The role of the CFO during a recession

Earlier this month, it was confirmed that the UK fell into recession in the latter half of 2023, with GDP shrinking by 0.3% in the last quarter.

Economic conditions have been challenging to say the least. A range of interconnected elements combined over a number of years to make business trickier and the economy more fragile. A cost-of-living crisis has followed years of economic turmoil and contributed to an experience felt in boardrooms across the country (if not the world) – a feeling of uncertainty around what the future looks like.

Economic instability created unpredictability. Strategic growth plans may be shelved in favour of survival mechanisms, with organisations putting increased pressure on the CFO to improve the financial picture. Proactivity is vital in this scenario. Quarters move quickly, and without a considered and practical plan to move forwards businesses can soon find themselves in murky waters.

Heightened importance during economic difficulty

Strong leadership is essential for organisations at any time, but even more so during an economic crisis. A strong CFO is able to breed confidence – both within their department and the wider company. As a primary advisor to the CEO and wider board, our role goes beyond purely financial management and steps into the consultative – and that’s never more apparent than when the economy is unsettled and confidence is low.

The CFO’s role as a central player in risk management, cost control, financial planning, and forecasting is imperative during turbulent times. Notwithstanding our responsibility to deliver a good job, we have obligations to the board and stakeholders which are vital to the long and short-term success of the business.

We all know how important cash is, but never more so than when interest rates are elevated and continuing to rise. Data and forecasts must be accurate to inform investment decisions, business cases, and the management of working capital.

Data integrity and its role as an essential pillar of finance

Data is everything in finance. It forms the backbone of all our decision-making, which is why it’s so important that the data you’re working with is right. Put simply, the wrong decisions will be made if your data lacks integrity, quality, and accuracy. A recession puts this into even sharper focus, as money is tight and decisions will be monitored more closely than usual.

I cannot overstate the importance of investing in your data. If you don’t already have confidence in your data, now is the time to solve this. You cannot hope to survive (or thrive) during a recession without it.

Put measures in place to capture, store, and monitor data properly, and regularly review the data outputs.

Once finance teams are assured of their data’s integrity, their reporting, risk management, forecasting, planning, regulatory compliance, and customer relationships will be greatly improved.

Bringing the board on the journey

Financial data is complex and it’s easy to forget that not everyone on the board will have the same detailed understanding that you do. Learning to present data in a way that tells a compelling narrative is important. Visual aids can help, and many software solutions have built-in reports and dashboards to make delivering this more seamless.

Bringing the CEO and the wider board with you on the financial decision-making journey is a fundamental part of the role. It’s our job to make recommendations that safeguard the future of the business in such a way that the board will accept. Linking performance to business outcomes and drivers is a good way of doing this.

The right tech for the right job

Having the right technology in place is a huge help for CFOs in times of recession, but balancing the need for digital transformation with the need to reduce costs can be tough.

It can seem counterintuitive to invest in anything at a time when you need to scale back. But certain investments can translate into an opportunity to increase efficiency. The associated productivity gains can translate into increased profitability too. So, in this scenario, not investing would prove to be more expensive in the long run.

There is, of course, a process of due diligence to be done before any investment, and ROI should be high on your agenda. It can be costly to switch providers multiple times, so seeking tech partners who align with your values and offer scalability in relation to your business needs is important.

Ultimately, recessions create an evolution of the CFO role. It’s our responsibility to steer our respective organisations through the turbulence and make tough decisions that will safeguard the future of the business for years to come.

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