Chief Financial Officers (CFOs) during the past several months have had to recast many of their forecasts and internal plans in response to mounting external instability, including Russia’s invasion of Ukraine, the surge of inflation to a 40-year high, borrowing costs rising from record lows, and a persistent threat of instability from COVID-19.
The prices of oil, grains and other commodities have surged worldwide since February 2022, pushing up broad measures of inflation. In the U.S., the consumer price index on a 12-month basis jumped 8.5 percent in March and the producer price index, a measure of suppliers’ costs to businesses, soared 11.2 percent.
The World Bank, citing repercussions from the Russian invasion, recently said it trimmed its estimates for global economic growth in 2022 to 3.2 percent from a 4.1 percent forecast in January.
“Downside risks cloud the outlook, including simultaneous omicron-driven economic disruptions, further supply bottlenecks, a de-anchoring of inflation expectations, financial stress, climate-related disasters and a weakening of long-term growth drivers,” the World Bank said.
While monitoring the impact from external upsets, CFOs are also focusing more on internal tasks such as digital transformation and adherence to environmental, social and governance (ESG) best practices. To meet these challenges, many CFOs need to broaden the talent within finance teams.
CFOs during the budgeting cycle are more closely linking finance and strategy, with a growing importance using tools for financial planning and analysis (FP&A) to monitor for any “warning signals” to a business.
CFOs are also adjusting to their expanding role by delegating some of the accounting responsibilities. Or they are giving subordinates greater decision-making power, with the heads of FP&A, procurement, information technology and real estate directly reporting to CFOs.
During the pandemic, many CFOs sped up adoption of process automation, advanced finance analytics and other technologies, upgrading closer to real time scenarios planning and the tracking of cash and the business outlook.
Rather than solely make decisions based on the available tools or systems, expert CFOs define the road map for the function for the organization and apply a cost-benefit analysis to prioritizing the different digital investments.
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