Chasing Sustainable Business Growth Through Disruption

Food for Thought: The CFO and sustainable business growth

The CFO is responsible for sustainable business growth. They need to be cognisant of global and regional current affairs, and aware of how socio-cultural and geo-political trends impact the business, its sector and customer bases. They need to understand the digital capabilities of his or her teams. They need to be continually modelling risk, forecasting scenarios and calculating value. It makes for a demanding—and fascinating—role.

This role’s imperative to sustain growth through, despite or because of, disruption, was the key topic for HotTopics and Soldo’s Food for Thought lunch.

London-based CFOs and finance leaders from multiple sectors came together to detail how the recent UK General Election result is impacting their forecasting, how ESG, talent and generative AI should be approached as executives, and what growth strategies are actually worth pursuing.

This Food for Thought article is an opportunity for leaders not in attendance to learn their peer’s priorities, challenges and key questions.

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UK General Election Impact

‘Cautiously optimistic’ describes the mood of the debate well.

The Labour party winning the recent election was anticipated. At least for those around the table, the business community by and large feels reassured that there were at least no surprises in this election, counter to the experiences since the 2016 EU referendum. Furthermore, this particular Labour Government has been vocal about prioritising growth. This early combination of stability and business-alignment is pleasing to many CFOs who are now keen to crack on with their company plans in a less volatile environment.

Yet it is still unclear how certain sectors that are dependent on the public sector, or Government R&D spend, will fare.

Pharmaceutical and life sciences CFOs were in attendance. They are each monitoring potential new funding policies from Labour, the potential realignment in trade and relationship with the EU that was badly damaged by Brexit, and how public research units across higher education, hospitals and clinics, and the genomics industries will evolve, too.

Indeed, when pressed, some CFOs were also aware of the long gap between the election and the first budgetary update, currently scheduled for October 2024. Does this pose a state of flux for business leaders? Possibly not: the UK situation must be viewed with a wider context, we heard; notably, France and the US look to be increasingly unattractive to investors looking for safe havens for their cash and portfolios. The polarisation of politics is certainly spooking the market. CFOs are following this closely, too.

A key attribute for the CFO therefore when considering these geo-political influences is adaptability.

To be specific, how well can a CFO anticipate headwinds and tailwinds? One leader brought up the concept of VUCA, or, volatility, uncertainty, complexity and ambiguity. It describes the situation of constant, unpredictable change that is now the norm in certain industries and areas of the business world. Many CFOs seemed resigned to this ‘new normal’.

Not all businesses want or enjoy close, direct relationships with governments, of course. For those CFOs around the table who are viewing the election’s ramifications from afar, the general health of the economy, and stances on interest rates vis a vis a mercurial public, are higher up the list of priorities. In fact, one CFO informed the table that their CEO and Board are far more concerned about risk management than before; they have since built a dedicated risk, and critical response, team to review live threats against the business.

Talent, ESG and Generative AI: Challenges and Opportunities for the CFO

1. ESG

How urgent is ESG right now?

As an industry we have seen mixed results on the promotion of net zero, for example, and ESG initiatives that are not directly tied to KPIs or otherwise are rapidly dropping from priorities in an uncertain market—as has been noted in other downward economic cycles.

Compounding this drag is the one-size-fits-all approach to ESG regulation that is stymying productivity.

One CFO reported how their investment fund is not ESG-focused, and yet, because of its FTSE 250 position, has to comply with its compliance. One such example is an ESG component of its annual report. For them, it is a poor use of time, resources and capital; the compliance box-ticking was called a “burden”.

For those organisations that can move the dial, however, ESG has been a source of competitive advantage.

One CFO reported that they have launched new products that better consider carbon footprint, making it a more compelling choice for end users or businesses. The bet has paid off: the new products are a serious driver of revenue, we heard.

For those around the table, it was also good to be reminded of the interconnectedness of challenges. As a helpful segue into the next theme, talent, CFOs also mused on the expectations of graduates on the corporate social responsibility of their new employers. Recruiters are putting more pressure on HR leaders to flex any CSR or ESG principles to attract environmentally aware talent, to mixed effect. It is just one of the balancing acts leaders must make: positioning the business for the current market and the future workforce.

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2. Talent

And so to talent. Within a highly engaging two hour debate it is difficult to pick out the most animated moments—yet few drew as many appreciative laughs and rueful headshakes at this topic.

Generation Z poses a paradox, we heard. 

On the one hand, their expectations of work and its meaning have shifted at oftentimes dizzying rates. On average, they want a job with purpose but are also known to chase salary raises. They want a good working environment or office, but are also keen to pursue remote or hybrid working roles. They demand a better work-life balance, but are frustrated at the lack of progress they make in their careers even after a few months. 

“The level of entitlement is astounding.”

This is not just your typical generational divide. Building talent for the future is a key remit for leaders. If a new cohort is pushing back on menial tasks—but important for experience and skills—it doesn’t just make the job of managers harder, it threatens a social contract between those who are rewarded well for the work they do and those who expect rewards without the accountability that comes with it.

Remember, however, they are a paradox.

One talent-orientated CFO reminded the table that this generation is “our children”. Their entitlement comes from the way in which they were raised and the life events they have had to adapt to—the pandemic, successive economic crises, social media and more. The lesson for the C-suite is as follows: flexibility in thinking is critical here, and generation Z offers a golden opportunity to evolve maligned ways of working and more transparent relationships. Explaining the why of the role, daily, is one way to build trust in the team and in the process. 

One phrase that stuck out was ‘empowered accountability’. This ensures that new starters have a clear runway to success, given notable parameters for their own work, and are made clear that it is down to them so that they not only feel more in charge of their destiny, but that they trust the process.

3. AI

There was constructive disagreement as to the long term impact of AI. Will it gut the workforce? Will it herald a productivity boon? How does the finance leader consider those and build a future team to capitalise on them? No clear answers emerged—which is inline with commentary across the industry.

What is clear, however, is that some sectors are further ahead than others when it comes to data and standardisation. Whilst a number of CFOs claimed that generative AI was long out of reach until they were further ahead on their modernisation journey, others were able to share case studies.

1. AI for forecasting: For a particular type of business, one where flow dynamics or processes form the majority of the structure, using AI to generate a forward looking view over a bottom-up has yielded some useful insights.

2. AI to analyse competitor earning calls: Of particular note was the use of generative AI to analyse recent competitor earnings calls to discover likely analyst questions much quicker than scanning call notes in order to anticipate “the questions coming our way”. It also allows the investor team to prepare and take those insights back to the business, having had good data on what the market is focused on, in order to improve the financial outlook and the performance of the business.

3. AI for workforce communication: Testing internal chatbots for easier data sharing between colleagues may make for more efficient work, and less time searching for disparate information.

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Closing Thoughts

One of the closing questions of the debate asked CFOs how they viewed themselves: as an accountant, or as a direct contributor to growth and value creation. The room was split neatly in half. 

Given the on-going transformation of the role, this ratio is likely to shift in favour of value creation, we heard.

A CFO is now encouraged to take a lead in planning for and training talent, continuing their role as partner to the CEO by reimagining the finance function, and acting as company seer, given their remit to constantly horizon scan.

This places CFOs in a fantastic position to drive value: knowing the numbers of the business implicitly means CFOs are first to spot any potential issues. Growing into the role to understand the rest of the business means CFOs can then be better positioned to advise solutions and next steps, meaning they stop being problem spotters and instead be solution drivers.

In fact, after all this, it may well be a question of nomenclature, as per the introduction: for more and more finance leaders their evolution demands a title change: Chief Value Officer. 

As the role transitions from accountant to strategic, CFOs are putting more market analyses and insights back into the business, influencing the direction of travel and strategy for the organisation. 

As one CFO put it, “...it’s why I love my job.”

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