CFO expert Clifford: Communication is key for both cash-rich and cash-poor CFOs
Scarce bank lending coupled with strong corporate earnings and flush bond markets have created a bipolar world for CFOs: they either face a bitter liquidity crunch or huge cash piles building up on their balance sheets. Speaking on CFO Insight TV, Les Clifford, a partner at professional services firm Ernst & Young and a leader of their CFO programme, discusses their new report looking at how CFOs on both sides of the divide can cope with the challenge.
For chief financial officers at cash-strapped companies, raising liquidity is a daily challenge. This requires open communication with the lenders, Clifford says. “What you want to avoid is crisis management. Oftentimes many people try to believe that around the corner it’s going to be resolved, there’s going to be cash.” Instead of open discussions about long-term solutions with their lenders, they opt for short-termism.
However, this can be a dangerous approach, Clifford warns. “Most lenders are good at looking at the market and making their own views of these companies already,” he says. “So coming together to discuss each other’s perception can break down walls. ... Make [the lenders] a partner more than purely a lender.
Chief financial officers at cash-rich companies seem to face the easier task. However, they too must ensure that their message is being understood, Clifford says. “The question is: Are CFOs communicating their decision clearly enough to investors?” Many finance chiefs may not do all they can in this respect, leaving them vulnerable to investor backlash.
Jay Nibbe, Ernst & Young, on how today’s CFOs help set the strategy of their organisations
In recent years, accounting firm Ernst & Young has commissioned a string of CFO surveys that look at every aspect of the expanding role for CFOs, from their career paths to their role in external communications and their involvement in shaping corporate strategy. The results speak for themselves. In an interview with CFO Insight TV, Jay Nibbe, managing partner EMEIA Markets at Ernst & Young, explained that most CFOs spend 50% or more of their time on strategy, which is “almost necessary” in the current economic environment. The growing importance of strategy is underpinned by a staff of “world-class” and highly specialised individuals who support the CFO, including treasurers, controllers and accountants. “While it may seem they should spend more time on the operational and financial side of things, they now lead much larger and much more professional teams,” Nibbe says. “This has allowed the CFOs to step out of the details and get much more involved in the strategy.”
Climate expert von Saldern: “Many companies are unaware of the potential gains from permits“
European companies let millions of euros in potential profits slip through their fingers because of lax carbon management, says Andreas von Saldern, an expert at Ernst & Young. Chief financial officers should take charge to ensure companies make the best use of their allocated permits.
Many chief financial officers could be forsaking millions of euros in potential profits by not actively managing their carbon emissions permits. According to Andreas von Saldern, Executive Director Climate Change and Sustainability Services at Ernst & Young, companies frequently book their carbon permits on their balance sheets at a value of zero because they were allocated for free. But these permits could be worth a lot of money if sold on the open market instead of stashed away, earning chief financial officers a nice windfall profit. “I see many companies that are unaware of the potential gain that could be made from their permit,” von Saldern says.
Gerd W. Stürz, partner at Ernst & Young: “CFOs should consider becoming non-executive directors.”
The world is changing for non-executive directors on company boards, and CFOs are benefitting from it. Shareholders and boards of directors are increasingly keen to have CFOs of other companies as non-executive board members. According to a recent study by Ernst & Young, in 2002, 36% of CFOs from the world’s largest companies held non-executive directorships. In 2012, this proportion has now reached 46%. “Such positions do eat up quite a bit of time,” says Gerd Stürz, partner at Ernst & Young, “but they are very rewarding for the companies, who benefit from a seasoned CFO’s expertise, and for the CFO, who gets a new perspective from outside his own company.”
Armand Angeli, IAFEI Europe President, on the globally evolving CFO role
The role of the chief financial officers has spread around the globe. But Armand Angeli, Europe President of the global CFO association IAFEI, points to differences in how the role is lived around the globe. Starting in Central and Eastern Europe and then looking to China, Angeli takes a broad look around.
Investment banker Bryson: CFOs Enjoy “Golden Era” of Bonds
The looming eurozone break-up has driven bond costs down to levels previously thought impossible. Anthony Bryson, European Head of Corporate Debt Capital Markets at BNP Paribas, explains why chief financial officers have been happy to “grab the money”.
30.07.2012 - Turnaround-Berater Alvarez: "CFOs werden durch Krisen einflussreicher" (in Englisch)
Die Krise hat CFOs in eine schwierige Lage gebracht. Ihre Meinung ist für Investoren und Kreditgeber ausschlaggebend; das finanzielle Überleben des Unternehmens hängt von ihnen ab. Gleichzeitig werden sie durch die prekäre Situation des Unternehmens zum „Überbringer schlechter Nachrichten,“ wie es Antonio Alvarez III, Geschäftsführer der Turnaround-Beratung Alvarez & Marsal Europe, ausdrückt. Für einige Finanzvorstände ist das eine Chance, in neuem Licht zu erstrahlen. „Einige CFOs lieben diesen Augenblick“, sagt Alvarez. „Andere scheuen davor zurück; es ist ein hoher Druck.“