FINANCE-TV

06.08.12

Turnaround consultant Alvarez: “CFOs become more powerful in a crisis”

The crisis has put chief financial officers in a difficult position. While investors and creditors strongly rely on finance chiefs’ opinions, making them crucial for companies’ financial survival, the precarious state of many businesses makes them the “bearer of bad news,” as Antonio Alvarez III, managing director of turnaround consultancy Alvarez & Marsal, puts it.

 

For some finance chiefs, now is the time to shine. “Some CFOs relish this moment,” he explains. “Others shy away from it; it’s high pressure.” In this situation, “the facts must speak for themselves,” Alvarez says, to ensure that chief financial officers win over other stakeholders in their cost-cutting efforts that will eventually cut away at the company’s product range.

 

 

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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.