Amid Recession Demand for Skilled CFOs on the Rise
Chief Financial Officers and senior-level executive CPAs now say the U.S. economic downturn will last longer than previously expected. According to a new survey of 1,183 CPAs who hold leadership positions as chief executives, COOs, and CFOs conducted by the American Institute of Certified Public Accountants (AICPA) and the University of North Carolina’s Kenan-Flagler Business School, the majority of those polled expect no turnaround in the economy before 2010 – six months longer than previously estimated. “As the recession has deepened and pessimism solidified, a majority of CPAs working in business and industry now don’t expect an economic recovery before 2010,” said Arleen Thomas, AICPA’s SVP for Member Competency and Development.
The AICPA/UNC study did offer one glimmer of hope: about 25% of companies still expect some growth in the next 12 months. But as the majority of executives brace for continued turmoil, CFOs are facing increasing pressure to make the best of a bad situation, according to CFO.com. CEOs are increasingly leaning on their Finance Chiefs to better understand their companies’ liquidity position and come up with a strategy for the months ahead. The question is: do they have what it takes?
CFOs Face Unprecedented Circumstances
A growing number of CFOs will find themselves running the finance function of an insolvent business as the downturn continues to take its toll, according to CFO.com. The report states that Euler Hermes, a credit insurance company, predicts the number of insolvencies worldwide will rise by 25% this year following a similar increase in 2008. Moreover, in Western Europe the firm predicts a 34% rise this year following a 25% jump in 2008. In France and Germany, Euler Hermes forecasts a rise in insolvencies of around 12%. The Netherlands could also see a surge of 38%.
A recent Deloitte paper argues that the combination of the worldwide credit crunch and a recession with possible deflation creates a unique and unprecedented set of circumstances for CFOs. Deloitte concludes CFOs will have to navigate two distinct challenges: they must manage their short-term credit, cash and performance needs – despite receding pricing power and they must efficiently position and utilize assets with an eye toward post-recession growth. Ajit Kambil, Global Director of Deloitte Research, says “The challenge for CFOs will be to read the signals and discern the shape and structure of the recovery.”
Skills of the Ideal CFO
Though a daunting prospect for most Finance Chiefs, CFO.com says the “burgeoning corporate rescue culture means that there is greater scope for effecting a turnaround than in the past.” So what does it take for CFOs to hold it together even as their companies are falling apart? CFO.com says the basic skills needed from Finance Execs during administration are the same everywhere.
The report states that insolvency practitioners and restructuring experts list the following three skills which characterize their ideal CFO:
- A perfect grasp of up-to-date figures. Particularly if there’s been a high turnover in the executive team, the challenge to stay on top of the numbers for new CFOs much harder. At a minimum, however, up-to-date numbers give CFOs a better chance of mapping out a contingency plan.
- The ability to plan for every eventuality. Administrators say a “plan-for-the-worst” approach say makes the difference between a good CFO and an excellent one in distressed situations.
- A strong enough voice to ensure that when you speak, your board listens. CFO.com quotes Alan Hudson, a Partner at Ernst & Young, as saying that CFOs should stick to the facts, however painful they might be for members of the board to hear, and the sooner they are made known, the better. “It’s no good after the event saying, ‘I always knew we were destined to fail,’” says Hudson.
Another key area of focus for CFOs concerns reporting practices. Finance Chiefs must provide the right information at the right time. CFO.com quotes Neil Griffiths, a Partner in the restructuring team at law firm Denton Wilde Sapte, as saying, “If you’re in distress you want daily [rather than monthly or quarterly] information coming through so you can see how close to the edge you are. The CFO becomes absolutely critical in all of that.”
CFO.com adds that if a CFO can manage to demonstrate these key skills during troubled times, there is a good chance there will be a job awaiting them at companies that survive. The report states, “A Finance Chief who can confidently and quickly provide full visibility on deteriorating cash positions, identify where the company is being squeezed and articulate what to do about it is more impressive to an administrator than one whose leadership flourishes in good times, but withers in bad times.”
Looking Ahead…
Much has been written about the fact that greater CFO accountability is contributing to a high rate of turnover. Recent KPMG research suggests that CFOs are, in fact, moving on to new opportunities for which their particular talents are best-suited.
Indeed they are. Executive search firm, A.E. Feldman, reports that CFO jobs are opening up as a growing number of companies are now looking for finance chiefs with treasury and capital-markets skills. The firm adds that Finance Chiefs who understand and can manage enterprise-wide risk, who can get funding for growth opportunities, who know the debt markets and who are strong on valuing assets are in demand. Flexibility and the ability to adapt to the dynamics of the market as the crisis unfolds are also critical.
Are you a CFO? If you want to grow your career or your company’s bottom line, contact A.E. Feldman’s President, Mitch Feldman now. Find out more about CFO jobs today!
