By The Editors,
14th November 2016
In the recent film The Walk, a high-wire artist Philippe Petit recruits a team to help him realise his dream: to walk the immense void between the World Trade Center towers on a tightrope.
For Philippe Petit, read financial decision maker. Every day, almost all modern financial decision makers are walking that tightrope: balancing the need to drive growth while simultaneously managing business risk.
It’s easy to wobble. The role of the financial decision maker has changed dramatically in recent years. None more so than the Chief Financial Officer (CFO). What was once a task of “financial engineer” or “number-men” in the 1990s, evolved into one of being a “super controller” in the wake of Sarbanes-Oxley, Basel II and other compliance regulations. Today, they are more likely to be positioned as a “strategic CFO”—one tasked with transforming the finance function in order to become a more strategic business partner focused on growth.
As financial decision makers walk that "compliance versus growth” tightrope, it’s easy to trip. In the past, the focus on risk management erred towards constant caution and minimal risk. If there was any question of risk in a transaction or other business decision, the answer would frequently be ‘no’.
Now however, the new remit for financial decision makers is to drive growth. This is a huge task in a challenging landscape. Increased financial risk is surfacing from business globalisation and rising cases of bankruptcy and fraud. Moreover, businesses are struggling to achieve steady and significant growth owing to economic and political uncertainty: Brexit, for example.
These tightrope walkers can’t stop half-way between the Twin Towers though. The winds of change will catch them. Digital disrupters—those start-ups with a fraction of the resources of a large conglomerate, but a vast amount of agility and ideas—are just around the corner. Consider, for example, the empty hotel rooms suffering at the hands of Airbnb. The traditional banks that are tearing up their business models so they can compete with lean FinTechs. And the threat to automotive manufacturers as Google and potentially Apple move into the car-making business. The bottom line? Growth sometimes means taking risks.
There is a way forward though. Every financial decision maker—from the CFO to the Finance Director—needs to assess and make bold decisions about risk and opportunity; balancing the need to avoid bad risk and accept smart risk. In other words, maximising working capital and minimising bad debts. They need to use that knowledge to give sales teams the ammunition needed to grow.
How does the financial decision maker do it? The answer is to adopt three core characteristics: being a financial steward, a value creator, and a value accelerator.
By applying data, insight and analytics—such as the —financial decision makers can blend all of these roles and balance risk with growth. Organisations that extract the most value and insight from data are uniquely positioned to pin-point where growth and risk exist, identify top sales opportunities, shorten your sales cycle, and improve cash flow. It’s a simple equation: smart, insight-based decisions equal business growth.
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