From High Risk to High Reward: Getting the CFO Expertise Your Company Needs Today

by Ted Lanes

Today's chief financial officers face unprecedented challenges, with increasing risk and complexity tied to their every decision. Regulatory scrutiny mounts while the CFO is not only trying to ensure that core accounting and reporting activities are correct, but often is also working to provide the leadership and strategic vision necessary to adapt the business model to weather the recession. 

Experience proves critical:  the CFO must be able to interpret complex and volatile business conditions while balancing the preservation of the company's value and capital in the midst of the most serious credit crunch in recent history. And often the skill sets that were needed in the steady state or growth conditions of the past few years are no longer those that best serve the company today. The risk of lacking the financial skills your company needs must be addressed: do you have the financial team in place that your company needs to navigate through the recession? 

Companies need skilled CFOs to manage liquidity, short-term credit, cash and performance needs - despite receding pricing-power. Up until now, cash-flow margins free cash flow measured as a percentage of revenue have remained flat. But Charles Mulford, director of the Georgia Tech Financial Analysis Lab and co-author a new study on the subject, reports that the median free cash flow for nonfinancial companies could sink by 50% during the next year, especially if the recession continues to choke revenue streams. Consulting firm Deloitte and Touche believes that CFOs can expect to operate in an environment of tighter debt to equity ratios, restrictions on use of capital and investments, and reporting requirements to providers of capital.

Strong financial leadership is imperative. As decreasing or uncertain revenue expectations drive cost reduction throughout the business, increasing layoffs, sub-optimal procurement management, business divestitures, new product pricing strategies, and sometimes total financial restructuring ensue.

Savvy companies are also looking to their CFOs for advice in positioning their company for the future.  These CFOs and their teams are scouting for acquisitions that may represent significant additions to the current product mix, add valuable intellectual property (IP) to the knowledge base, or bring in beneficial new talent that would be inaccessible or out of range previously.

Furthermore, however, today's CFOs also must plot a course of action to get through the downturn, prepare for recovery by successfully positioning assets and managing risk, and ready the company for eventual post-recession growth. The reward of good financial management through the current downturn is the confident readiness to succeed and "rev up" smoothly and quickly when the recession ends. 

Avoid financial risks; look to the experts.  Join the many companies today that are bringing in capable finance executives that are better equipped to deal with the complexity and risk facing businesses today. As the business environment changes, a CFO who was a good fit for the company 3-5 years ago may not be the right person for the job right now.  You may have need of a CFO with experience with distressed operations, restructuring, or bankruptcy to guide your company away from or through these eventualities should it be required and ensure that your company can survive the process and come out stronger on the other end. Whether you need full or part time, short or long term support, an experienced Cerius Interim CFO or Part time CFO will ensure that your company can successfully navigate the rocky shores of the recession and leverage your ability to gain an edge during tough times.

For more information, see CFO Leadership: When You Can't Afford to be Wrong.  Harness the Skills You Need When You Need Them, or read our white paper, "Gaining a Competitive Edge Through Interim Executive Management".

Ted Lanes is an Interim Executive with Cerius Interim Executive Solutions, the largest provider of Interim Management services. He specializes in turnarounds, restructuring and distressed situations as well as cash flow maximization and process and systems improvement.

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The Human Capital Institute "Gaining a Business Edge through Interim Executive Management".

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