By Tim Vine, Head of European Trade Credit at Dun & Bradstreet
In an increasingly globalised and digitalised world, roles in business are not what they used to be ten or twenty years ago. It would be unheard of, or at the very least unusual, to have a CIO or COO in a company, but these days businesses cannot do without them. So what of the CFO, the financial backbone and core of an organisation? Their roles are under increasing scrutiny internally and externally, and thus their role has transformed from “financial engineer” or “number-men” in the 1990s, to “super controller” in the wake of Sarbanes-Oxley. A more “strategic CFO” is du jour.
Financial decision makers (ranging from CFO to credit risk manager) must now focus on mitigating risk, but not in its traditional, original form involving little risk-taking. A financial decision maker’s reputation has been cemented as a roadblock on fast growth, but companies these days expect much more. Their new remit is focussed on driving growth, and is thus under increasing pressure to mine big data to understand and mitigate risks, improve operational efficiency and identify opportunity.
In short, the modern financial decision maker has three core characteristics within business. They are the financial steward, a value creator and a value accelerator.
This new remit is in no small part down to a progressively challenging landscape where there is increased financial risk due to businesses globalisation, rising cases of bankruptcy and fraud and businesses struggling to achieve steady and significant growth largely due to economic and political uncertainty. What has happened in the world politically in the last six months alone has made businesses even more concerned about declining stability and stunted growth.
We can even see this shift in a financial decision maker’s remit in trade credit, for example; a staple of the modern business environment is where goods or services are purchased on account and paid for later. It is also a key tool for business growth. Here, credit professionals need to assess and make bold decisions about risk and opportunity – balancing the need to avoid bad risk and accept smart risk – or rather, maximise working capital and minimise bad debts. Using this knowledge, they need to share their findings and tools with sales teams needed to grow and to ensure they are harnessing all insight to drive business forward.
And thus we shouldn’t underestimate the power of data used in making these decisions about risk and opportunity. As data analytics has evolved, so has a financial decision maker’s role within the company; the data that they use is involved in looking at the financial background of a business to credit analysts assessing whether potential customers have a strong credit rating. But data is pointless without the tools to turn it into intelligence, and this is where the modern, data-fuelled decision maker must come into their own. They must use this information and turn it into actionable assets that will drive revenue, efficiency and a host of other benefits for their organisation.
It’s clear to see that companies are increasingly shifting away from the rigid roles that financial decision makers once occupied. Expectations on CFOs and the like are much higher, so that companies don’t fall into sclerotic management that could impede growth. It is now about not just taking risks, but ‘smart’ risks that will help turn these financial decision makers into enablers for business growth.