CFO: Strategic Planning to Avoid Pitfalls

July 7, 2022 | 5 Mins Caitlyn Simons

CFOs at multinational companies these days can become heavily involved in the strategic direction of the organization. They always have a seat at the table as they will be asked to sign off on any investment to support strategic changes.

So, it is a vital importance that CFOs fully understand what their colleagues on the leadership team are trying to achieve in terms of company direction and investment. As business leaders, they need to be aware of the advantages and the potential pitfalls so they can make careful decisions based on a full understanding of the bigger picture.

In this article, we will look at some of the common pitfalls that chief financial officers may wish to avoid when helping with the strategic planning process in their company.

Failing to futureproof technology systems

A major pitfall to avoid would be an investment in a technology stack that involves a range of tools that are likely to become obsolete quickly. Technology advancements move fast and there is always a new piece of technology around the corner that could potentially render an existing or traditional tech stack obsolete very quickly- the iPhone came along and essentially finished the BlackBerry phones which could not compete with this new, more advanced technology.

A CFO will always be investing for the long term, and while they will always understand the desire to operate with innovative, new, and original technology stacks, they will also be keenly aware of the dangers of being blinded by headline grabbing tech stacks that turn out to not have the performance levels and longevity they may have promised.

There is nothing worse than rushing into a new technology investment and being under the impression that this is something that is going to enhance and benefit your company, only to realize that this tech is not sustainable for the long-term business plan. This is a waste of the company’s finances and can also waste time and resources by investing in the implementation of this technology. Doing substantial research in your planning process and always thinking about the long-term outcome when it comes to any new tech investment is something that must be considered by the chief financial officer and finance leaders.

Future proofing purchases is a key component of any cost management strategy and CFOs will always be asked to manage costs as part of any company strategy and their financial planning for the business. It is also advisable that they pay close attention to the data security credentials associated with any new tech purchases to avoid making any common mistakes that can be associated with data security breaches. The security features of any new potential technology investment must be in line with the highest industry standards, as the risk of reputational damage due to a security incident is too high to even consider.

Complex compliance makes things harder

While there is nothing easy about reducing the complexity associated with local and global level compliance, any efforts that the CFO can make when collaborating with their compliance management team or legal departments may prove to be worthwhile.

The multinational company is usually fully responsible for compliance, regardless of which third parties they partner with or who they may subcontract services out to. Therefore, should an incident happen, or a compliance regulation fail to be adhered to, the relevant authorities rarely show any sympathy towards any explanations that attempt to transfer responsibility to a third party. As a general rule, you can expect a zero-tolerance approach to compliance failures from the relevant authorities.

In the finance department, which is under the control of the CFO, financial regulation is notoriously changeable and complex. A CFO will want to have clear procedures and accountability in place to ensure that the financial operations executives are constantly monitoring this crucial area. Regulations change all the time, and you can expect to see changes on a quarterly basis.

In a post pandemic world, lots of changes are happening and the situation is still very fluid when it comes to taxation around remote workers, as well as responsibility for delivering final accounts from companies who have staff and entities in multiple global locations.

Any technology software that provides better visibility and control around compliance obligations could prove to be a very worthwhile investment, and anything a CFO can do to make this process and situation more risk free by maintaining regular contact with the compliance officers within the company, will be a positive step.

Ignoring digital transformation could be costly

Every CFO at this point will know and understand to a certain degree what is involved in a digital transformation. It is quite likely that they will have been approached by several different stakeholders within their organization asking for an investment for digital upgrades to technology stacks and operational processes.

Part of the job of the CFO will be to balance these requests against the long-term interests of the company, and then make informed decisions about which investment is the most valid. They are highly unlikely to have the luxury of pleasing everybody, this is something that can never happen, especially when cost management and control is the remit of the CFO.

There may be a temptation for the CFO to put off digital transformation for a year or two, to wait and see how the pandemic plays out and which might be the best technology to invest in. This cautious approach has a ring of truth to it, but it could turn out to be costly. The nature of digital transformation is usually relatively urgent, making a decision to postpone it or put it on the backburner makes a business susceptible to advances from the competition. If the competition has gone ahead and invested in their digital capabilities, they may be able to make positive inroads into new markets and territories quicker than you.

Nobody is advising immediate investment without solid data and a clear business case, but a decision to postpone or delay digital transformation could turn out to be unwise in the long run. Always being aware of what is happening in the digital technology world and market, could prove to be helpful when it comes to keeping your company up to date with all the latest trends and making sure that you are able to keep one step ahead of the competition.

Every CFO will be keen to avoid any pitfalls and the few considerations discussed in this article could be valuable f. Taking steps to future-proof your technology systems and always have the long-term outcome in mind could be beneficial when it comes to avoiding making any unnecessary or even wasteful short-term tech investments. As well as this, having a technology software that can help uphold any compliance responsibilities by offering you better visibility and control, and also not neglecting your digital transformation initiatives could all prove to be useful when it comes to avoiding any financial pitfalls as a CFO.

 

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