Business development and rapid scaling is a common feature at multinational companies today- it is often a major focus of priority or mandate from the board of directors. Companies are keen to grow and expand into new territories, seek out and take advantage of new opportunities or carve out market share wherever it is possible to do so. This will ensure that they continue to add strong revenue streams to their business models, maintain financial stability and develop forward momentum.
A CFO in a modern multinational will play a key role in any strategic decision-making that is designed to create and develop new revenue streams or increase the overall profitability of the firm. Some CFOs even join a firm at a period of rapid growth, and they are expected to hit the ground running with fresh thinking and ideas for even further growth.
In this article, we will examine what might be the priorities for a CFO inside a multinational that is either preparing for or currently in the midst of a period of intense growth or expansion.
Manage the Money
It might sound pretty simple and obvious but making sure that there are fluid cash flows to help with expansion is likely to always be the first priority of any CFO. Managing budgets, cash forecasting, analytics and financial accounting all come into play here as the CFO needs to examine the current status around financial stability and cash flow as well as the ability of the MNC to generate additional cash or borrow funds to help it meet any ambitious growth plans.
The CFO is likely to draw upon key relationships they have developed with venture capital firms or other industry investors with a view to creating a steady flow of cash funding for current and future use. The CFO needs to be cautious here as cash flow funds have a limited lifespan, but they also need to get the balance right and show some tactical aggression in the market when it is needed. The balancing act between risk and reward is always very tight, so the role of the CFO can be very pressurized due to the consequences of getting it wrong in a demanding and at times, unforgiving business landscape.
Clear Strategy
Clarity is a key issue for any CFO and it works both ways - the CFO must seek out and receive clarity from the board of directors who are demanding fast growth - and a CFO must also deliver clarity to the professional teams in the finance department, as well as any other stakeholders who have a vested interest in how and where any available funds are spent or distributed.
It has become very clear in recent years that a strategic mindset and strong strategy skills have become integral to the role of the CFO. This person must now bring to the table a lot more than just financial expertise and deep experience with handling money matters. CFOs today are expected to also display strong digital experience and a keen awareness around the role of new technologies in a modern multinational.
They are expected to understand how the market operates, what customers are looking for and how scaling into new territories can be managed effectively. There is an expectation that they will present their findings in a roadmap to business leaders in a clear and concise manner that demonstrates an understanding of the company along with their values and strategic direction.
When a CFO obtains clarity, they are then in a position to set and manage expectations. This allows them to deliver bad news if it is needed and avoid surprising people. Surprises are not good when coming from the person who is in charge of managing the money. The board does not want to be surprised; they want to hear things that match their expectations. Finance teams working for the CFO also do not want to be surprised, they expect to work towards a clear set of goals that have been outlined and documented early in the process. If surprises or bad news is unavoidable, the CFO needs to have a plan in place to mitigate or resolve any issue - this is another situation in which clarity is important- it is a case of explaining what has happened and what is going to happen in response to the event. As soon as everybody is on the same page, things can move forward.
Partner with the CEO
At a fast-growing MNC, it is important that both the CEO and the CFO plan and work together to execute agreed business strategy. Progress will not happen as quickly if these two individuals tend to operate in silos or only communicate and interact with people they know and trust. They need to form a strong bond and partnership at a very early stage and make a commitment to each other, that they will communicate with and include each other in any process that is connected to the growth of the company.
It can be a simple case of two heads being greater than one and both of these individuals will have a variety of ideas and skillsets that they can share and harness to create a strong alliance capable of delivering business success. If they both agree on the strategy and future direction of the MNC, then it can become a case of the CEO helping to raise the funding and capital needed for the CFO to distribute it in ways that help fund the agreed upon strategy.
Strong coordination and regular communication between these two crucial individuals will ensure that the CEO is always fully aware of how and where money is being spent. This money should always be spent with the approval of the CEO and in line with agreed upon principles, arising from any strategy meetings. If the CEO and CFO are both clearly aligned in their principles and behavior, this makes buy-in from other stakeholders and staff at the MNC much more likely.
Allocate Resources
Any business strategy may turn out to only be as effective as the number and quality of resources available to the leadership teams. The manner in which they optimize and allocate these resources will have a significant impact on how successful any strategy is likely to become.
There will be a limit to the number of products a company can deliver at one time and similarly, there will be a likely cap on the number of countries an MNC can look to scale into in a year. The CFO would play a significant part in deciding which project is the business priority, how much funding is to be allocated towards this project and which resources should be made available to give it the best chance of success. This will likely involve having to make some difficult decisions, possibly even cutting funding from another area of the business and transferring those funds over to a more viable project. This may be an unpopular decision, but any CFO has a finite number of resources available to work with and tough decisions around how and where to allocate them must be made.
Manage expectations
This is always a good general rule of thumb for any CFO, but in a fast-growing M&C, it becomes more of a priority rule. There will always be a temptation to make strong, bold and ambitious declarations around growth and market share. The CFO can manage expectations here by striking the right balance between ambition and prudent financial management.
The CFO will be expected to deliver results, but they can exert a certain level of control over what the expectations might be around this delivery. They can work with the board or CEO to agree on public messaging that does not over promise. This helps to protect the CFO from expectations getting out of hand and ensures that the multinational is in a position to deliver on any statements issued around expected performance in the market. It is always better to be a little conservative and then exceed market expectations as this is a positive and easier story to manage in the public domain.
Technology
It is very difficult to achieve rapid growth without complementary technology so this is another key area of focus for any CFO. The role of the CFO has changed in recent years- previously they were expected to provide numbers, now they are expected to provide insight and strategy too. Technology that can deliver analytical solutions while also being robust enough to mitigate risk against cyber-crime will be of major interest to any CFO.
Technology can be a source of predictive analytics when it comes to estimating likely future costs- for example, analytics in global payroll operations can provide the CFO with valuable estimates on global payroll costing when scaling into a new country. These are valuable insights, derived from real time reporting, capable of shaping day-to-day decision-making. This is technology as a partner, risk mitigator and business driver. Through the use of innovative technology, a CFO is in a position to combine internal financial information with strong data driven insights. This helps the CFO address critical business questions with a greater degree of control, speed and accuracy.
Profitable growth is likely to remain the top priority for any CFO, but in a fast growing MNC, the CFO will look at the factors outlined above to help them assess the ways in which they can best deliver this profitable growth.
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