Navigating in uncertainty: there is always a CFO in the cockpit.
These are the times we are living, and leaving them behind will be a slow process
“The CFO and uncertainty”. This is the title for the second edition of the CFO Frontline Report. The report prepared by Bankinter's CFO Forum performs a detailed analysis of the state of this profession in Spain and, over months of study, has found the word for the era we are living in. A new way of dealing with existence and business that will probably fit into our lives.
These were the words of the CFO of Bankinter, Jacobo Díaz, during the report's presentation. “CFOs are not pessimistic about the situation, but uncertainty makes them take a stand, adapt and anticipate both in their tasks and in the role they perform”, said Javier Hernández Bermejo, Bankinter's head of Medium-sized Businesses.
The level of concern of Spanish CFOs has gone from 6.07 to 6.9 in one year. Almost one point in twelve months that were marked by inflation and the first drumbeats of war at the gates of Europe. In a profession characterised by foresight, by projecting into the future, the lack of certainty is summed up in a sentence from a CFO highlighted in the report: “The world has changed”. A sentiment that evokes “the world of yesterday” that Stefan Zweig missed so much.
“Now it's time to go back to winter quarters”. This is one of the comments given in the 144 surveys of CFOs in Spain. It may convey some pessimism, but the report's figures point, at the same time, to a realistic view that detects positive signs in companies in the midst of a perfect storm.
“A perfect storm, aggravated not only by COVID, but by the war in Ukraine and by the energy crisis in Europe. For an industrial company, the energy item went from 3% to 11% in one year”, acknowledged Iratxe Pardo, CIE Automotive's Chief Finance and Treasury Officer, at the roundtables organised to comment on the report.
Positive growth forecasts
Uncertainty may not let us see the forest for the trees. If we look at the figures, the forecasts are moderately positive. The pollsters asked the CFOs about their forecasts for economic growth 12 months ahead. And these are their answers:
- 69% of CFOs predict moderate growth.
- 16%, high growth.
- 3% observe stagnation.
- And 12% of respondents see the bottle half empty: “recession”.
Along the same lines, 46% of CFOs consider that the situation in their company is “favourable”. Only 13% classify it as “unfavourable”. “Despite the uncertainty, CFOs are still confident about growth in the medium term. But CFOs are not relaxing and this is proven by the 14% increase in average concern”, according to Javier Hernández Bermejo.
And what do we do in the face of uncertainty?
The concerns of CFOs, according to the CFO Forum barometer, could be summarised as follows: inflationary tensions and economic uncertainty. Two other factors come much farther behind: the breakdown of the supply chain and the shortage of raw materials. A concern that coincides with that of their European colleagues, as detected by Deloitte.
We know what worries them. The next question is logical: What can be done? This is the answer given by CFOs in Bankinter's survey:
- Look very closely at the cost of financing, in view of the continued rise in interest rates, which makes them look for additional coverage. 41% of CFOs are working on new funding avenues.
- Focus on the impact of rising costs on the business and pass them on to customers. 73% of CFOs are already convinced that increased costs must be passed on to the customer.
CFOs no longer see digitalisation as the first lever to avoid the catastrophe that befell the economy in March 2020. Now, according to the CFO Frontline Report, the double recipe is information management combined with greater leadership within the organisation.
Information is gold because it allows you to anticipate, diversify, search for new suppliers, and make financial decisions. “We are a knowledge centre”, said one of the participants in the report's presentation.
“Having complete information, in a timely manner, is essential. Given the Finance area's close position to the general management, we CFOs have to navigate in certainty, instead of thinking or believing something. We have to be guarantors of communication channels and transmit key information to other departments”, argued Ana San Vicente, CFO of Teknia.
“Uncertainty as usual”. This is the title of an international CFO congress held a few weeks ago in Barcelona. Uncertainty will not disappear from view, not even in the medium term. The advantage is that there is someone in the cockpit.