Part 2 of a 2-part series. Read Part 1.
A new merger is on the horizon – and not the kind that adds assets to your company’s portfolio and balance sheet.
“The CFO’s role in the next few years will increasingly be one where fund availability, competitive disruption, and economic and political uncertainty merge,” Dr. Steve Carvell, Cornell University professor of finance, recently told us.
And you know what that means: Change. Change that needs to be embraced.
“The strategic CFO needs to begin to shift now,” Carvel added. “They need to recognize that the current landscape is unlikely to continue unabated.”
So, what changes should you expect? What challenges do you need to prepare for? And what are the risks if you don’t adapt?
In a recent interview, Dr. Carvell shared his insights and answers to these questions and detailed how CFOs can rise to the coming challenges and emerge as strategic leaders. This is Part 2 of that interview.
What’s on the horizon
Q: How do you see the CFO role evolving in the next few years? What should CFOs be doing now to prepare?
It has been many years since the great recession began. Economies across the world have been flushed with liquidity. Interest rates and inflation rates have been at historical lows for a considerable period of time. But that will change.
CFOs need to see how their fund availability and cost of capital will be affected as liquidity in the system is reduced and interest rates rise along with inflation. Having a sense of how this competitive and financial disruption will be absorbed within the company’s free cash flow, capital structure, and costs of capital will be necessary for CFOs in the coming global business environment.
Q: What new challenges are CFOs facing as the role expands? What should they watch out for?
The major challenge, of course, for CFOs in this environment is to not lose sight of the trees for the forest. The fog of war, as it’s often called, can cause even the best leaders to lose sight of the day-to-day necessary operations. This is why it is so important for CFOs to make this transition in their organizations sooner rather than later.
The future generation of CFOs
Q: What is the sentiment like among your students right now – potential CFOs? What are they worried about?
Most current students have grown up within the boundaries of the great recession. They seem committed to being uncommitted, recognizing that their career paths are likely not to follow the pattern of the generation before. The likelihood of their staying in one job for five years, never mind 20 years, is quite low. So, most of my students today are interested in having a broad range of talents that are fungible, allowing the maximum flexibility.
My challenge, as a faculty member at Cornell University, is to have students be comfortable with uncertainty. They need to recognize uncertainty as the progenitor of options and to see the lack of determinism around them as an opportunity to succeed and to flourish. Economic systems, in this sense, are very similar to biological systems. In an environment without disruption, natural selection has already determined the winners and losers. In an environment where there is disruption of some type, new species can form and prosper. It’s no different in the economic and financial world. Disruptions are opportunities in disguise.
Time to rise
As Dr. Carvell advises, now is not the time to lose sight of the forest for the trees. Now is the time to embrace change and develop strategies to evolve toward becoming an intelligent enterprise for finance. That’s how you and your team can help your organization navigate the disruption, uncertainty, and risks that are to come – and those that may have already arrived.
If you missed Part 1 in this series, read it here. For more insight into the changing role of CFOs and how to stay ahead of the shift, visit The CFO’s Guide to the New Era of Intelligent Finance.
Why have AI, machine learning, predictive insights, and digital assistants become the must-have new tools of forward-thinking CFOs to drive business performance? Watch the Nov. 6 webcast.