LONDON - It’s not just truck drivers and nurses. The most acute labour shortage for many companies right now is the chief financial officer (CFO).
Assignments for CFO appointments across Europe, the Middle East and Africa are up almost a third on this time last year, according to executive-search firm Spencer Stuart. As inflation and higher interest rates signal the end of easy money, companies are seeking more from their finance directors.
However, good finance directors are scarce, according to Rebecca Morland, co-head of the global financial officer practice at search firm Korn Ferry. Given the average age of a CFO among companies in the UK’s FTSE-100 stock index is 52, few have ever dealt with such levels of inflation, combined with prospects of recession.
“The CFO is not just running the finance organisation, but they’re almost the deputy CEO, and in a lot of contexts they’re often the chief transformation officer as well,” Ms Morland said. “It’s quite a challenging, demanding time.”
No longer dull number-crunchers, CFOs now occupy the hottest seat in the boardroom. During the pandemic, they had to raise billions of dollars to shut down operations and furlough thousands of workers. Budgets were slashed and banks were asked to extend credit lines to keep businesses afloat. Now they need to deal with economic prospects few imagined before Covid-19.
Nestle‘s Francois-Xavier Roger said he doesn’t agree with the reputation of CFOs as mere bean counters. His job is to “stay calm” and take a long-term view. A critical part of the role is ensuring liquidity - and imagining every possible outcome.
At the start of the pandemic, Nestle didn’t need to raise money, but the finance chief secured credit lines anyway. “When we entered that crisis, we were not exactly sure of where the world was going,” he said. “As CFO, you need to prepare for the worst-case scenario.”
In the coming months, as businesses seek new funding, CFOs will increasingly find themselves having to prove their mettle. Banks will become more demanding on loan conditions. Credit’s much more expensive. Even the companies that were fortunate to raise money when rates were low will have to grapple with the challenge of investing to expand their businesses.
Nik Jhangiani, CFO of Coca-Cola Europacific Partners, made a tough call in mid-2021. While colleagues were convinced interest rates would drop further past rock-bottom lows, he decided to fix 100 per cent of the debt of the bottler of Coca-Cola in markets across Europe and Asia.
“I said at some point you’re going to be in a rising-rate environment,” the CFO said. “At that point, the cost of debt was still so low and attractive, why was I trying to crank it to get two or three more basis points, but putting ourselves more at risk?”
Today, the decision looks prudent. With central banks still raising interest rates, any company unlucky enough to be refinancing in the coming months faces a steep interest bill.
Esben Christensen, a managing director in turnaround and restructuring at the consultancy AlixPartners, said CFOs would play more of a leading role as the focus shifts from a company’s profit and loss account to cash and liquidity. “When we have a restructuring, the person that people really want to talk to is the CFO,” he said.
While the role has changed significantly since Lavanya Chandrashekar, CFO of Guinness-brewer Diageo, began her career, there is one key responsibility that has remained constant - a firm grasp of a company’s finances. “The part that can never go away is controllership,” she said.
The departure of a CFO can often come when a company is experiencing financial turmoil. On Jan 13, the gambling company 888 Holdings announced CFO Yariv Dafna would step down after only two years. Since 888 bought the international assets of British bookmaker William Hill for £2.2 billion (S$3.9 billion) in September 2021, 888’s shares have fallen about 80 per cent.
“It’s not for the fainthearted,” said Korn Ferry’s Ms Morland. BLOOMBERG
