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A Leading Role

The evolving role of the CFO

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The last three years have tested the UK’s CFOs more than any other period in recent history. As a decade and a half of unbroken growth came to an abrupt end in September 2008, many finance directors were faced with the first significant crisis of their careers. For some, the shock was too much. For others, it was a challenge to be met head on.

The central challenge for a whole generation of CFOs changed overnight from that of overseeing sensible growth to ensuring that the business was still there in the morning. Mark Freebairn of Odgers Berndston is the leading headhunter of CFOs for large corporates in the UK. In his view, the seismic shock of the financial crisis presented many of today’s CFOs with their first major test.

“It’s a sweeping statement, but look at the FTSE, where most businesses grew from about 1995 to 2007,” he says. “And then suddenly Lehman’s goes pop and most FDs were looking at it thinking, ‘I’ve never seen my growth decline, how do I deal with this, with the shareholders and the board’? The good FDs learnt on their feet. The poor ones struggled and got replaced.”

Test Your Mettle
John Nicholas was FD at Williams Holdings for 12 years before a stint heading up finance at Tate and Lyle. He’s now pursuing a portfolio career as a non-exec and chair of several audit committees. He agrees with Freebairn that the crisis did test the mettle of finance professionals generally, and that as a result, CFOs have been forced to temporarily shift their focus back to the fundamentals as the economy slumped and times became tough.

“Part of the reason for that is simply the economic environment we’re in: the nuts and bolts need to be managed. So for the CFO that becomes all about whether the business is a going concern, does it have the debt facilities necessary to keep going, is it going to breach its covenants?” he says. “For CFOs at the moment there’s now a lot of focus on risk management and as a result all of that has pushed the role back to the technical side.”

However, Freebairn is sure that the shift from strategist to technician is not one likely to remain unchallenged.

“It’s certainly not permanent, not for the FD,” he says. The headhunter argues that the breadth of FD responsibilities gained from two decades of expansion won’t force a reversal of the role overnight by a market correction.

“There’s always been the demand for technical focus, but there’s more of it now because of nervousness about integrity of information and the desire not to worry investors by being perceived to have something funny going on,” he says.

“That need has always been there, but if you’ve grown profits by 10% each year, and the share price has doubled in the past four years and you say we’ve added something up wrong, and we just need to restate the numbers but it’s all good, then the investors will think, ‘idiot, but never mind.’ But if you turn around and say ‘we’re declining 10% year on year and we’ve got the numbers wrong’, then you’ve just shattered the whole business story and it takes two or three years to get back.


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