UK: Seven Steps For CFOs To Stay Ahead Of The Curve

Last Updated: 23 July 2013
Article by Deloitte Financial Services Group

Most Read Contributor in UK, August 2017

In an article for Financial Director Magazine I provided advice on the areas that CFOs should be thinking about this summer.  I have shared a summary of the article here.

What CFOs should be thinking about this summer
Britain has been mired in its longest peacetime recession since the Great Depression. There are however early signs that the economy began to pick up over the last six months and the results of our latest Deloitte  CFO Survey are surprisingly strong.

For British companies, that have spent the four years since the financial crisis in a hiatus of uncertainty, the temptation is to do nothing until the UK economy definitively improves and the Eurozone's problems are resolved one way or another.

Yet large British companies both listed and private, are facing challenges they need to address - as well as opportunities they should grasp - right now. I have prepared a seven-point checklist of what CFOs should be thinking about this summer:

1 - Staying liquid: Scaling the refinancing wall
A formidable wall of debt maturities will hit the markets in the period leading up to 2015. If I were a CFO, the thing I would have on my radar would be looking carefully at my debt maturity profiles and ensuring access to facilities over the next five to seven years.

2 - Cash piles: Making them work
While some companies are facing a liquidity crunch, others have been conserving cash since the financial crisis. The Deloitte 2012 UK Working Capital Performance Study revealed that excess working capital held by UK plc has risen to £64bn. CFOs need to consider where to put that money to ensure that they get a good interest rate for balances.

3 - Zombies: Bringing them back to life
One of the biggest hangovers from the credit crunch is the emergence of so-called, "Zombie Companies" - operationally sound businesses, which were acquired or refinanced in the boom times and saddled with a debt burden that can never be repaid in full. The solution for Zombies is for their loans to be allowed to work their way out of the financial system over time. Over the next three years or so, financial institutions will be obliged to de-leverage their balance sheets.

4 - Planning for uncertainty: Eurozone
The number one issue for my clients remains the preparedness and resilience of their business to negative developments in the Euro area. CFOs can better prepare for risk by:

  • Separating the time horizon to look at shorter-term risk mitigation activities versus longer-term, strategic considerations.
  • Ensuring there is a robust and considered assessment of both the upside and downside risks to be managed.
  • Finally, it is important to develop a pragmatic and achievable approach where management time and company resources are effectively allocated to support the company's response.

5 - Good housekeeping: Sweeping away old problems
For CFOs who do not have the cash - or desire - to expand, a recession provides opportunities to control costs; make economies of scale and position their companies for growth. This is an opportunity to reconsider older acquisitions and how they were integrated, as when looked at, particularly with the benefit of hindsight, it is often clear that more could be done and that there will be a better understanding of the acquired organisation.

6 - Opportunism: Positioning for growth and acquisitions
After four years of cost-cutting, cash-rich companies should now be positioning themselves for an upturn as well as considering strategic acquisitions that can deliver economies of scale in a low-growth environment. Business has accepted the new economic reality is here to stay. In conditions where even modest organic growth is hard to achieve, CFOs and corporate leaders need to consider inorganic growth opportunities, otherwise they risk squandering their hard won gains.

7 - Global strategy: Looking beyond Europe
New Deloitte UK Futures research shows that UK big business (with annual revenue in excess of £1bn) is looking overseas for growth and 75% of large UK companies expect to be either a global leader - i.e. within the top three in their industry worldwide - or an international company - having over 50% revenues coming from foreign markets - within the next five to ten years.

In a dynamic, globalised economy, simply staying still is just no longer an option. CFOs must stay ahead of the curve, not only addressing any problems before they occur, but they must take advantage of the current business environment. These seven areas should be priority for CFOs, while maintaining their sound approach to making big business decisions.

Read the full Finance Director Magazine article.

Marcus Boyle
Partner, Head of UK & EMEA Finance Transformation
Marcus has 20 years consulting experience and is the partner in charge of Finance Transformation in the UK & EMEA. Marcus has published a number of articles and papers and is often quoted in the press on how CFOs can successfully transform their finance functions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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