Not just truck drivers and nurses are affected by this. The position of chief financial officer is proving to be the most difficult for many businesses to fill right now.
According to executive-search agency Spencer Stuart, there has been an approximately thirty percent increase in the number of assignments for CFO jobs across Europe, the Middle East, and Africa compared to this time last year. Companies are expecting more from their finance directors in light of the fact that rising prices and interest rates herald the end of the era of easy money.
“The COVID epidemic underlined to many CEOs that their CFOs were technologists, rather than leaders in a crisis,” said Chris Gaunt, who leads Spencer Stuart’s financial officer practise in Europe. Gaunt is responsible for leading Spencer Stuart’s financial officer business in Europe.
Recently, there have been a significant number of job reorganisations as a result of companies’ efforts to modernise their operations. Eoin Tonge left Burberry Group Plc to join Associated British Foods Plc, which is the parent company of Primark, and Julie Brown made the decision to leave Burberry Group Plc in order to work for GSK Plc. Asos Plc is looking for a new Chief Financial Officer, and Ahold Delhaize is hiring because Natalie Knight is pursuing an opportunity in the United States.
However, according to Rebecca Morland, who is the co-head of the global financial officer practise at the search firm Korn Ferry, good finance directors are difficult to come by. Given that the average age of a Chief Financial Officer at a company included in the FTSE-100 stock index in the UK is 52 years old, very few CFOs have ever dealt with such high levels of inflation in conjunction with the possibility of a recession.
According to Morland, “the CFO is not just running the finance organization; they are almost the deputy CEO, and in a lot of contexts, they are often the chief transformation officer as well.” This statement is based on the fact that the CFO is responsible for more than just running the finance organization. “This is truly a difficult and stressful period,” the speaker said.
CFOs are no longer relegated to the role of dull number crunchers; rather, they now occupy the most desirable seat in the boardroom. During the pandemic, they were required to collect billions of dollars in order to suspend operations and place thousands of employees on unpaid leave. To keep companies from going under, their budgets were slashed, and the banks were asked to increase their credit lines. Now, they are faced with economic prospects that very few people could have envisioned before COVID-19.
Keep Calm
Nestle SA’s Francois-Xavier Roger stated that he disagrees with the notion that chief financial officers are only accountants. It is his responsibility to “be cool” and think long-term. Liquidity management and scenario planning are two important aspects of the function that are essential to its success.
Even though Nestle did not require more funding at the beginning of the pandemic, the chief financial officer went ahead and acquired credit lines. “When we entered that crisis, we were not exactly sure of where the world was heading,” he added. “We were not precisely sure of where the world was headed.” “As CFO, you need to make sure that you are always prepared for the worst possible outcome.”
As time goes on and companies continue to look for new sources of capital, chief financial officers will find themselves under growing pressure to demonstrate their worth. The terms and conditions of bank loans will grow increasingly stringent. The cost of credit is significantly higher. Even firms that had the good fortune to be able to raise capital during periods of historically low interest rates will have to contend with the difficulty of investing in order to expand their operations.
In the middle of 2021, Nik Jhangiani, Chief Financial Officer of Coca-Cola Europacific Partners Plc, was tasked with making a difficult decision. While his coworkers were sure that interest rates would continue to fall below historically low levels, he made the decision to resolve one hundred percent of the debt owed by the bottler of Coca-Cola in all of the markets across Europe and Asia.
The CFO stated, “I told you earlier that at some point you’re going to be in an environment with rising rates.” “At that time, the cost of debt was still so low and attractive; therefore, why was I trying to crank it up to get two or three more basis points, but putting ourselves in a more precarious position?”
As of right now, the choice appears sensible. Any business that has the misfortune to be refinancing in the next few months is in for a rude awakening in the form of a hefty interest bill given that central banks are still working to raise interest rates.
The manufacturer of Sensodyne toothpaste, Haleon Plc, went independent from GSK in July and raised £9.2 billion ($11.3 billion) in debt in March 2022. The average maturity of these bonds was just over eight years. Only one-fifth of the debt is variable, while the other portions are fixed at their respective rates. The next significant refinancing for Haleon is scheduled for the year 2025.
Scenario Planning
According to Tobias Hestler, the CFO of Haleon, the majority of his job consists of scenario planning.
Hestler stated that he did not believe anyone could have predicted the turmoil that was caused by the United Kingdom’s September mini-budget, which resulted in an increase in the cost of borrowing money. At this time, Hestler is concerned about COVID in China and is making preparations for when global inflation decreases.
He said, “We assume that we’re hitting the peak, and it’s going to come down in the second half of next year, but then how quickly it comes down requires some scenarios.” “We assume that we’re hitting the peak, and it’s going to come down in the second half of next year.”
Hestler is attempting to cut costs in areas such as advertising, and he stated that the business is on track to reduce its debt to a level that is less than three times Ebitda by the time 2024 comes to a close.
According to Gaunt of Spencer Stuart, boards are currently looking for finance directors who are more equipped to deal with crises. They have discovered that their current chief financial officers are more of an “easy top-line growth person” than a “genuine challenge of leadership, rise-to-the-occasion person.”
The focus will shift from a company’s profit and loss account to cash and liquidity, according to Esben Christensen, a managing director in turnaround and restructuring at the consulting firm AlixPartners. Christensen predicted that chief financial officers will play a more prominent and decisive role in the coming years. He stated that whenever there was a reorganization, the chief financial officer was the person everyone wanted to talk to the most.
Changing Role
Since Lavanya Chandrashekar, the Chief Financial Officer of Guinness-brewer Diageo Plc, began her career as a CFO, the role has undergone significant change; however, there is one primary responsibility that has remained the same: having a solid understanding of a company’s financial situation. She stated that the controllership was the component that could never be eliminated.
When a corporation is suffering financial difficulties, it is not uncommon for the Chief Financial Officer to resign. The gambling corporation 888 Holdings Plc announced on January 13 that CFO Yariv Dafna would step down after serving in that role for only two years. 888’s share price has dropped by almost 80 percent since September 2021, when the company paid £2.2 billion to acquire the international operations of the British bookmaker William Hill.
Morland, from Korn Ferry, was quoted as saying, “It’s not for the fainthearted.”