How to see around corners

The best CFOs can’t predict the future. They’ve learned to get ready for a number of different ones

If you’ve read any content about “the modern CFO” lately, you’ll have noticed a recurring theme: the CFO who can see around corners. The one who spots what’s coming, calls it early, and steers the business to safety.

Let’s be honest: that’s not how CFOs operate. And I don’t think anybody should be expecting their CFOs to be able to predict the future. But here is something they can do: get their business ready for a number of different futures.

The real challenge: speed and scenario planning

In plenty of organisations, Finance is still seen – and sometimes behaves – primarily as a narrator of the past: they close the books, explain variances, and produce forecasts (which often become obsolete as soon as they’re published).

It’s a corner that many business leaders put Finance professionals in. And it may cause them to wonder: if Finance disappeared for six months, would the organisation’s strategy really suffer? Or would they just be late with reporting?The elephant in the room is that, of course, reporting matters. But it doesn’t help answer the crucial questions that are being asked around the boardroom table when the business has to make the big calls, fast. Forward-looking CFOs understand this. That’s why they’re transforming their Finance departments from a reporting function to data-driven centres for decision support.

How to actually “see around corners”

Help with decision-making is what I believe “seeing around corners” really means: not knowing what will definitely happen next but making the best and most informed calls on things that could happen – without waiting three weeks for a report to be ready. It’s a lot less mysterious than the former and much more practical and systematic. That’s what Integrated Business Planning (IBP) helps complex organisations do. For instance, it can map out different scenarios by connecting data sources from across the business (e.g. from supply chain, workforce, sales, manufacturing) to answer questions such as:

What could plausibly happen? (e.g. if our supplies get stuck in the Suez Canal for 3 weeks in March?)
What would it mean for us if it did? (e.g. how quickly would we have to stop production?)
What choices do we have before it happens? (e.g. what other suppliers can we activate?)
And what do we want to put in place now, so we don’t have to panic later? (e.g. which framework agreements should we negotiate?)

This goes way beyond risk management

This has got nothing to do with crystal balls, and everything to do with informed foresight. At the heart of connected planning are two sets of variables: external forces you can’t control (e.g. interest rates, inflation, geopolitics, competitor behaviour, etc) and internal levers you do have control over (e.g. pricing, hiring strategy, investments, product mix, etc). The value that an IBP-empowered CFO adds isn’t predicting the external forces perfectly. It’s connecting them to the internal levers early enough so that the business can respond before the pressure hits.

Traditionally, we’ve been calling this risk management. I believe that’s selling it short. While protecting the business is part of the job, there’s always an upside benefit, and that’s about seizing opportunities, i.e. answering the question “where can the business win under different scenarios?”

Imagine walking into a board meeting and saying: “We’ve stress-tested against five plausible scenarios. Here’s what breaks. Here’s what holds. And here are our options if scenario B happens”. When you do this, you’re not making mysterious predictions. You’re talking about actions, timing, and trade-offs – the things that actually determine outcomes.

The CFO as the connector of the organisation

In my mind, CFOs are better placed to take on this role than anyone else in an organisation. That’s because no other function across the business has the same ability to understand data and reporting as Finance – and to own strategic business data. Once you’ve learned to apply the type of rigour to your financial data that will make it robust enough for reporting and external audits, you know what quality you expect from data that’s good enough to base business decisions on – whether that’s capital investment or cash flow, or sales plans, supply considerations, and hiring strategy.

It’s worth remembering this and taking a renewed pride in it, especially in these times, when unprecedented volumes of data and macro-economic unpredictability are washing into businesses every day. And hopefully, it will help CFOs refresh their commitment to turning their departments into the decision-support centres their organisations need – to see around corners, steep price increases or supply chain squeezes.

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