Sustaining Business Margins And Delivering Financial Performance

Emerging Role Of CFO As Strategic Partner

Fierce competition in today’s global markets, the sky limit expectations of customers, yet sustenance of business margins and delivery of financial performance to meet expectations of investors have put the CFO's role on the hot seat and repositioned his role from mere number cruncher to ‘Strategist or Financial Architect’.

In current turbulent times, it is imperative for CFOs to be in a strategic partnering  role with the CEO. Thus, increasing the need to demonstrate his visionary leadership, and innovative and strategic execution skills while displaying ever greater levels of perseverance and adaptability.

Though traditional finance skills of analysis, reporting and control are still crucial, the job of the CFO is broadening far beyond mere functional expertise into a role which is more strategic and persuasive. In brief, the role of a CFO is extending from ‘Governance’to ‘Guidance’. Newer  areas where CFOs add significant values comprise of ‘capital budgeting’, ‘Risk Management’, ‘Customers Profitability’, ‘Business development’, ‘M&A support’, ‘Pricing Strategy’, New product development (NPD) and competitors mapping and analysis.

Financial Transformations

Years of high costs and disappointing sales have caused pathetic decline to business value, resulting in  the employee’s morale being low, shattered confidence of customers and suppliers, with mounting losses and sinking cash flow, the company could not even repay its loans regularly.

In hindsight, CGL had invested heavily on new manufacturing facilities resulting in under-utilization which caused strain on profitability and free cashflow.

CFOs Strategic Actions In Partnership With The CEO

a) A de-novo aggressive review of business portfolio and investments in subsidiaries/ associate companies to facilitate exit decisions, which did not align with CGL strategic Business intent and core competencies.

b) Sale of non performing assets in form of land, factory, buildings and residential flats, etc. in view of downsize and relocation of plants.

c) Raised funds (over 60 Cr.) despite no leveraging capability and acceptable security, to meet statutory obligations of VRS payments and provide lifeline support to critical operations.

"The role of CFO is extending from Governance to Guidance"

d) Other strategic initiatives when I was extensively involved as CFO included contributing on organic growth of CGL i.e., setting up newer manufacturing facilities (motors, stamping, fans and lights). The process included investment evaluations, optimization plans for revenue,  cashflow and tax.

e) On inorganic side, taking key lead role by evaluating several M&A initiatives to facilitate key decision making process. This has resulted into first outside India acquisition in the history of CGL i.e., Bdguim based Pauwels Group, Hungary based GANZ Translocation and Ireland
based Microsol.

f) Next item on the agenda was to generate better ROI or positive EVA. A formal EVA incentivisation process was introduced by CFO. To exemplify, a lot of businesses were over  dependent on the Government and semi government bodies that were paying for the goods after 150 days even longer.