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Three ways CFOs can drive value for the business

The role of CFO has grown exponentially in recent years. While traditional CFO roles may have focused on being the gatekeeper and scorekeeper, the exponential CFO helps set the vision, advises on strategy and steers execution. If one part of this growing role stands out from the rest, it is enterprise value creation. Creating value isn't straightforward. With investors, partners, employees, customers and other stakeholders all placing their own demands on a business, making decisions to drive enterprise value involves deftly managing trade-offs and tensions across a broad range of risks and rewards. That's why the risk-balanced, capital-informed perspective that CFOs can bring is crucial for pushing through uncertainty and paralysis to unlock the most optimum path forward. But what does this path actually look like? Deloitte's recent The CFO Value as a Value Driver report suggests the top value levers for CFOs include managing cash and capital, shaping the cost curve, and accelerating growth. Independently valuable, these three priorities can also reinforce one another in a dynamic interplay that boosts value creation. Accelerate Growth When it comes to increasing the pace of growth, simply going 'bigger' isn't the whole answer. It requires a careful assessment of the organisation's priorities, willingness to absorb costs, and go-to-market practices, alongside a clear view on where the growth opportunities exist. Those opportunities can come in different forms. Business model transformations, for example, can boost efficiency and resiliency while capitalising on product or market synergies. Channel optimisation can help develop a more loyal customer base by creating better interactions and richer experiences. Kate McLean is Finance Transformation Leader, Deloitte Australia Entering new markets can be risky, but the risk can be minimised through a joint venture — particularly if the JV links previously unlinked sectors, meaning the potential for growth is high. Meanwhile, product diversification can not only help grow the top line, but also insulate against downturns or losses in existing lines. No matter what path is taken, all growth opportunities have flow-on effects on the other two value levers: growth changes the cost base and can free up or tie up capital. CFOs need to be able to see all sides of the equation and keep things in balance to achieve the best outcome. Shape the Cost Curve One practical example of this is the way a CFO approaches cost cutting. It's common for CFOs to be instructed by their CEO to focus on managing and reducing cost, but the way that's done can have consequences on capital flexibility. As part of a value creation agenda, some CFOS may need to shift their thinking from 'taking costs out' to 'keeping costs out'. Rather than making sporadic cuts in the moment, the organisation should tighten up visibility, supplier terms and technology commitments to pursue sustainable, structural change. However, making diligent and structural cost reductions brings its own challenges. When it's clear on the page that different operational areas need to be trimmed differently, it may feel 'unfair' to some around the table. Stature and buy-in are needed to make those decisions with authority. A CFO who establishes and manages expectations while using leadership and communication to embed them across the enterprise can instil permanent discipline that may even last longer than their tenure at the company. Manage Cash and Capital The connection between costs, growth, and capital is clear: it's the deployment of capital that fuels growth. But the resources you have are only as valuable as the uses you put them to. Every line-of-business leader in an organisation wants more capital investment to grow, and each one can usually argue a good case in their favour. CFOs need the ability to weigh a limited capital pool against unlimited demand to assess where returns will likely be the greatest. CFOs should develop a value-centred rational framework aligned with enterprise strategy-guided investment decisions over a one-off, in the moment approach. Long-term aims should be balanced with short-term objectives using a 'portfolio-like' approach that groups investments to match priorities. This can help CFOs detach capital decisions from the annual treadmill, making capital investment a focus of constant attention and decision-making rather than a big yearly number that no one can question or change. This approach can also improve communication to capital markets and investors by providing them with more granular detail in forward-looking guidance about investment and return on equity. Another option is to allocate investment in accordance with strategic goals, one at a time. Doing things across the board may be simple to administer, but also may overlook areas of growing or diminishing need. By recognising and managing the interplay between accelerating growth, shaping the cost curve, and managing cash and capital, CFOs will play a crucial role in driving value at their organisations. But although CFOs are expected to do more and more in this area, it's not something they can do alone. CFOs will need the buy-in and collaboration of the C-suite, the finance function, and the broader business to succeed. This means establishing themselves as trusted leaders with strong people management skills and a compelling vision for where they want to help take the company, and how. Kate McLean is Finance Transformation Leader, Deloitte Australia. - Disclaimer This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ('DTTL'), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. 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