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How Can A Bond Between The CEO And CFO Drive Sustainability?

Driving sustainability through communication between CEO and CFO

5Oct

Despite many companies setting innovation and growth as their priorities, there are factors that can distract them from retaining this focus throughout their business journey. The business environment is unpredictable and is infused with high risks associated with increased competition, changing consumer behavior, and political uncertainties. Businesses are often forced to sacrifice their innovative goals in favor of stability, using a low-cost strategy. However, a low-cost strategy shouldn't have a negative meaning as with the right vision it's capable of accelerating growth.

The C-suite is responsible for critical strategic decisions in the company and it's often their lack of confidence that holds back potential growth. The problem comes from the inability to distinguish between making running a company cheap and making a company sustainable. Ideally, cost cuts would free funds for their further allocation in growth investment, but according to the Accenture study, most of the seniors feel that it's too complicated to align growth and cost reduction. Consequently, free funds may be available but executives are not adventurous enough to allocate them wisely. What can be done?

If a CEO is the key decision-maker, a CSO is responsible for strategy, the CFO is the person to come to when aligning your strategic costs and growth investments. This collaboration in the C-suite is capable of great results, but all parties need to ensure they are not harming the company with cost reduction, but only making it fit for future growth.

The CFO role has recently undergone significant changes, because today, aside from dealing with corporate finance and balance sheets, the role has acquired a strategic skill set, making CFOs highly valuable assets. According to the insight from McKinsey & Co, they believe that it's crucial to have CFOs involved deeply in the strategic processes. Among the reasons is the fact that usually, the CFO would already have a sit on the board, enabling them to influence or encourage decisions. The second reason lies at the core of the CFO's direct responsibilities and includes the unique understanding of key financial metrics and the ability to evaluate a situation according to market behavior. So if a company decides to reduce costs but still aims for growth, it's the CFO to speak to first.

A growth strategy is strongly correlated with making a company sustainable, meaning that any cost reduction should benefit corporate ecosystem and by no means harm it. The lack of communication between CFOs and CEOs is among the key reasons why the latter may struggle with decision making and alignment of a strategy. In today's business environment, C-suite roles become increasingly cross-functioning, meaning that without communication, a broader transformation of the operating models would drive poor results, where instead of sustainability the company will only become cheap to run, but unstable.

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Heinz

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