How CFOs help their CEOs sleep better at night

Each year since 2021, KPMG has produced their "Keeping Us Up at Night: The Big Issues Facing Business Leaders" report. Its purpose is to outline key themes and challenges that Australian business leaders face as they navigate an increasingly complex and uncertain global landscape.

Typically these themes reflect both the external pressures and internal challenges they face in adapting and thriving in the ever changing context.

While the key highlight in the report is always the "Top 5 challenges" infographic (below), the primary themes that emerge throughout the 2024 report are:

1. Cyber Risks: Unsurprisingly cybersecurity emerges as a key concern, with business leaders increasingly recognising the need to protect their organisations against cyber threats. A cyberattack is a 'when, not if' scenario, and business leaders consider it a top priority to prevent the type of high profile breaches exprienced over the past 12-18 months.

2. Talent Management: The acquisition, retention, and upskilling of talent for a digital world features once again in the top 5 but slightly less pressing than in previous years, possibly due to the influx of migrants and the temporary alleviation of talent shortages.

3. Regulatory Challenges: Navigating evolving regulatory processes and reporting changes remains a top concern for business leaders, reflecting a broader anxiety about compliance and the need to adapt to a changing regulatory landscape.

4. Cost Control in an Inflationary Environment: Managing costs amidst inflation has become a top-five priority for the first time, indicating the growing impact of economic conditions on business operations, continued strain for the consumer and therefore the need for effective financial management strategies.

5. Digital Transformation: The pursuit of digital transformation and the optimisation of organisational value through technology continue to be identified as key challenges, underscoring the importance of innovation and the adoption of digital technologies in driving business success.

6. Emerging Technologies: New technologies, such as AI, machine learning, blockchain, and quantum computing, significantly disrupted the market and as all organisations attempt to get and stay up to speed, it represents both challenges and opportunities for future growth and innovation.

7. Geopolitical Disruptions and Social Challenges: Those surveyed express concern over geopolitical disruptions, the social impact of disruptive technologies, embracing the opportunities presented by climate change and energy transition, and preparing for a future skills gap. These issues reflect the broader societal and global challenges that impact business operations and strategic planning locally in Australia.

8. Technology as a Common Thread: The role of technology is fundamental issue that influences all other challenges, acting as both an enabler and a source of risk. Once again, KPMG recommends a collective recognition among C-suite leaders of the need to harness technology for competitive advantage while also managing its complexities and threats.

I might not need to say it, but I will. All of these issues sit within the scope and remit of the CFO.

How you react determines how you respond

You'd be forgiven for feeling your heart sink to your stomach as you read the above summary and you wouldn't be alone if that was closely followed by a surge of adrenalin as you kick into action-mode.

STOP!

The quality of your response is determined by the quality of your reaction.

Contrary to popular belief, reacting and responding are not the same thing. In fact, there is an important moment of exposure that happens at the juncture of the 2. And that is the Juncture of Decision.

The Juncture of Decision is where thoughts turn into actions.

We know that the best thoughts without actions are simply dreams, and actions without thought are just dangerous.

If we were to stop short at the Juncture of Decision and simply react to the above list, we might move forward and create projects to tackle each of the above, all with project teams and steering committees. Sound familiar?

What would be different if we passed through the Juncture of Decision and responded accordingly?

We would engage our System 2 thinking, as articulated in Nobel Prize winner Daniel Kahneman's Thinking fast and slow. We would not be distracted by our automatic thoughts (aka our monkey mind) and find clarity with intentional thought. Finally, we'd stay strategic, and not be dragged down by tactical thoughts.

What do CFOs need to help their CEOs find the signal in the noise?

There are 3 key resources that CFOs need to be more resourceful in how they think and how they act. Said another way, they need 3 resources to walk through the Juncture of Decision:

1. Time: to think slow, you need the time to slow down your brain and deepen your thinking.

2. Energy: being intentional takes energy. Nothing happens by default or by accident.

3. Space: thinking big picture requires space. Space the brain, space around your body.

(P.S. Your CEO needs that, too.)

The truth: there are really only 2 challenges

While each of the 3 reports KPMG has produced annually list a multiple of challenges that would send a shiver down any executive's spine, when you take a better look at the list, really only 2 challenges exist: regulatory and resources. Everything else is detail.

We know the world is full of noise. Those CFOs that have the greatest impact are those who have mastered the skill of avoiding distraction and have an innate ability cut through the noise.

Which is why I want to empower you with the insight that there are really only ever 2 questions to answer:

How are we adapting to the changes in our regulatory environment? and How are we optimising our resources?

(There's actually a third, not contemplated by KPMG's reports and tCFO Leadershat is: 'How are we ensuring that we deliver an acceptable return on our investment decisions?'...but that is the topic of another article.)

How could you innovate the impact of your actions?

How can you elevate the outcome of your actions?

How will use the Juncture of Decision to do so?

Love to hear your thoughts...