When uncertainty is on the menu

By in Business Trends, Opinion

CFOs have faced a lot of uncertainty in their area of responsibility in the past year, and will continue to do in the months ahead. Besides the usual fare such as responding to currency fluctuations, low interest rate environments and technological disruptions, a CFO’s menu includes those occasional but still striking events that they have to digest. In short order, they have faced Brexit, the Australian Federal election and the insecurity surrounding the upcoming US election.

Although those events might appear as a linear progression, as one disruption is followed closely by another, they can cause significant upheaval.  But what does all this uncertainty mean for Australia’s leading CFOs?  Does it impact their decision making?  Or is it simply business as usual?

“Not all those things [elections etc.] are treated as equal in our minds,” explains Aaron Canning, who has been CFO at Australian natural health care company, Blackmores since 2014. Blackmores has limited exposure to the UK and continues to view the market positively.

“The country still appeals to us but recent events have highlighted the risks associated with political and regulatory uncertainty. We will continue to adopt a cautious; perhaps wait and see approach,” Aaron says.

While the lead up to the US presidential election is having no significant impact on business as yet, that could change as a large proportion of Blackmores’ trade is conducted across Asia where a number of currencies are directly influenced by the US dollar. Depending on which candidate wins in the US, “it could be an uncertain time, particularly in the initial period.”

In Australia’s post-election world, Aaron would like to see continued investment in healthcare. “Blackmores supports continued focus and investment on preventative healthcare measures where there is evidence to show the benefits of complementary medicine, and their ability to ease the burden of growing public healthcare costs. Being proactive in the maintenance of health and well-being far outweighs the cost of treating the illness when it appears,” he notes.

Although CFOs face such uncertainty on a daily basis, what has altered is the speed of change. “Change is happening faster. Whether it be regulatory change in some of our markets or political and social instability, we need to be able to react quicker,” Aaron says.

The speed of change over the last few years has required Blackmores to become more nimble.  It has processes and systems in place that allow its executives to monitor the business’s programme against its long-term strategy, and make any necessary course corrections. This includes better access to real-time data, robust infrastructure supporting operations and strong local teams in the countries it operates in.

For Nimesh Shah, who has been CFO of media intelligence company Isentia since 2010, the latest political ructions are part of the constant change that CFOs face. “It’s been a terrific ride so far,” he says.

Since listing in 2014, Isentia has moved into the digitisation of main stream media and expanded into Asia, which accounts for 25 per cent of its current revenue. “You go through cycles in the listed market,” says Nimesh. “The key for me as a CFO is make sure you stick to your strategy.  If you stay the course, then the numbers over the long run will speak for themselves and the share price will take care of itself.”

Nimesh views regular communication with shareholders as key for a CFO in a public company. But he cannot achieve that alone. He lists having a good group financial controller responsible for governance and reporting as essential, together with a company secretary.  “These roles are important, because if the CFO has to do everything, then you can get bogged down in operational work and company secretarial matters,” comments Nimesh. Isentia also employs an investor relations consultant who is a conduit between Nimesh and shareholders. “She allows me to make the most efficient use of my time with shareholders.”

Making sure that shareholders understand the rationale behind the company launching new services into its markets is another of Nimesh’s core responsibilities. “When we moved into content marketing, we made sure that shareholders had enough time to understand that part of the business before we went in too deep,” he says.

“While you‘re running your own programme you want to make sure you are staying the course with your strategy, and communicating that well to the shareholder cohort; not chopping and changing all the time. “

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