The Next-Generation CFO: How Can You Succeed as A Strategic Leader in Today’s Complex and Volatile Business Environment?

by Myles Corson

To succeed as a strategic leader in today’s complex operating environment, financial executives will likely need to navigate three fundamental paradoxes.

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Financial executives are currently operating in an extremely complex, demanding, and volatile business environment. Today’s challenging macroeconomic backdrop is defined by higher interest rates, the looming threat of recession, ongoing talent shortages, a fast-moving digital revolution and heightened geopolitical tensions. Accordingly, the pressure is on financial executives to help their organization meet its objectives while simultaneously driving the transformation of their finance function and enhancing their own skill sets.

To succeed as a strategic leader in today’s complex operating environment, financial executives will likely need to navigate three fundamental paradoxes. These paradoxes have been highlighted by the 2023 Global EY DNA of the CFO Report, which provides an in-depth perspective on the challenges faced by financial executives. These paradoxes are as follows:

Paradox 1: Balancing near-term and long-term investment priorities

More than three-quarters (78%) of respondents to the EY research said that “effectively balancing trade-offs between short-term and long-term priorities is an important challenge for finance leaders”. This finding is hardly surprising given that a similar percentage of respondents (76%) revealed that the challenging market environment is intensifying the pressure on finance leaders to drive cost efficiencies and hit short-term earnings targets. 

To achieve efficiencies, 90% of surveyed finance leaders are planning to reduce or pause spending across key business areas, ranging from marketing to people development. As part of their effort to hit short-term earnings targets, half of respondents (50%) are cutting funding in areas considered long-term priorities for the business, with ESG programs being the most vulnerable to such cuts. 

The fact these decisions are being taken points to a fundamental disconnect between finance leaders and investors when it comes to companies balancing their short-term earnings with long-term value creation. Significantly, more than three-quarters (78%) of investors surveyed for the most recent EY Global Corporate Reporting and Institutional Investor Survey believed that companies should make investments that address create long term value relevant to their business, even if it reduces profits in the short term.

Paradox 2: Balancing risk with innovation and bold transformation

As stewards of their organization’s assets, finance leaders are rightly focused on effective risk management. At the same time, they know they must prioritize transformation if they are to build and maintain a high-performing finance function that helps to support the sustainable, long-term growth of their organization.

The research showed that when it comes to finance transformation, there is a lot of workstill to be done. Although a plethora of digital tools are available to finance functions, just 16% of finance leaders surveyed describe their finance function as best-in-class today. This explains why 37% of finance leaders will be prioritizing technology transformation over the next three years, with 27% focusing on advanced data analytics.

Concerningly, talent ranks at the bottom of finance leaders’ list of priorities, cited by just 19% of respondents. This is despite the pivotal role played by people during any transformation. In fact, research by the EY organization and the University of Oxford’s Saïd Business School suggests that finance leaders who consciously empower their people can more than double their chances of transformation success.

Paradox 3: Balancing the evolving role of the CFO with traditional skill sets

A senior finance role is often regarded as a steppingstone to the CEO position because of the strategic grounding and commercial experience it provides. In fact, nearly half (45%) of respondents to the research aspired to become a CEO in the long term. 

Yet, the reality is that many financial executives face a challenge around achieving their career ambitions because their traditional finance skill sets simply do not equip them with the breadth of experience they need to step up into a more strategic role. Unfortunately, their busy day jobs make it difficult for them to attain this experience as well. Over one-third (37%) of respondents to the research cited their biggest obstacle to personal development as “finding the time to build knowledge and expertise through exposure to external expertise and access to thought leadership."

It's not just their own development that finance leaders must worry about either. They also have responsibility for identifying and nurturing talent, including the next generation of CFOs. Yet, significantly, only 48% of non-CFO respondents to the research felt that their CFO invests enough time in mentoring. 

How to succeed as a strategic leader

Fortunately, there are ways for finance leaders to overcome these three paradoxes. Firstly, they should focus on their business impact, looking specifically at how they can develop a comprehensive strategy that creates long-term value for the organization while supporting the achievement of short- and medium-term objectives. They should also build trusted relationships with their C-suite colleagues and other senior leaders and provide data-driven insights that help their colleagues to achieve strategic goals.

Enhancing the performance of the finance function is also key to addressing the paradoxes. As well as investing in cutting-edge digital tools, including advanced data analytics, finance leaders should prioritize driving cultural change across the finance function. This involves tackling the ‘back-office mindset’ that is often associated with finance teams. Finance professionals should be encouraged to develop their business acumen, curiosity and digital expertise. They should also learn how to feel more comfortable dealing with uncertainty. 

To overcome the paradoxes they face, finance leaders should also invest in their own development, particularly in honing the interpersonal skills that will enable them to better connect with others. The research found that less than one-third of respondents (32%) always speak up when their opinion differs from the consensus. Yet to succeed as strategic leaders, finance executives need to be first-rate influencers, capable of influencing everyone, at every level of their organization, from the CEO and the board downwards. They also need strong communication skills so that they can articulate their vision and inspire their team to follow them through the transformation journey, which will be difficult at times.

The three paradoxes identified by the EY research undoubtedly present challenges for financial executives who want to establish themselves as strategic leaders. Simultaneously, they create huge opportunities – particularly for those financial executives who invest time in developing themselves and their people, and who feel confident driving bold and innovative change agendas. For finance leaders navigating today’s complex and volatile operating environment, overcoming the paradoxes will be the secret to their success. 

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms. 

Myles Corson is EY Global and Americas Strategy and Markets Leader, Financial Accounting Advisory Services