I like to learn new words. perpetual crisis It has been selected as the 2022 word of the year by the British Collins English Dictionary. It’s defined as “a prolonged period of instability and insecurity, especially as a result of a series of catastrophic events”—essentially, a word that describes what it’s like to live in difficult times. Whether or not CFOs are familiar with the term, they undoubtedly know what it entails and deal with its implications on a daily basis.
According to the results of a recent global survey conducted by Protiviti and North Carolina State University’s Enterprise Risk Management Program, global uncertainty, disruption, talent, culture…these are the immediate and long-term challenges that CFOs consider. The study assessed The key risks considered by global leaders in 2023 and the decade ahead (through 2032).
CFO respondents share board members and CEOs who see a range of people, talent and culture issues as the top risks facing their organizations over the next 12 months, even amidst uncertain economic growth, inflation conditions, continued supply The same is true in the context of chain challenges, geopolitical changes on a global scale, and continued concerns about cyber threats and ransomware attacks. Over the next decade, these issues are compounded by fears that the growing pervasiveness of digital technologies and the rapid pace of disruptive innovation will exacerbate talent and skills shortages and disrupt, if not overturn, current business models.
Below is a breakdown of the notable challenges CFOs see in the short and long term.
people and culture
With talent and culture-related risks dominating CFO risk priorities for 2023, finance leaders must add talent management to the growing number of organizational priorities they help shape while driving corporate strategy. Challenges related to people and culture come in many forms. Most notably, in the face of impending disruption, CFOs see resistance to change across the workforce as a formidable barrier to organizational performance and success—which can lead to strategic failure. In these rapidly changing times, this risk speaks to the need for trust, transparency and effective strategic communication.
In addition, CFOs worry that the organization’s culture may not sufficiently encourage the timely identification and escalation of important market opportunities and emerging risk issues. These flaws in the culture can prevent an organization from acting as a first mover when new opportunities for growth or expansion arise, potentially resulting in missed strategic opportunities. This risk warrants attention because it is critical for CFOs and their peers to stay in touch with business realities both on the front lines and in the back office.
Other people-related priorities for CFOs involve attracting and retaining top talent and rising labor costs—challenges that CFOs believe can limit their organizations’ ability to meet operational goals while meeting profitability goals. This organizational issue affects everyone, including the financial organization. Finally, finance leaders are prioritizing three “future of work” risks: fundamental changes in the overall work environment (e.g., expansion of the digital workforce); meeting employee preferences for remote work and/or collaborative hybrid work environments; and organizations adapting their operations capacity to adapt to the evolving “new normal” driven by ongoing pandemics and emerging societal changes. These risks require a reimagining of recruitment and retention. They limit access to needed skills and could ultimately hinder efforts to improve operational efficiency and efficiency unless steps are taken to upskill and reskill existing workers and fully align the workplace with employees’ preferences.
A related concern for CFOs is the lack of organizational resilience and/or agility to manage unexpected crises. With uncertainty abounding, most people realize that it is not a question of if the organization will face a crisis, but when it might happen. Preparing today for tomorrow’s crisis makes good business sense. While this is largely a cultural issue, it also involves organizations modernizing their legacy systems and embracing innovative and emerging technologies.
Technology Disruptions and Disruptors
The CFO’s 10-year outlook heralds an era of disruption ahead, particularly in terms of the rapid pace of disruptive innovations brought about by artificial intelligence, digital currencies, the metaverse, quantum computing, and other advanced technologies. Not surprisingly, a key issue again centers on talent: CFOs recognize that the adoption and optimization of emerging technologies depends on the organization’s ability to acquire new skills that are either in short supply or require comprehensive reskilling of existing workforces Upgrade and retrain.
CFOs also say that the rapid pace of disruptive innovation may outstrip their organizations’ ability to properly manage these risks, and even outcompete, without requiring wholesale changes to existing business models.
Finally, CFOs of many companies are concerned that their organization’s existing operational processes, internal talent, legacy IT infrastructure, lack of digital expertise and/or insufficient digital knowledge and proficiency could lead to negative consequences. Potential outcomes include failing to meet performance expectations related to quality, time-to-market, cost, and innovation as competitors—companies that are “born digital” or invest heavily in leveraging technology to gain a competitive advantage—raise performance standards. These risks support an ongoing narrative that the 2020s will indeed be a tumultuous decade.
Supply Chain Uncertainty
Another issue of high concern to CFOs in the coming year is the supply chain. According to CFOs, ongoing supply chain uncertainty—including key supplier viability, supply, energy shortages, unpredictable transportation and distribution logistics issues, and/or lack of price stability in the supply chain ecosystem— May result in difficulty in delivering the product or providing the service at an acceptable profit. Fragile supply chains are not a new problem, but recent overlapping global crises have convinced many boards and C-suite executives of the need to rethink long-standing supply chain risk management strategies and capabilities. An overarching goal in developing a new approach to supply chain risk management is to replace the dominant focus on low-cost sourcing with a more disciplined, holistic approach centered on fostering resilience and reliability in the face of ongoing global turmoil. CFOs also recognize that supply chain strategies need to be reworked to integrate climate change considerations with other ESG matters.
Yes, the word is perpetual crisis, both now and in the future. The level of uncertainty and speed of change in today’s global marketplace continues to generate a wealth of potential risks that can disrupt an organization’s business model and strategy in a short period of time. The message of our current research and the research we’ve conducted over the past few years is that uncertainties are here to stay. For today’s CFOs, keeping abreast of emerging risk issues and market opportunities has become leverage in enabling the finance function to play an important role in improving organizational resilience and shaping long-term success.