Chief financial officers (CFOs) around the world have now been at the coalface of economic turmoil for four years. They have been buffeted by the European debt crisis, US economic uncertainty and, in some jurisdictions, political instability. They are now bracing for the flow-on effects of the slowdown in China.
In this special report, INTHEBLACK spoke to CFOs at listed and private companies across Europe, the US and Canada, Asia and Australia to learn how they’ve coped.
We asked them to explain the impact the economic shockwaves have had on their balance sheets, how the turmoil has redefined their approach to risk, how they have shifted their focus, adjusted their processes and resources and how they see future.
The impact was not evenly spread. Australia’s national carrier, Qantas, while boasting exemplary risk management, is bedevilled by continually rising operating costs, largely driven by record fuel prices. On the other hand, as CFO Gareth Evans points out, the glass is still half full in that new opportunities have emerged for the airline in the growth markets of Asia and resources-sector travel on the domestic front.
For UK food chain Pret a Manger, the global economic outlook is of less concern because, as finance director Nick Candler notes, people would rather spend £5 well than £4 badly. Pret’s key risk is longer term, with the world’s population growth eventually likely to threaten the food supply chain. In the meantime, the London-headquartered food group continues to expand globally, with operations in Europe, the east coast of the US and now in Hong Kong.
Similarly, despite the dour outlook for the US economy, John Quinn at automotive parts group LKQ Corporation says as long as people continue to drive, they will always need spare parts and his company will continue to grow. In a bear market the company’s appetite for M&A is truly bullish. In 2010 it completed 20 acquisitions, last year it did 21 and this year it has already announced another four. Even so, Quinn stresses that since 2008 he has spent a lot more time looking at risks and how to manage them.
And therein lies the rub: the majority of reports characterise the crisis as a financial one and clearly on one level it is – just ask Lehmann Brothers, mortgage holders in the US, or anyone in Greece, Spain or Italy. On another level, however, the crisis exposes material gaps in risk management – particularly operational risk – and without exception every CFO interviewed in this report has in some way acknowledged that they have had to retool their risk management practices.
How they have gone about it and communicated it and the rewards they have reaped not only makes for enlightening reading, it also offers up solutions almost all companies can and should take on board.