The 360° CFO

Omniscience—the state of knowing everything--is what every CFO strives to achieve. That’s because the role of the CFO often goes well beyond finance and accounting to other aspects of the organization that are just as central to its success, stock price and evaluations. Since their role inherently touches every part of an organization, CFOs have a uniquely 360-degree view of operations and are perfectly positioned to see the opportunities, and consequences, of the company’s business decisions; the reaction to every action.

It’s this higher-level view that provides the CFO the best vantage point to help bring the organization together to ensure achievement of short-term goals, while also planning for long-term success. Another way to think about it is that CFOs are frequently finding themselves taking a leading role in guaranteeing a company’s resilience, and not only surviving but thriving as well.

For this reason, it’s important that CFOs fully understand how the company is performing and where additional potential lies. In my experience, there are three critically important functional areas that CFOs must get to know in particular, each of which can have a significant impact, both positively and negatively, on the company’s financial performance, evaluations, and reputation.

1. Know Your Supply Chain

For many companies, supply chain networks are growing rapidly—spanning continents and growing infinitely more complex. This complexity breeds risks in the supply chain such as labor problems, dishonest suppliers, reputational risks, natural disasters, cargo thefts, political instability, and environmental impact among others. Companies need to consider all the potential risks as they evaluate, establish, and reevaluate their supply chain. CFOs have a crucial role to play in quantifying and mitigating these risks, as the actions of organizations even loosely associated with your company can have a lasting impact on the bottom line and the overall resilience, or ability to rapidly bounce back from a setback.

Take for instance a long-running lawsuit against Nestle and Cargill by six workers who claim they were kidnapped from Mali and taken to Ivory Coast between the ages of 12 and 14 and forced to work as child slaves for up to 14 hours a day, six days a week. As part of their lawsuit, the workers allege that the companies gave farmers money for personal spending outside of their contracts with the farms, ensuring they’d receive the low prices made possible by slave labor.[1]

With this lawsuit, even if the companies are ultimately found not guilty, the damage done by these accusations to their reputations will likely take significant time and money to repair. To avoid the potential for this type of reputational harm, which can lead to more problems than those of perception, a company must be confident that all their vendors and suppliers within their supply chain adhere to the same values that the company does.

2. Prepare for a Breach

It’s not a question of if, it’s a question of when. Almost every organization gathers data and information on its customers; this is only natural as they strive to provide best-in-class client services. But customers expect companies to safeguard this information, not letting it be compromised, misused, or inadvertently released. Yet doing this is no easy task; it requires the adoption of consistent and stringent information security-minded practices throughout the entire organization.

Even some of the most well-known brands have found themselves ensnared in data breaches which expose their customers’ data. Yahoo! is a great example. Beginning in 2012, Yahoo! experienced a series of data breaches across its products, ultimately resulting in every single Yahoo! user’s information being exposed—nearly 3 billion accounts in total.[2] These breaches came to light when Verizon was in the process of buying Yahoo!, leading to Yahoo!’s sale price being drastically decreased by $350 million. Beyond that price reduction, Yahoo![3] was forced to pay millions of dollars in settlements to customers, and millions more in fines to the Securities and Exchange Commission.

Yahoo!’s data breach, while among the most severe, serves as a reminder for companies of all shapes and sizes. My view is that an attack, or breach, is inevitable—it truly is not a matter of “if we get attacked”, but “when.” It is unlikely hackers will ever go away, but by implementing data governance and frameworks to capture, report out, analyze, and understand the data they’ve collected and hold, companies can proactively identify potential threats and quickly respond to issues, limiting potential liabilities.

3. Be Strong to Survive

 Being resilient requires a company to constantly challenge itself to improve performance and grow sustainably. This also requires full transparency across products and services and people and processes to better understand and identify opportunities and risks, which in turn will enable a company to better prepare for and respond to an incident, or a changing market.

An example that illustrates this best for me is Blockbuster Video. For many years there were few alternatives to renting a movie than going to Blockbuster. As the digital revolution set in, Blockbuster was slow to adapt and had significant competition from companies like Netflix. Eventually, the costs of operating its 10,000 stores prevented it from investing in new technology, and by 2010, the company declared bankruptcy.[4] Meanwhile, Netflix thrived and has become the go-to service for content streaming and as a result its stock price has risen from around $50 per share to over $300 in the past five years.[5]

If Blockbuster had been a little more resilient and proactive in assessing future threats, it would have better understood the disruption the internet would have on its business, as well as how to balance the significant costs of operating so many brick and mortar locations while being able to adequately invest in new services.

Big-Picture Leadership

The ability to look at the bigger picture, at all the moving parts and how they interconnect is precisely the 360° leadership that CFOs must provide as they help implement an organizational resilience strategy: pay attention to short-term goals, factor in long-term success, and understand precisely how each decision effects all parts of the organization. And, conduct ongoing horizon scanning to be aware of developing technology and trends to be able to pivot quickly to address new challenges and opportunities By creating transparency across the organization from supply chain through data and into operations, a business will be able to quickly analyze its performance, respond to risks and drive new strategies that foster resilience and allow it to adapt and evolve for future success.

Sarah Murphy


Author: Sarah Murphy

Chief Financial Officer, BSI