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The Future of the CFO: From Number Cruncher to Value Driver

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Future of the CFO

Future of the CFO

Future of the CFO: From Number Cruncher to Value Driver

View the high resolution of this infographic by clicking here.

In today’s fast-paced business landscape, a company’s chief financial officer (CFO) is more integral to operations than ever. In fact, about 41% of CFOs spend the majority of their time on non-finance related activities, fueling data-driven decisions across the business.

The only problem? Leaders outside of finance still see CFOs contributing the most value in traditional finance areas, such as accounting and controlling.

Today’s infographic from Raconteur explores the expanding scope of CFO responsibilities, as well as the perception gap between CFOs and non-finance leaders when it comes to the former’s primary value-driving activities.

The CFO’s Expanding Role

Traditionally, the CFO was focused on financial reporting and issues such as compliance, accounts, and taxation. However, the scope of a CFO’s duties has increased dramatically in recent years. Thanks to technological advances, CFOs are now able to access massive amounts of data on their organization’s operational and financial performance.

“This puts the finance function at the heart or, arguably, the mind of the business from the outset, with many now being crowned as the ‘stewards’ of the long-term enterprise vision.”

Robin Bryson, Interim CFO at Impero Software

Armed with data, CFOs can help predict headwinds, forecast performance, and make informed decisions across departments. In a global survey, McKinsey asked finance leaders about the breadth of their responsibilities. Of the CFOs who said they spend they a majority of their time on non-finance tasks, here’s where their attention is focused:

Activity% of CFOs Focused on Activity
Strategic leadership46%
Organizational transformation45%
Performance management35%
Capital allocation24%
Big data and analytics20%
Finance capabilities18%
Technology trends5%
Other (e.g. risk management)5%

However, other business leaders remain in the dark about this broader role.

Differing Views

While the CFO’s job description has evolved considerably, outside perceptions of it have not. In a survey of both CFOs and non-finance leaders, there is a clear difference of opinion with regards to where financial leaders create the most value:

Areas in which CFOs have created the most financial value% of CFOs who agree% of others who agree
Performance management39%19%
Strategic leadership39%25%
Traditional finance roles33%47%
Organizational transformation33%21%
Finance capabilities30%15%
Speciality finance roles30%27%
Cost and productivity management26%42%
Support for digital capabilities and advanced analytics15%10%
Mergers and acquisitions (including post-merger integration)14%23%
Capital allocation10%22%
Pricing of products and/or services10%8%
Management of activist investors3%3%

CFOs see their largest contributions in the areas of performance management and strategic leadership, while others still consider the CFO’s value to be derived primarily from traditional finance and cost/productivity management.

How can CFOs demonstrate their increased responsibility to leaders outside of the finance realm?

Closing the Gap

According to McKinsey, CFOs can demonstrate their expanded role in three main ways:

1. Actively head up transformations.

While CFOs are already playing a role in transformations, non-finance leaders are less likely to perceive them as making strategic contributions. CFOs also tend to initiate the most transformations in the finance function alone.

To change perceptions, CFOs can lead enterprise-wide transformations, and communicate their strategic value through activities like high-level goal setting.

2. Lead the charge towards digitization and automation.

Few organizations have initiated the shift in a substantial way, with only ⅓ of finance respondents saying their companies digitized or automated more than 25% of their work in the last year.

However, the payoff is well worth the effort. Among those that have undertaken this level of change, 70% reported modest to substantial returns on investment.

3. Develop talent and capabilities across the organization.

CFOs have begun increasing their value through talent-building, but there is still a significant amount of room for further growth.

For example, CFOs can build capabilities during transformations, teach financial topics to non-finance leaders, and develop top talent across the organization.

Through these various strategies, CFOs can foster collaboration and understanding between departments—and succeed in their broader roles.

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Mining

How to Avoid Common Mistakes With Mining Stocks (Part 5: Funding Strength)

A mining company’s past projects and funding strength are interlinked. This infographic outlines how a company’s ability to raise capital can determine the fate of a mining stock.

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Funding Strength

A mining company’s past projects and funding strength are interlinked, and can provide clues as to its potential success.

A good track record can provide better opportunities to raise capital, but the company must still ensure it times its financing with the market, protects its shareholders, and demonstrates value creation from the funding it receives.

Part 5: The Role of Funding Strength

We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.

Part 5 of the series highlights six things to keep in mind when analyzing a company’s project history and funding ability.

Funding Strength

View all five parts of the series:

Part 5: Raising Capital and Funding Strength

So what must investors evaluate when it comes to funding strength?

Here are six important areas to cover.

1. Past Project Success: Veteran vs. Recruit

A history of success in mining helps to attract capital from knowledgeable investors. Having an experienced team provides confidence and opens up opportunities to raise additional capital on more favorable terms.

Veteran:

  • A team with past experience and success in similar projects
  • A history of past projects creating value for shareholders
  • A clear understanding of the building blocks of a successful project

A company with successful past projects instills confidence in investors and indicates the company knows how to make future projects successful, as well.

2. Well-balanced Financing: Shareholder Friendly vs. Banker Friendly

Companies need to balance between large investors and protecting retail shareholders. Management with skin in the game ensures they find a balance between serving the interests of both of these unique groups.

Shareholder Friendly:

  • Clear communication with shareholders regarding the company’s financing plans
  • High levels of insider ownership ensures management has faith in the company’s direction, and is less likely to make decisions which hurt shareholders
  • Share dilution is done in a limited capacity and only when it helps finance new projects that will create more value for shareholders

Mining companies need to find a balance between keeping their current shareholders happy while also offering attractive financing options to attract further investors.

3. A Liquid Stock: Hot Spot vs. Ghost Town

Lack of liquidity in a stock can be a major problem when it comes to attracting investment. It can limit investments from bigger players like funds and savvy investors. Investors prefer liquid stocks that are easily traded, as this allows them to capitalize on market trends.

Hot Spot:

  • A liquid stock ensures shareholders are able to buy and sell shares at their expected price
  • More liquid stocks often trade at better valuations than their illiquid counterparts
  • High liquidity can help avoid price crashes during times of market instability

Liquidity makes all the difference when it comes to attracting investors and ensuring they’re comfortable holding a company’s stock.

4. Timing the Market: On Time vs. Too Late or Too Early

Raising capital at the wrong time can result in little interest from investors. Companies in tune with market cycles can raise capital to capture rising interest in the commodity they’re mining.

Being On Time:

  • Raising capital near the start of a commodity’s bull market can attract interest from speculators looking to capitalize on price trends
  • If timed well, the attention around a commodity can attract investors
  • Well-timed financing will instill confidence in shareholders, who will be more likely to hold onto their stock
  • Raising capital at the right time during bull markets is less expensive for the company and reduces risk for investors

Companies need to time when they raise capital in order to maximize the amount raised.

5. Where is the Money Going? Money Well Spent vs. Well Wasted

How a company spends its money plays a crucial role in whether the company is generating more value or just keeping the lights on. Investors should always try to determine if management is simply in it for a quick buck, or if they truly believe in their projects and the quality of the ore the company is mining.

Money Well Spent:

  • Raised capital goes towards expanding projects and operations
  • Efficient use of capital can increase revenue and keep shareholders happy with dividend hikes and share buybacks
  • By showing tangible results from previous investments, a company can more easily raise capital in the future

Raised capital needs to be allocated wisely in order to support projects and generate value for shareholders.

6. Additional Capital: Back for More vs. Tapped Out

Mining is a capital intensive process, and unless the company has access to a treasure trove, funding is crucial to advancing any project. Companies that demonstrate consistency in their ability to create value at every stage will find it easier to raise capital when it’s necessary.

Back For More:

  • Raise more capital when necessary to fund further development on a project
  • Able to show the value they generated from previous funding when looking to raise capital a second time
  • Attract future shareholders easily by treating current shareholders well

Every mining project requires numerous financings. However, if management proves they spend capital in a way that creates value, investors will likely offer more funding during difficult or unexpected times.

Wealth Creation and Funding Strength

Mining companies that develop significant assets can create massive amounts of wealth, but often the company will not see cash flow for years. This is why it is so important to have funding strength: an ability to raise capital and build value to harvest later.

It is a challenging process to build a mining company, but management that has the ability to treat their shareholders and raise money can see their dreams built.

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Business

Visualizing America’s Entrepreneurial Spirit During COVID-19

How have new business start-ups in the U.S. been impacted by COVID-19? New data reveals the resilience of the entrepreneurial spirit in America.

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entrepreneurial spirit

Mapped: America’s Entrepreneurial Spirit During COVID-19

Despite the risks of opening a business during a global pandemic, new data from the U.S. Census Bureau reveals that the entrepreneurial spirit is alive and well in the United States.

In total, there were 492,133 new business applications in January 2021—an increase of over 73% year-over-year (YoY).

The region with the highest growth rate was the South at 84% with more than 220,000 new business applications in the region in January of this year. Mississippi had the highest percent increase at 164%, with over 6,000 new applications in January 2021.

Here’s a closer look at the number of total applications by state and region:

Notably, new business applications have soared in the last month or so, bouncing back from a dip between July and December 2020.

The growth rate from December 2020 to January 2021 stood at 42.6%, with the biggest change happening in the Midwest, where applications have gone up 48.6%. Here’s a look at the biggest changes in applications by region since December 2020:

RegionNumber of Applications in January 2021Percentage Change from December 2020
Midwest85,50348.6%
Northeast 77,91047.9%
West103,86140.5%
South 224,85939.6%

Note: Business applications are measured by collecting data on new applications for Employer Identification Numbers with the U.S. government.

Opportunity Out of Crisis

Prior to the pandemic, new business startups were actually on the decline, but in times of crisis there is often opportunity.

People have become wildly innovative during COVID-19, partly because they were forced to do so due to job or income loss. Economists call this ‘creative destruction,’ wherein new innovation springs up because of the failure of particular industries or businesses.

Here’s a look at new business applications by industry.

IndustryNumber of New Business Applications (Jan. 2021)
Retail Trade101,842
Professional Services56,280
Construction43,724
Other Services43,511
Transportation and Warehousing 41,320
Administrative Support32,765
Accomodation and Food Services27,409
Health Care and Social Assistance 27,266
Real Estate23,804
Finance and Insurance22,607
Arts and Entertainment14,407
Unclassified 13,442
Wholesale Trade10,298
Information9,907
Manufacturing7,420
Educational Services6,790
Management of Companies 4,273
Agriculture3,978
Mining585
Utilities505

Creative destruction has been keenly exemplified in the rise of remote and digital services over traditional brick and mortar stores. In fact, the industry with the highest number of new business applications in January 2021 was retail services, mostly online, with over 101,000 applications.

Feeling the Entrepreneurial Spirit?

As business applications are on the rise, more jobs could potentially be created in the U.S., and competition will likely increase as well. While starting a business during COVID-19 is risky, it could have immense payoffs for the individuals involved and the overall economy.

In fact, a piece from the U.S. Chamber of Commerce actually recommends specific business ideas that are ‘pandemic-friendly.’ Among many virtually-based ideas, the list includes:

  • Digital marketing
  • App development
  • Fitness and wellness services
  • Box subscription services

Perhaps, for digitally minded entrepreneurs, there has never been a better time to start a business.

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