BACK TO SCHOOL we go. And what a return it will be for UK finance directors. When the summer began, the economy remained a concern, but after worrying about it for so long, thoughts had naturally turned to hoping the weather would hold for the holidays. But the past two months have been anything but relaxing. To employ an overused phrase, it really has been tumultuous: the London riots; the destruction of News of the World; the worsening euro crisis and the threat of Italy needing a bail out; the US debt debacle and the country’s credit rating downgrade; climbing unemployment statistics; poor GDP figures and the return of a double-dip recession as a serious threat. The sun has mostly stayed away from the UK this summer, and the rain just kept coming and coming as the gloom descended in a multitude of ways.
Many FDs will return wondering whether they have to go back into crisis management mode. The signs are that something unpleasant may be around the corner. The Bank of England is holding rates at an all-time low for the foreseeable future, jobless rates are rising, and politicians across Europe seem braced for more strife. If anything, our tribulations seemed to worsen even as we sipped rosé in the south of France.
It is against this backdrop of excruciating uncertainty that FDs must do their job. And if ever there was a time when fellow board members might turn to an FD for reassurance, it is now. As our new columnist, The Secret FD, writes on page 18, the FD has to answer to a “mind-blowing variety of communities”. I envisage difficult times for the FD. Business will be tough, as we’ve become accustomed to, with many finding margins difficult to achieve and customers hard to find. A premium will once again be placed on cost management and cashflow. If you thought those two issues had disappeared, it may be time to think again.
However, FDs are in line to have one of their many other roles come to the fore: chief corporate soothsayer. Not only do they need to be head accounting technician, regulatory boffin and business guru; chief executives are likely to want FDs to read the economic runes and then colour and reshape business plans accordingly. The pressure will be on to do business and the FD must control the risks. And the risks, after this summer, are global and far beyond the control of the CEO and FD for the most part. Even Nobel Prize-winning economists struggle to predict what happens next. What hope has an FD?
It will all be about knowing your markets, knowing the drivers, knowing what effect the various external factors will have on suppliers, customers and prices, and all the time elevating anticipation to an art form.
Gavin Hinks, Editor