Risk & Economy » Brexit » Financial Director’s year in review

It was a year of turmoil, that began with the burning question of how Brexit would be delivered, but ended 12 months later with none of us the wiser. Finance directors worried about many issues, yet the UK and global economy remained positive. Stock markets stayed relatively buoyant despite the threat of a trade war between the US and China.

The year kicked off with the collapse of government outsourcing giant Carillion which focused the minds of finance directors and other C-suite on its implications. Peter Williams, chairman of online fashion group Boohoo.com, said “It’s a truism that companies have often collapsed, not because they’re unprofitable, but because they’re out of cash.”

Former pensions minister Steve Webb said companies paying out large dividends to shareholders while their pension funds run big deficits may be subject to greater regulatory scrutiny, following the collapse of Carillion.

The failings of Big Four firms in relation to Carillion and other recent corporate collapses set in train a push for re-evaluating the role of the accountancy sector. In February, Liberal Democrats leader Vince Cable told Financial Director: “I would want the competition authorities to look at the industry with a view to whether there should be a structural remedy- that could involve divestment or breaking up some of the firms,” he said.

Following similar expressions from shadow chancellor John McDonnell and business secretary Greg Clark, the Competition and Markets Authority (CMA) eventually announced by the end of the year it was investigating the sector. In addition, accountancy regulator Financial Reporting Council’s (FRC) shortcomings in were addressed in the Kingman review, which pressed for powers to be increased.

Major interviews

Amongst the notable interviews appearing in Financial Director was a rare conversation with Royal Bank of Scotland (RBS) FD Ewen Stevenson, who said of resurrecting the state-owned bank he was “committed to seeing it through,”

He said of the task: “It is far harder and far more complex than I’d imagined.” He promptly left weeks later to become the head of finance at HSBC.

This year was the 10th anniversary of the collapse of investment bank Lehman Brothers- so a timely moment to consider where the CFOs who ran finance at the UK’s banks in the toughest days of the financial crisis are now.

Most seemed to be gainfully employed still- two are at very senior levels at Nationwide Building Society. The former deputy CFO of both HBOS and Lloyds Banking Group, Ian Smith, told us in an interview how his experiences of the time had shaped his thinking for his current role of finance chief at challenger bank CYBG.

Many of this year’s interviews touched on some of the major issues of the day. A conversation with BP CFO Brian Gilvary reflected on the challenges for the oil major in an era of growing pressure to address climate change. He said that although he claims to agree with the science of the IPCC, he rejects the idea of the planet being seriously imperilled as “scare tactics”.

In December Shell said it would ask shareholders to reward executives for managing a transition to cleaner energy. Days later the COP 24 UN climate change talks ended with 200 countries agreeing a deal on putting the Paris agreement into practice.

An interview with Peter Lynas, CFO of defence giant BAE Systems, was conducted to the background of the ongoing war in Yemen where Saudi Arabia has been using equipment such as fighter aircraft supplied by BAE. He said: “Of course I have a moral conscience.”

The issue was picked up again in an interview later in the year with Labour’s John McDonnell, in the context of the killing of Saudi journalist Jamal Khashoggi at the Saudi embassy in Turkey. He told this publication he was against arms sales to  Saudi Arabia: “We shouldn’t be having any dealings with Saudi Arabia until two issues are resolved. One is the allegations of the attack on Jamal Khashoggi the journalist, and the second is what’s happening to the large numbers of people whose lives are at risk in the Yemen.”

A new landscape?

The interview with McDonnell proved to be of huge significance because the possibilities thrown up by Brexit suggested a general election, and a possible Labour victory in sight. One area touched on was the policy of nationalising industries such as utilities and power companies.

This was put to Susan Davy, CFO of Pennon which owns South-West Water, who suggested there might be alternative avenues being discussed with Labour other than outright nationalisation. The opposition party scotched the idea.

The interview was one of many undertaken with leading female CFOs in the UK and elsewhere including Grainger’s Vanessa Simms, McCarthy & Stone’s Rowan Baker and Direct Line’s Penny James. That said, one of the most profound issues addressed by Financial Director was the diminishing number of female finance leaders in the FTSE-100.

The 100 Group of financial directors’ outgoing head Andrew Bonfield, who left National Grid to become CFO of Caterpillar, said: “Companies and boards just have to get used to this idea that people’s careers aren’t moving at the same pace and same direction, at the same time, and take a bit of risk occasionally- and promote women into more senior roles.”

These concerns prompted a major summit- the Women in Finance event launched under the #FDFemaleLeaders tag that sought to understand why there are so few women running finance and in other C-suite roles. As well as main speaker 30% Club founder Dame Helena Morrissey, a set of leading female finance and other leaders participated in the event.

The November summit was also supported by a broad chorus of voices including corporate leaders from both sides of the Atlantic, leaders of all the main UK political parties and heads of the main accountancy bodies.

Brexit, eventually

As the event was taking place, several senior government ministers resigned, a day of high intensity as Brexit took another twist. Next year offers more uncertainty – especially the likelihood of a no-deal outcome.

Two leading CFOs, Adrian Marsh of DS Smith and Oliver Tant of Imperial Brands, gave their negative assessment of a no-deal, just as the government announced plans for the country to prepare for such an outcome.

Things will be tough as we move forward but more and more finance leaders have developed a skill set that makes them and their organisations increasingly resilient in these complex and uncertain times. How they can thrive in this environment was discussed at CFO Agenda in the Summer and will be central to next year’s event.

A number of key politicians we would have liked to have heard from- especially in government- managed to avoid scrutiny this year. We will be hot on their trail next year, when we will continue to secure the best interviews from finance directors and other corporate leaders of the most important organisations in the UK and elsewhere.

A scheduled interview with Renault CFO Clotilde Delbos was postponed after the group’s chairman and CEO Carlos Ghosn was arrested in Japan. Although fired from the top roles at Nissan and Mitsubishi, which are in a global alliance with Renault, he wasn’t removed from the French carmaker, although he is still anguishing in a Japanese jail.

Among the other finance leaders that made the news was Meng Wanzhou, CFO of China’s biggest company Huawei and daughter of the telecom giant’s founder. The issue may have rekindled trade tensions between the US and China, ensuring that going into next year, Brexit won’t be the only big issue on everyone’s minds.

 

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