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Editor’s Letter: Why FDs are central, but nervous

They have (as you will have realised) all recently announced the departure of
their FDs. Wm Morrison may soon be added to the list…

Many of these FDs have left (or are about to leave) under a bit of a cloud.
Profit performance has, in most cases, been disappointing. Markets are tough,
not least in the retail world, and customers are unforgiving if the stock isn’t
fashionable – or, in a few cases, isn’t there at all.

So the answer is clearly to shoot the FD. It’s tempting to sympathise and
imagine that the FD is the scapegoat, the sacrificial lamb offered to City
analysts to feast on, thereby allowing the real culprit – the CEO – another year
or so to allow his share options to come out from under water.

What is true is that the FD today has a range of increasingly complex
responsibilities that make it virtually impossible to be sure they are all being
mastered. Supply chain disasters, for example, have featured in more than one of
the cases listed above.

In others, the role of the finance function as the central nervous system of
the corporation has been in the spotlight – and found wanting. The quick relay
of accurate information from the extremities to the brain where the data is
processed, decisions made and relayed back to the limbs and vital organs is a
life-saving process for corporations, just as it is for humans. Wrong data, slow
data and the confusion that results when data conflicts with expectations all
upset the smooth functioning of the company and its valuation in the
stockmarket. FDs are responsible for all this.

So who would even want a job like this? The problem is that the private
equity market offers potentially even greater rewards than the FTSE-350, but
without the regulations, the bolshie analysts or the media scrutiny. Attracting
true talent to these rolls will become increasingly difficult.

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