Written by Shahab Wahdatehagh Director, Vice President, Global Trade Intelligence EMEA/AP 

Following regulations is no longer enough. CFO’s have evolved from a traditional observer perspective to a more involved business advisory role in the context of compliance, where they must balance and manage risk while scouting avenues for business growth. Thomas Lobert, solutions consultant at Descartes Systems Group, explains how the typical role of a CFO has recently evolved and why and why understanding the value of screening solutions and trade content is crucial. This requires the support of digitalisation for business growth and risk mitigation.  

Key Takeaways

  • CFOs are evolving from traditional observers to active business advisors, balancing risk management with business growth through digitalisation.
  • Close collaboration is now required with C-suite peers and various departments to drive financial strategies that align with organisational goals, focusing on risk mitigation and resource optimisation.
  • CFOs should assess their company’s trade footprint to understand the financial impact of imports and exports and their contribution to overall financial performance.
  • By leveraging compliance strategically, CFOs can create growth opportunities through scenario planning, identifying alternative sourcing options, and ensuring supply chain resilience.
  • Investing in compliance software like Visual Compliance is essential for CFOs to generate insights, manage risks, and meet new demands, especially in light of supply chain disruptions and increased business risks

According to the most recent McKinsey survey, the role of CFOs is rapidly evolving. Working together with C-suite peers, line managers, investors and boards to focus on performance and capabilities, CFOs have opportunities for leadership as never before, with their jobs expanding beyond just numbers. 

Today, CFO’s shape robust financial strategies in line with organisational goals. This involves gaining an in-depth view of potential risks and opportunities across supply chains and markets, where CFOs can optimise resource allocation, mitigate risks and capitalise on growth prospects. 

However, driving financial performance and organisational success is not achieved by just one person. It requires collaboration and alignment across various departments, especially with the compliance team who can help create value from the effective use of screening solutions and trade content. 

A team effort  

As leaders within an organisation, CFOs play a pivotal role in fostering a culture of growth and development in the finance team. To start this process, CFOs should map out the value of the company’s overall trade footprint, which involves quantifying the financial impact of the business’ imports and exports — both of which are crucial for international trade.  

This entails analysing the volume of trade transactions, the value of goods or services exchanged, associated costs — like tariffs and transportation — and potential revenue generated. By doing so, CFOs can gain a clear understanding of how international trade activities contribute to an organisation’s financial performance.  

From there, it is important to allocate resources in skilled personnel and the appropriate tools to manage risks effectively and advance growth. This includes hiring experts in trade regulations, finance and risk management, as well as implementing compliance management systems and automation tools, like Visual Compliance, for efficiency and greater insight.  

From compliance to opportunity  

A growth mindset is the belief that one’s abilities and intelligence can be developed through dedication, hard work and resilience — a term coined by psychologist Carol Dweck.  

After all, cultivating a growth mindset in the finance team is crucial for developing a high performing team. Here, CFOs can leverage compliance as an opportunity by turning it into a strategic advantage through scenario planning exercises in teams.  

Firstly, determine the critical commodities or raw materials essential for your business operations. Then, explore different jurisdictions or countries where these commodities or raw materials can be sourced, as some regions may offer financial advantages, such as lower duty rates, faster delivery times or favourable free trade agreements (FTAs). 

It’s also essential to analyse associated risks, including political instability and supply chain disruptions, because they can significantly impact sourcing strategies and business operations. For instance, political instability in a sourcing jurisdiction can lead to sudden regulatory changes, while supply chain disruptions can interrupt with production and lead to financial losses.  

Once the risks have been identified, use these planning exercises to come up with contingency plans. Notably, they must outline alternative sourcing options and supplier bases, as well as backup transportation routes.  

This strategy should be supplemented with continuous monitoring of market dynamics. Ensuring adaptability and resilience in the supply chain is critical, meaning that CFOs must be able to make timely adjustments to sourcing strategies in response to changing conditions.  

Digital support  

A 2022 research by an artificial intelligence firm found that over half of CFOs are seeking to use new technology to generate more insights and improve their team’s efficiency. As CFOs aim to generate deeper insights to grow operations, investing in compliance software becomes a necessity.  

Arguably, it’s most crucial for a unified risk approach and insight opportunities into both critical raw material sourcing and key markets for product sales. Put simply, it provides CFOs with a comprehensive understanding of their business landscape to  help them make informed decisions.  

This comes as according to a 2022 CFO Insights Report supply chain disruptions were among the top ten new business risks. Concerningly, the report, which surveyed 750 finance professionals, demonstrated that finance leaders lacked confidence in managing these risks.  

As a result, budget should be allocated toward digital support for CFOs to successfully meet the new demands of their role, having been impacted by the Covid-19 pandemic.  

Automating due diligence tasks helps to save time and effort by efficiently screening third parties for compliance. It also serves as a centralised source of compliance data, providing a single, reliable source of information, especially in the event of a government audit or a board request for disclosure.  

Long gone are the days when the CFO’s role was just finance. Now, it has broadened, requiring to not only implement the right tools but in line with budgets too.  

Options like Visual Compliance allow CFOs to strategically evaluate expansion opportunities by analysing entity and jurisdictional risks tailored to their business’s product portfolio, ensuring informed decision making and risk mitigation.