After a turbulent 2023, many CFOs may be apprehensive about what the next year could bring. With 2024 promising regulatory changes and further technological advancements, CFOs are faced with more challenges than ever before. To help navigate the coming year, we’ve identified the top five priorities for the office of the CFO.
Driving growth
One of the key priorities for CFOs in 2024 is driving growth. After dealing with economic uncertainties in the previous year, CFOs are now focused on taking their corporate performance to the next level. To achieve this, CFOs are determined to equip their teams with the necessary tools and technologies to enhance productivity. Going forward, digital transformation is likely to be high on the agenda.
Of course, the biggest growth driver for a company’s performance is the people that comprise its workforce. The global talent shortage shows no signs of stopping, with many CFOs looking into ways they can attract and retain a skilled employee base. Because of this, organizations are now placing increased emphasis on employee engagement initiatives. Prioritizing the satisfaction and engagement of the workforce has become an integral part of strategic planning for CFOs. This approach aids in fostering a positive environment where employees can thrive and contribute effectively to overall business success.
Cost optimization
In addition to driving growth, cost optimization will be top of mind for finance leaders. As companies endeavor to drive corporate performance, there will be a spotlight on managing costs to reduce expenditure.
To achieve this, CFOs will need to conduct an in-depth analysis of current processes and operations within the company. This involves approaching the evaluation with a keen eye for identifying areas of inefficiency or unnecessary complexity.
CFOs should prioritize initiatives based on their potential return on investment (ROI). It is crucial to carefully weigh the costs and benefits of implementing changes, considering the potential impact on business goals and financial outcomes. A holistic approach to cost optimization involves not just reducing expenses, but also extracting the maximum value from existing operations.
Ultimately, effective cost optimization is about aligning initiatives with specific business goals. Prioritization should be driven by the expected impact on overall financial performance, as well as the ability to optimize operations without compromising quality or customer satisfaction.
Risk management
Risk management will continue to be a top priority for CFOs in 2024, especially after the challenges faced in the previous year. CFOs will remain vigilant in identifying and mitigating emerging threats that could impact their organizations.
One essential aspect of risk management is accounting for inflation and other economic conditions. By monitoring and forecasting economic trends, CFOs can better adapt their strategies to mitigate potential financial risks caused by inflation or economic downturns.
Another critical risk that CFOs must address is cybersecurity. With the increasing frequency and sophistication of cyber threats, organizations across industries are investing in robust cybersecurity measures. CFOs will need to prioritize cybersecurity initiatives to protect their businesses from potential data breaches, financial losses, and reputational damage. It is also essential that they evaluate their existing tech stack, as well as future technology partners, for their security credentials.
Effective risk management should involve regular forecasting and scenario planning. By regularly reviewing and analyzing financial and operational data, they can identify potential risks and develop contingency plans to mitigate their impacts. Scenario planning allows CFOs to simulate and assess the outcomes of various risk scenarios, enabling proactive decision-making and strategic preparation. There is also a need for comprehensive risk management frameworks. There should be processes and protocols to identify, analyze, and mitigate risks across different areas of the organization. By having a structured and integrated approach to risk management, CFOs can ensure that potential risks are recognized and addressed holistically.
Compliance
Compliance is always top of mind for CFOs but with a spate of regulatory changes, 2024 promises new challenges in this area. One significant development is the Corporate Sustainability Reporting Directive (CSRD), which came into effect in 2023 but will have practical applications between 2024 and 2028. The first reporting cycle, based on data collected from January 2024, will take place in 2025. It is crucial for EU companies that meet the CSRD thresholds to proactively prepare to meet the necessary requirements. This also applies to non-EU companies with significant operations in the EU market. One of the requirements is the need for machine-readable ESG reports.
Another compliance challenge that CFOs will face pertains to the changing global taxation rules, specifically the area of Pillar 2. This aims to address Tax Challenges Arising from the Digitalization of the Economy. As part of this, a global minimum tax (GMT) of 15% on the income of multinational enterprises (MNEs) with a global turnover of at least €750 million will be established. The GMT comprises the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).
The goal of these regulatory changes is to prevent companies from shifting profits to low-tax jurisdictions in order to minimize their tax liability. Pillar 2 is expected to generate substantial additional tax revenue for governments globally. Its objectives include creating a more level playing field for businesses, promoting a more competitive business environment, and establishing a fairer tax system.
In the face of these compliance challenges, CFOs must stay vigilant, and carefully navigate CSRD requirements, as well as the new global taxation rules. This will involve thorough assessment, planning, and collaboration with relevant stakeholders to ensure adherence to these evolving standards. Having a robust compliance framework will be crucial for CFOs to manage reputational, financial, and legal implications effectively.
Data storytelling
Being data led is an essential component of making solid business decisions. In 2024, CFOs will be going a step further and embracing data storytelling. This is reflective of the shifting mandate of the CFO, and how in recent years the role has shifted from a purely financial and data led role to a true strategic partner.
Data storytelling is a unique way of analyzing and presenting data in order to communicate insights. It goes beyond simply collecting raw data, it involves contextualizing and utilizing that information to construct a narrative that effectively communicates the insights derived. By employing relevant data sets with data visualizations and dashboarding techniques, CFOs can begin to weave a coherent story that lays the foundation for effective decision-making and actionable outcomes.
By embracing data storytelling, CFOs can effectively communicate the value of the data and engage stakeholders on a deeper level. This approach enables more impactful decisions, combining the analytical power of data with the persuasive impact of storytelling. Ultimately, it empowers CFOs to convey complex information in a compelling way, driving organizational understanding, alignment, and future business success.
Want to know more? Follow us on LinkedIn for more deep dives and CFO insights.
