For Finance Professionals: Impact = Acumen
To make a real impact, finance professionals require business acumen.
In recent times, business acumen has emerged as a vehicle for improving financial performance and a source of leadership (Wikipedia)
Business and industry skills develop over time when a finance professional makes the time to watch how a process is carried out. It may also come from getting other persons involved in discussions, trial and error, reading and knowing about your company’s products, and then learning more about the strategic direction and/or annual report.
Food is considered to be an intimate product because it is consumed. Globally it is the 3rd largest industry in the world (Ibis World) and in 2021, the global food and beverage market was forecast to grow to half a trillion U.S. dollars by 2028 (Statista)
When I began my journey in the food and beverage industry, there was considerable talk about sustainability and at the time, this focused on packaging. Consumers became more aware of labels and product ingredients and how and where their food was grown.
Eight years on, and this trend has not changed.
What has changed is growth in food tech alternatives and, more importantly, an emphasis on analytics to create greater insight to finance leaders. This requires getting the right people to drive the business’ future using the right tools (correlations, regressions, predictions) (AI-Enabled Analytics for Business by L Maisel, R Zwerling and J Sorensen).
According to the CGMA Competency Framework (2019), 8 business skill areas are of particular concern to finance professionals. We have tapped into CFO University’s library for resources to help you improve each of these business skill areas.
1. Strategy or a general sense of why the organization exists - Financial goals come from the strategy so finance professionals need to be aware of these goals and support them through forecasting, ongoing performance measurement, and engaging in hedging when there are food commodity shortages.
2. Business models or an understanding of how we make money - When there is a disruption to existing business models, managers look to finance and one way I see this happening in the industry is through transforming procurement by treating it as a core part of value creation, in light of supply chain disruptions.
3. Market and regulatory environment or an understanding of the wider environment - When it comes to food, there are cyclical and seasonal considerations that are required to forecast more effectively. Regulatory requirements and compliance is a big area for food manufacturers because food forms part of public health so it is tantamount to ensure your company is up to date with external and consumer audits such as ISO certifications.
4. Process management or structured activities based on the life cycle of a product - Where there is food there can be waste so benchmarks and KPIs help and even alternative ways to treat waste. Finance professionals can also support process management by correctly explaining the reasons for variances. Furthermore, in one of my previous roles, provisions, contingent liabilities and inventory obsolescence also formed part of the monthly review.
For process redesign ideas and building out KPIs read these pieces, A Guide to Financial Process Redesign and CFO Talk: The CFOs Guide to Great KPIs with Bernie Smith
5. Business relations or internal and external relationships - This is simply collaboration or facilitating long term relationships with internal and external customers
6. Business ecosystems or understanding networks - For anyone in finance, taking time to understand your firm’s value chain can be a crucial source for you to gain insight into what goes into each of its transactions. This can be a source of value generation and helps make sense of the basics should your company suffer from business complexity.
7. Project management or proper availability of resources to achieve the desired outcome - Supporting efforts through raising finance for inventory and investment. Food is a very capital-intensive industry so investment analysis for capital expenditure is part of the job. Support can also be sought when it comes to making, buying, leasing or partnering decisions when it comes to assets.
8. And finally, macroeconomic analysis or an understanding of external factors - Finance can support by being a part of new revenue streams, analyzing trends and of course scenario planning (base, best and worst scenarios).
The list above is certainly not exhaustive, but to add value in their roles requires finance professionals to be competent with business acumen.
Join this conversation and share advice on how you have developed business acumen for your industry.
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