What must FDs do in these conditions?
Stuart Oag, finance director, Stewart Milne Homes
We need to take a very detailed look at our cost base.
When times are good and prices are going up it is easy to become complacent
about your cost base, and any cost increases are more than offset by increases
in selling price.
Forecasting cash requirements going forward in a declining market is twice as
important and three times as difficult.
But it is not just the role of the FD to pull [a company] through the credit
crunch, it’s a senior management team issue.
Clearly the FD is a key player and their skills base is as important as the
other members. But it’s about the balance of people and individuals within the
boardroom to look strategically.
If you were a good FD yesterday, you should be a good FD tomorrow. Your
ability to look into the future to use your skills to assess risk, to weigh up
opportunities and see solutions rather than create problems.
One of the fears I have is that FDs are seen as the brakes on potentially
good ideas and this is a real opportunity to help people weigh up options.
FDs can say: ‘If you look at X, Y, Z, perhaps you should go ahead with this
one. There are some risks, but we can manage them better and let’s move on, find
solutions to do things with the risk properly weighed up.’
Do FDs have the skills to steer businesses through the crunch?
Andrew Sawers, editor, Financial Director
I think this is the first time we’ve seen a crisis of this sort for a very
long time. You have to be an old fogey like me to remember how bad the 1990-92
recession was, which came on the back of an inflationary boom and the bust then
lasted for the thick end of two years.
What was interesting was that a few years after that everybody was expecting
a recession, we were almost talking ourselves into it, but it didn’t happen. I
think part of it was that memories of the 1990-92 recession were so sharp and a
lot of FDs had cut their teeth in that recession, but they had actually pared
things down, they prepared, they’d slightly battened down the hatches and we
wound up not having a recession at all in 1998-99.
Part of the interesting challenge at the moment is a lot of people who are
FDs now, who are 35 years old and were probably at university and thinking about
changing the world from a common room, didn’t get that sort of experience from
Having said that, the whole role of the FD is actually a lot more
professional now than it was in the 1980s run-up to that dreadful recession.
There is actually a good skills base, if not necessarily the hard experience of
this sort of downturn.
What do FD clients want in these times?
Peter Havelock, partner, IBM
In many ways, more of the same, but the key areas we’re focusing on with some
of our clients at the moment are around the sort of predict-and-measure-type
capabilities. In financial services, we pride ourselves on the ability to be
able to manage risk and model risk.
Some haven’t been as good at that lately, but those techniques in terms of
modelling specific scenarios are going to be of great value to FDs in all
industries. You can be as sophisticated as you can with that type of modeling.
Be clear about what measures matter to your organisation Ð what are the
leading indicators you need to be watching out for?
The business partnering role of the FD becomes even more critical at this
stage and being able to understand profitability and to help drive it is crucial
We’ve also been looking at helping organisations become more efficient, and I
don’t mean just in terms of cost reduction.
What I’m really getting out there is how do we make our cost base more flexi
ble and more responsive to these types of market conditions, so that when it
does turn again, and that could be this year or next year, how can we respond
to that increase in demand very rapidly and, therefore, be able to get ahead of
our competition in whatever market it happens to be.
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