Opportunities rise as the CFO role expands

Accounting

Efforts to navigate their companies through the extraordinary challenges of the last year have put CFOs in an even more strategic position than they were before. They changed business models, looked for new ways to generate revenue and drove more efficient outcomes. They shifted gears from focusing primarily on financial reporting to guiding their company’s survival.

Against that backdrop, finance leaders are in a pivotal position to be even more strategic partners to leaders across the enterprise — something nearly half of the CFOs responding to our most recent U.S. Pulse Survey said was their top priority for the finance function. ESG offers a path for CFOs to do that. Here are some ways they can collaborate better and work together with leaders in operations, human resources, risk and tax.

Operations leaders

The pandemic highlighted needed investments in companies’ supply chains: a lack of resiliency, inventory shortages, too many SKUs. The low-cost trade-off, with dependence on one sourcing location or on locations far from U.S. shores, revealed limitations for many companies in 2020. More recently, component shortages, shipping bottlenecks and natural disasters have only added to supply volatility. Finance leaders have seen supply chain risks firsthand — and the impact they’ve had on their business and cashflow.

Operations leaders also see how ESG ties into their supply chain operations. COOs say improving workforce productivity and advancing ESG strategies like lowering carbon emissions are top priorities for 2021.

CFOs can work with operations leaders on supply chain agility and other resiliency efforts, including working more closely with their companies’ inventory management teams. Finance and operations leaders can also tag-team on how to tackle ESG issues. Many companies’ post-pandemic strategy will mean a stronger connection between the two functions.

Human resources leaders

Employee health and well-being and the shift to remote work put “people” issues front and center for many companies. In the early days of the pandemic, finance leaders and human resources leaders had to address operational issues related to people working from home and concerns about employee health and safety. Now they’re dealing with more social issues like employee burnout and the loss of women in the workplace. Issues that were once considered primarily workforce issues — diversity and inclusion, upskilling, mental health, employee well-being — are business issues that tie directly to productivity and, therefore, recovery and growth, and they are key elements of ESG.

Employees are top of mind for finance leaders as they prepare for work in a post-COVID-19 environment. Nearly three-quarters (71 percent) of the CFOs we surveyed told us their companies have invested or plan to invest in new tools to support remote work, and 60 percent said the same about upskilling the workforce on digital tools that support virtual work. Finance leaders are in a prime position to help shape the future of work for their companies and their employees. They’ll want to work closely with human resource leaders to better understand workforce issues, like new benefits and resources for employees and how to bring women back into the workforce.

Risk leaders, CISOs and CIOs

Cybercriminals took advantage of the chaos COVID-19 caused as companies dealt with the shift to remote working, weaknesses in supply chains and other disruptions. Cybersecurity and data privacy are important issues, not only for CISOs, CIOs and other risk leaders, but for finance leaders — threats evolve, and attacks become bigger, which leads directly to costs and risk management oversight. Nearly all companies (96 percent) surveyed in PwC’s 2021 Digital Trust Insights plan to adjust their cybersecurity strategy as a result of the pandemic, and 55 percent of technology and security leaders plan to increase their cyber budgets. CISOs and CIOs are working to better quantify cyber risk to help make sure the spend is aligned to business priorities and targets the biggest risks.

Finance leaders can use risk management leaders, including their CISO or CIO, as sounding boards around risks related to digitization and cybersecurity, and risk leaders should work with their CFO to communicate the value of their company’s security program. Finance and risk leaders can work together to address growing ESG risks — 65 percent of risk leaders responding to our latest U.S. Pulse Survey expect them to increase this year, in part as more companies enhance reviews of disclosures.

Tax leaders

Not surprisingly, the Biden administration’s infrastructure plan calls for an increase in the U.S. corporate tax rate. Proposals also include changes to U.S. international tax rules, including increasing the global intangible low-taxed income (GILTI) tax rate to 21 percent, applying GILTI on a per-country basis and eliminating the 10 percent deduction for qualified business asset investment. Senate Finance Democrats and Treasury Secretary Janet Yellen are also calling for an overhaul to U.S. international tax rules. Other countries may also rewrite many fundamental international tax rules, fueled by the OECD’s base erosion and profit shifting (BEPS 2.0) project. The OECD project aims for large companies — highly digitalized businesses as well as consumer-facing companies with cross-border activity — to pay a minimum level of income tax. At the same time, some countries could impose their own unilateral digital services-type taxes. Any of these potential changes to tax policy would mean an impact on business — day-to-day operations, cash flow and investment decisions.

CFOs are increasingly addressing ESG reporting priorities. About 30 percent of CFOs responding to our March U.S. Pulse Survey said identifying frameworks and metrics to focus on, gathering and coordinating ESG data across the business and communicating information around ESG reporting are top priorities. As ESG metrics and reporting around tax transparency are fast becoming business imperatives, tax departments are becoming more involved in ESG initiatives, such as ESG-related deals and investment structuring and social equity tax incentives.

Finance and tax leaders should work together to evaluate and model the potential effects of Biden’s proposals and help their colleagues in other departments understand what these tax policy changes might mean to the business. They should also work together to communicate with policymakers about how specific proposals may affect employees, job creation and investments in the U.S. They can also collaborate on the company’s ESG efforts and any tax implications.

ESG is just one area of opportunity for strategic business partnerships. As their role continues to expand, CFOs will have even more opportunities to connect and work together with other business partners to meet growth challenges and goals.

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