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Dealing with Uncertainty: The Top Three Questions to Ask Your CFO


Expert insights from Caroline Kirrane, CFA Charterholder, MBA, and Finance Course Leader at the Institute of Directors in Ireland.

With rising energy costs, rising labour costs and moribund consumer sentiment, business executives are learning to navigate regular existential threats. That the current environment is challenging is not news to anyone but exactly where the challenges are coming from and how to tackle them are questions that are, appropriately, being discussed and debated at the boardroom table. In this post, I outline some areas of concern for directors and suggest some questions that directors can ask their CFOs in order to better understand the issues facing their businesses. 

What is our Working Capital Situation and How is it Evolving? 

Profitability and balance sheet strength are always important to guard, but when it comes to a crisis situation, today as ever, cash is king. Understanding the working capital cycle of your business as well as how it is responding to the current conditions is of primary importance. Cash flow is not just important to a business, it is oxygen. Just like a human being can’t survive for very long without breathing, a business will not last long without cash. Unseasoned CFOs may throw out figures of reserves or cash buffers. But more savvy CFOs understand that in a real crisis, cash buffers can disappear overnight and it is the business’s skill at breathing – taking in and paying out cash – that will count. Cash flows around a business in a relatively predictable cycle and understanding the nature of this cycle is the key to protecting it in times of distress.

How are the Current Supply Chain Disruptions Affecting our Business and What Steps are we Taking to Mitigate These Effects?

Brexit, COVID-19 and the war in Ukraine have dealt three once-in-a-generation shocks to the economy in a scant five years. Little wonder that supply chains across some industries are creaking, and for many more are ragged and mangled. This is affecting businesses in different ways but the ones that can adapt may not just survive but thrive. With any introduction of chaos to the business environment, there will be winners, survivors and losers. Where possible, try to ensure that the managers in your business have thought deliberately and strategically about ways to profit from the chaos. In certain industries, though, it’s worth acknowledging that for the moment, just surviving may indeed be winning.

What Impact is Inflation having on our Bottom Line and are we Adjusting for it Appropriately and Quickly Enough?

For close to a decade, I’ve been listing out the three causes of time value of money to students and executives; risk, interest rate and inflation. The last two of those have seemed like factors from a bygone economic era. But both are back with a bang. Interest rates are on the rise and inflation has soared in the last year, partially caused by the supply chain issues previously mentioned. For over ten years, inflation has been a non-issue with the result that there is a generation of finance managers and executives that have had little contact with it outside of a textbook. Mistakes will be made in adjusting to this new inflationary environment. Where possible, try to make them quickly, learn and adjust. A typical mistake made by business executives is taking a passive stance and waiting too long to raise customers’ prices to reflect the rise in input costs. Managers and directors would be advised to remember that while loyalty to customers is admirable, you cannot serve your customers well if you’re no longer around to operate.