When Interim CFOs become Sustainability Managers
This article is written by HedgeGo Interim CFOs and their challenges The appointment of an interim CFO often includes the company’s desire to change or transform existing processes and directions. This may involve restructuring the entire company or “just” introducing new systems; in any case, “change” is the order of the day. The deployment of such an interim manager can often take six to nine months. Interim CFOs of international companies are very familiar with areas of responsibility such as risk and change management. This means being able to react flexibly to changing data situations and mediate between all interests. In addition, the added value for the company must be proven quickly and this requires a robust set of tools and flexible processes. The Interim CFO and FX Management Interim CFOs are often very well-trained managers who have to prove themselves in all areas of financial management. The specific depth of FX management is often neglected. In any case, it is important to know the mechanisms of the company, for example the willingness to take or avoid risks – and this applies across parent and subsidiary companies. Rules for risk assessment and treatment cannot therefore be defined from the ivory tower of the Treasury, but require proximity to the actual business and the use cases hidden within it. At the end of the day, the success of FX management will be rewarded with a balance between value-at-risk (the protection of the balance sheet) and cash flow-at-risk (the costs incurred for protection). So how can an interim CFO find pragmatic solutions in a relatively short time that support this goal? Cash, cash and more cash Interim CFOs usually only have a short period of time to optimize FX management processes. This requires smart data (decision data). This is less about providing market prices, which are easy to obtain using standard applications. Decision data from FX intelligence is more about elaborate market assessments that enable well-founded and rapid implementation of cash management processes. Such core tasks include CCT (cash conversion timing), i.e. the optimized conversion of risk currency into base currency. There are a wide variety of approaches here. Some companies prefer quantitative approaches, i.e. converting USD into EUR, for example, when a certain amount is reached. Others fix the conversion on certain days of the month to support other processes. But there are other adjustment wheels that should not be neglected. Just as important as CCT is the optimization of payables through improved timing of payments, i.e. BTP (Best Timing Payables). Our FX intelligence has proven that the expenditure of base currency to pay claims in foreign currency can be reduced by up to 2% per year. In one of our cases, this form of active management was able to pay the entire treasury department. Systems that provide early warning of changes in the FX market are also very useful. For example, a PMA (Pressure Map) gives good interim CFOs time to prepare for upcoming actions. This is less about long-term “predictions”, which in most cases do not work, but rather about short-term forecasts based on the latest forecasting technology using machine learning. Interim becomes sustainable Despite the often short duration of interim CFOs, sustainable results can be achieved through the use of good FX intelligence. It is important to note that FX decision data has nothing to do with the execution of specific security mechanisms. The “execution” is carried out with professional payment providers, and FX intelligence serves as a preliminary stage, as qualitative input for decision-making. However, FX intelligence requires a sustainable change in existing processes, away from rigid “no-brains” and towards intelligent, flexible systems that fundamentally improve cash management. Of course, the effort involved should not be underestimated, especially the human component that has “always done it this way” and resists change. First steps So what would be the first steps of an interim CFO towards improved FX management? Every action begins with an analysis of existing processes and use cases. Is there financing with FX components, so-called inter-company loans? Is cash conversion controlled quantitatively or qualitatively? What do contracts with suppliers that are influenced by FX look like? Is there an early warning system, an FX intelligence that automatically provides the decision data that enables rapid action? Are all exposures known? All of these questions must be answered before implementing FX decision data. Interim CFOs often do not have much time, but this should not involve a lot of effort in FX management, which would certainly be ensured by using FX intelligence. More information on this can be found here . 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