The state of affairs of Pakistan’s economy does not present encouraging signs since a long time. The GDP growth rate is still not as high as it used to be. The security and law and order situation of the country has not yet stabilized. Energy and water crises reached to a level where a national disaster is very much on the cards. Foreign Investments are not coming at the pace and in the magnitude as the country needs. In fact certain multi-national companies are even considering dis-investing their capital from the country and switching to an import model. Above all, the devil of corruption is toxicating every field of national activity.
Even after 67 years of existence we have not been able to set our directions and priorities. We have not yet figured out our true potential and identified the key “strengths” on which we should build our economy.Since our childhood our text books are teaching us that our country is an agriculture based country but even then we have not done anything to bring in advance technologies and best practices in that sector. Result is obvious; our yields per acre are going down and are also losing our competitive edge in world famous crops like Basmati Rice, Dandi-Cut Red Chilli, KasuriMethi, Mangoes and Kinoo.
The factors such as deteriorating law and order conditions andsevere energy crises are seriously affecting the real productiveeconomic activity. This is constraining the current utilization andfuture expansion of the economy’s productive capacity. A key indication is the falling investment to GDP ratio.In recent years Pakistan’s Investment to GDP ratio as compare to other regional countries is lowest as shown in the figure:
Source: SBP / AHL
It is therefore, quite evident that Investments being the main driver to growth, needs to be attracted as much as possible, especially in manufacturing and agriculture sectors.
However, in such a situation where the leading and influential characters of the society including politicians andbureaucrats are perhaps not able to play their part, the business leadership teams– with CFO being an integral part –have to come forward and do beyond what is expected from them.
In Pakistan CFOs must understand their shift of roles from stewardship to strategist and should assume a role of chief investment officer as well in his / her respective organizations, especially those in Industrial sector or Agri-based Sector. They must contribute their part in finding new and innovative ways to sustain the performance and grow the business.
The most important step to be taken in these times is to think courageously and audaciously. We must believe that even in such times there are a lot of opportunities lying and hiding around us. Such opportunities may require the CFOs to think a bit differently while analyzing the business potential and associated risks.
Whereas companies with global presence may be a bit tentative while taking decisions to invest in the country, the companies with greater foot prints and stakes in our country should and must take full advantage of the situation to hold the vacant ground left by the retiring global companies. CFOs in such cases must be ready, both mentally and skillfully, to re-design financial and business models which should not only facilitate the timely decision making by the business leadership but should also have the capacity to assign weightage to associated business risks rationally, intelligently and dynamically.
Furthermore, rapid technological changes, the rise of emerging markets and more empowered consumers, have all combined to disrupt traditional business modelsworldwide. As their influence has grown increasingly it falls upon the CFO to not only manage disruption, but to also identify and invest in the business models, products, and services that will lead to sustainable profitable growth.CFOs may find situations where their organization needs innovative thinking in order to beat the challenge from competition entering the market with a different model and game plan. CFOs along with other business leadership team should be able to respond by evaluating their existing model and implement changes as per the need of the time. Particularly CFOs role in this regard is multi-fold.He, on one hand, has to allocate financial resources and on the other hand act as a “Change Catalyst”. More importantly, CFO has to assess the importance and need to redesign the organizational structure to keep the new model separate in order to avoid any natural tensions or conflicts.
We must realize that the tools and structures that served finance and business leaders well in the past may no longer work as effective. Cost levers that used to be effective are becoming less so, as margins become squeezed and incremental operational efficiencies are harder to uncover. Therefore, today’s CFO is required to change his mind set from “Cost Saving” to “Intelligent Spending”. CFOs must realize that the biggest business risk is to miss an underlying business opportunity.The ever increasing competition may not give much time to the business leadership for taking key decisions as someone somewhere may lead to take first-movers advantage.More importantly such a change of mind-set makes CFOs an integral part of decision making and provides them with a unique opportunity to demonstrate their abilities in a whole range of strategic areas including business transformation and change management.
A focus on cost management will remain critical but must be balanced with an increased focus on growth. In the past, the top priorities for CFOs have been profitability, cost management, cash flow, and working capital. These will remain topof the agenda in the years ahead but continuing to deliver cost savings is becoming more difficult. At the same time, finance leaders must balance this cost focus with the need to identify and exploit growth opportunities in a slowly recovering country’s economy.
The theme of Sustaining Excellence – Shifting Gears in the CFO Conference 2015 organized by ICAP’s committee of Professional Accountants in Business (PAIB) is expected to enlighten the evolving role of CFOs in today’s challenging times.
The ICAP PAIB Committee is an offshoot of the International Federation of Accountants –PAIB and dedicated to create development avenues for the professionals in business and industry along the lines of international developments. For details [email protected]
