Essay: Challenges that financial managers are facing

Executive summary
The occurrence of significant challenges and fast changes in the macroeconomic environment has increased the role of financial managers. Their traditional roles involved financial planning, financial reporting capital structure and capital budgeting. In recent times, their roles have evolved into other strategic dimensions that define the part of business managers. One of the primary functions that had been given to financial managers involves communicating professionally to both investors and the board. The purpose of this paper is to elaborate an overview of the challenges that the current financial managers are facing in the current context of changes in the macroeconomic environment and how these challenges affect the business operations (Karadag, 2015).
The macroeconomic environment has experienced changes that affected operations of the business, changes in priorities and strategies and how the various departments had to adapt. This has caused increased complexity of the economic system leading to a subsequent increase in the complexity of business operations and increased interaction among global economic players. Such changes meant more complications experienced during this turbulent time. This increases the complexity of the role of managers and especially financial managers. We need to assess how finance function adapted to these uncertainties and complexities and how company CFO and board have adapted to these strategies in the finance department.
Challenges in the finance department include technology, infrastructure and human resources. The organization complexities increase with a better process that incorporates technology to analyze and collect critical financial data required in the decision-making process. The finance department can make good use of the technology which implies that they will need talent with a proper mix of knowledge and skills to apply this technology at its value. The human resource requires extra skills to attain this objective. The role of the finance manager has shifted from the traditional purpose of reporting from the past to the current strategic and transformational role. The finance manager needs to involve themselves with more strategic value-added activities.
The current unpredictable global markets have imposed new demands on the role of finance manager. The finance manager is expected to support scalability, flexibility and responsiveness in multiple opportunities and challenges faced by the world. The reduced revenue has forced companies to increase efficiency, reduce costs and make cuts when deeming fit and increase productivity. The current focus is mainly on productivity which involves entering new markets in the unpredictable market environment. To manoeuvre in this uncertain economic environment, there is a need to acquire new and appropriate skills regarding those that manage the finance department of companies. The finance department should provide better guidance to navigate the turbulent times.
Challenges to finance manager
Regulation- The uncertain and complex macroeconomic environment has increased the speed of the regulatory changes that have further improved the need to harmonize regulation across borders. This means increased responsibilities to the CFOs to accelerate compliance with all rules and to ensure the finance department has qualified professionals that can quickly adapt and implement the new regulatory changes. Professionals in the finance department are tasked with the responsibility of influencing regulatory and policy in place of their business.
Globalization- CFOs and another finance manager should have experience, and global perspective as the business becomes global. They need to comprehend how their company operates in various cultures, different regulatory areas and region to introduce finance function to the overall industry while increasing into new markets.
Technology- The finance manager should be part of the data revolution. The data should be collected and processed. The more complex software can be employed in data collection and analysis. A practical business should be put in place where the finance manager employs available information to gather, analyze and standardize data. The use of the technology will reduce the time spent on data collection and hence spare time will be used in connecting the information and providing valuable input in the decision-making process and their influence on business. A greater opportunity exists in these turbulent periods that uses extensive data and tool to provide insight into how they can be used for further development of the business (Mertzanis, 2013).
Risk- Finance manager faces a significant challenge in risk management. They are no longer involved in only cost-saving strategies. In the current highly uncertain environment, the CFOs have to approach the numerous uncertainties and risks proactively to safeguard the assets of the company, to reduce poor behavior that can erode value, implement right policies that affect the investments, shareholder return and cash availability. The balance on the risk-return is essential in this fast-changing business environment.
Transformation- The finance manager experience two kinds of change. One involves outsourcing and other shared values/services that take into account the purpose of the diversified skills in the more complex and fast-changing business environment. This will attract more risk to the business that needs to be carefully managed. The other part of the transformation is related to the finance function that focuses on the compelling analysis of the business process.
Management of stakeholders- The finance manager should not only prove both controllership and finance leadership but also act as a strategic partner to the CEO. The top management team consist of the senior finance executives, and they need to introduce their input to better the strategic decision making of the board. The CFOs need to communicate appropriately with hence should have excellent communication skills. They not only need to talk to investors, banks and financial experts but in proper language to media, board members and clients.
Strategy- The finance manager should be in a position to connect the analysis output and finance specific activities to the realities of the business to assist in the implementation process and strategy formulation. The finance managers should focus on balancing the strategy and numbers. The role of the finance manager should now focus on the method of achieving long term view on the process of business development rather than forecasting and analyzing past performance in the short term.
Reporting- The finance manager should not only focus on attaining financial goals beyond sustainability parameters. They should focus on the environmental and social objectives outside the traditional macroeconomic parameters. This has resulted in drastic economic changes in how decisions are made and the measurement of performance. The bottom reporting segment has a triple line which includes reporting and analysis on the economic, social and financial metrics.
Capability and talent- The challenges of the CFOs in a global context involves diverse skills required to respond to the fast-changing and more complex financial operations and functions that are developed abroad. They need working with talents from various cultures incorporating employing advanced technology among the virtual teams. The profile of the CFO has evolved from a specialist to a person with much broader skills and view of the business operations.
With the evolutions of the economic environment and more diverse role of the finance manager, the finance department has been forced to be split into two areas that include routine transaction oriented and the other is high value analytic and strategic. The finance managers should possess more complex skills and talents. They should have a more strategic overview over the development of the industry and opportunities that exist for the company, project management and communication skills, IT skills that involves using more complex software, attaining mastery in some foreign languages and achieving international perspective for the company. They should generally possess an appropriate mix of competencies, skills and knowledge with high component involved in operations, strategy and sophisticated analytics.
Recommendation
The finance manager is expected to understand how the organization works and provides other decision makers with the appropriate information they require more comprehensively. The finance managers should not only have technical capabilities, but they need to make a difference in the CEOs team. They should be in a position to select and make judgments based on the strategic priorities of the business. They need to bridge the language barrier concerning the technical vocabulary used by the finance managers to contribute to value creation of the company. They need to explain to the board and departments what the meaning behind the numbers is (Runtev, 2017).).
Conclusion
The business operates in an uncertain, turbulent, dynamic and changing economic environment. A lot of pressure is exerted on the finance manager and other departments to allocate resources more efficiently. They are also expected to gain a balance on both short term and long-term priorities and strategies to balance long term growth opportunities and counterbalance reduction of costs. This means that a career in finance and accounting have evolved into new challenges. By leading the finance department in one part and being a senior member in the other part means the finance manager needs to have the appropriate skills to cope with the challenges.
Reference
Karadag, H. (2015). Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), 26-40.
Runtev, m. (2017). New trends and features of international financial management. Economic development/ekonomiski razvoj, 19(3).
Mertzanis, C. (2013). Risk management challenges after the financial crisis. Economic Notes: Review of Banking, Finance and Monetary Economics, 42(3), 285-320.