We have all likely heard the “Defense…Defense” cheer at sporting events. It comes at a time when the home team’s fans realize that to be successful, their favorite team should only focus on stopping the other team from scoring. That is to say that the environment is unstable or unclear enough that the best approach is to protect the lead—not try to increase it.
It appears that CFOs and other top level financial executives are looking at 2016 as a year to play defense. It was noted in a recent issue of CFO Network that the consulting firm Protiviti conducted its “2016 Finance Priorities Survey” and found little appetite for playing offense.
Protiviti found that the top three priorities for CFOs this year year are:
- Preserving Margins
- Solidifying Earnings Performance
- Minimizing Cybersecurity Risks
Those priorities were likely formed in the environment in which companies find themselves. Although improved from the 2008-2012 period, earnings and cash flow are in many cases just returning to pre-2008 levels. And for many companies, particularly those in the manufacturing arena, it has been a very uneven return to those pre-2008 levels. It proved difficult at times to determine if end user demand was really growing or if those end users had just run their inventory down to such low levels that they were merely restocking.
So what plays might be in the defensive playbooks of CFOs? An obvious one is to place a tremendous amount of importance on getting cash flow forecasting right. This will likely require the CFO, Operating and Sales people to work together more than ever before. The CFO has to take the lead and ensure that all of the information necessary to create an effective cash flow forecast is easily available and is being shared across the company.
Another play could be described as “going up the middle” rather than running an “end around.” There are certainly times when the goals of the CFO, Operations and Sales are different. This can create dysfunctional “teams” and wasted effort as people go around others rather than working together. In the current “defensive” environment, there is no time for this wasted effort. Everyone’s efforts must be focused on maintaining margins and preserving earnings.
Only time will tell when the defense can come off the field. However, at this point, the defense looks to be in charge in 2016.