CFOs examine 2018’s financial entrails

With the year ramping up after the summer break, FEI asked leading chief financial officers about their expectations for the year ahead.

Navigating a shifting regulatory landscape and managing rapid technological change were the two standout issues.

Blackmores’ CFO Aaron Canning predicted that regulatory change and evolution, both domestically and offshore would be one of the challenges for the year, as well as charting an optimal path through the raft of Free Trade Agreements (FTA) which Australia has negotiated.

According to Australia’s International Business Survey 2017, analysis of over 1,000 Australian businesses by UTS Business School reveals 93 per cent are exporting, 48 per cent importing. While the vast majority of exporters are engaged with business partners based in countries where an FTA has been negotiated, the analysis reveals that companies are not yet taking full advantage of all that the FTAs have to offer.

Domestically Canning added that there were a range of fiscal policy changes impacting taxation – both corporate and personal – which needed attention.

Canning also said that many CFOs would need to tackle the changing retail landscape in Australia and quantify “the real Amazon effect.”

Technology and technological disruption looms large for CFOs in 2018. Dexus CFO Alison Harrop noted that one of her focus areas would be; “Responding to technological disruption and making sure we don’t get left behind – investing sufficiently in tech to retain a competitive advantage.”

One business which has seen its original business model profoundly disrupted by technology – but is now undergoing a wholesale reformation is Australia Post. CFO Janelle Hopkins said; “The rise in technology has given us access to more data than ever before. Therefore I believe we need to capture the opportunities created by data and create value by using it to solve customer, people and business problems, and generate commercial returns.”

To do that required organisations to invest in technology that capitalises on data and how it is used, and to invest in people – including people working in the finance function – with the skills to find the insights to influence data driven decision and actions.

“By investing in technology and people we’ll be able to better solve customer, employee and business problems and generate returns. This leads to various forms of value, including creating better customer and employee experiences, generating new revenue by commercialising data, reducing enterprise risk through early detection and warning of issues and providing our employees with new skills so they can continue having rewarding careers.”

Harrop also stressed the importance of investing in people and skills noting that “Retaining, motivating and engaging the best and brightest to propel our business forward,” would be a priority in 2018.

But she also acknowledged the need for Australia’s CFOs to continue to find ways to grow revenues, during a period when despite a relatively strong economy, wages growth was constrained and consumer confidence an issue.

Late last year NAB’s chief economist Alan Oster said that Australia’s short term outlook is reasonably strong for 2018 but that consumers remain cautious. He has also predicted interest rates may start to rise mid year (some economists have predicted two rate rises during the year amounting to a 0.5 per cent increase) and that the Australian dollar will weaken against the US.

When it comes to consumer confidence however there may be a change in the wings as January’s ANZ-Roy Morgan Consumer Confidence index revealed Australians to be at their most optimistic since 2013. Typically Australians do report higher confidence at the start of the year, but the ANZ’s head of Australian economics David Plank dismissed this year’s lift as simply a seasonal blip – or the result of Australia securing the Ashes.

“The increase this year is stronger than the 3.6 per cent average lift in confidence for the past nine ‘annual turns’, indicating that the gain in confidence is more than just seasonal. Confidence has been trending higher since the low for 2017 in late August.

“It is encouraging that consumers seemed willing to overlook their high debt burden, moderating house price gains and the impact of higher petrol prices. We think the continued strong growth in employment is the key driver.”

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