From Risk to Resilience

Today, one thing you can count on is constant change. CFOs are steering companies through the murky waters of uncertainty, tasked with a long list of responsibilities that extend from financial planning to risk mitigation and operational strategy. They're the key players who have to balance near term-decisions with long-term outcomes.

This article is all about providing CFOs with actionable insights on how to transition from risk management to resilience building. We'll examine the importance of investing in the right team, the transformative power of innovation and the art of managing cash flow for strategic growth. A special focus will be given to the potential of sale-leasebacks, an often underutilized form of alternative financing that can unlock significant capital. Whether you're a seasoned CFO or new to the role, this guide is the roadmap you need to help you rise above uncertainty and prepare your organization for sustainable growth.

Invest in Your Team

A strong team is the foundation of a resilient company. The right people bring wide-ranging perspectives that can make a real difference. What does this really mean for CFOs who are charting a course for growth and resilience?

The Value of a Multifaceted Team

A one-dimensional team just won't cut it in today's fast-paced business world. Companies need to have the right combination of skills and perspectives to navigate the complexities of the modern market. Each member of your team should bring a unique skill set that complements the others.

Take Google, for example. The company succeeds because it values new ideas, driven by a diverse team of engineers, data scientists, marketers and even psychologists. This multifaceted approach has been key in Google's ability to stay ahead of the curve.

Actionable Tip: Conduct a skills gap analysis to identify what your team is missing. Then, target those areas in your hiring and training efforts.

The Importance of Continuous Learning

The business landscape is always evolving, and your team should be doing the same thing. Continuous learning opportunities not only help team members get better at their job but also boosts employee morale and retention.

Actionable Tip: Allocate a portion of your budget for employee development programs. Whether it's workshops, online courses or conferences, make learning a priority.

Building a Culture of Resilience 

A resilient team can adapt to change, bounce back from setbacks and seize new opportunities. It's more than just the luck of the draw. Investing in your team is a deliberate, strategic move that results in growth and resilience. 

Actionable Tip: Invest in training programs and hire from a diverse talent pool to bring in a variety of skills and perspectives. Create a company culture where failure is seen as a learning opportunity. Encourage open communication to address challenges head-on.

Embrace Innovation

Innovation isn't just about thinking up the next big trend. It's about optimizing your current processes to be more efficient. Digitalization is a key player here. But how do CFOs use automation and technology to pursue operational excellence and business growth?

The Digital Transformation Journey

A digital transformation is a strategic overhaul of business activities, processes and models to fully take advantage of the changes and opportunities that digital technologies have to offer.

General Electric (GE) underwent a massive digital transformation to evolve from an industrial company into a digital-industrial company. The process involved implementing new technologies but also rethinking their entire business model.

Actionable Tip: Start by auditing your current tech stack. Identify outdated systems that are slowing things down and look for modern solutions that can streamline operations.

Data-Driven Decision Making

The ability to make informed decisions is a big competitive advantage. Data analytics tools can provide insights into customer behavior, market trends and operational efficiencies. That wealth of information provides many opportunities to take your operations to the next level.

Actionable Tip: Invest in data analytics tools that can provide actionable insights. Train your team to interpret and use this data effectively.

Automation

Automation can take over repetitive tasks, freeing up your team to focus on more strategic initiatives. For CFOs who need to manage resources efficiently, the time saved is invaluable.

Actionable Tip: Identify bottlenecks in your current processes and give some thought to how digital tools can eliminate them. Look for tasks that can be automated to save time and resources.

Embracing innovation is a necessity for CFOs aiming for efficiency and growth. And remember, innovation isn't a one-time event but an ongoing process. Keep your eye on new technologies and be ready to adapt.

Manage Cash Flow

Managing cash flow can be quite a juggling act. You need cash for day-to-day operations, but also to invest in growth. This is where sale-leasebacks come into play as a form of alternative financing. But let's take a closer look at the nuances of cash flow management, especially for CFOs who are trying to steer the financial ship through both calm and choppy waters.

The Liquidity Conundrum

Liquidity is like oxygen for a business. Without it, your operations can grind to a halt. But hoarding money isn't the answer either because idle cash doesn't generate returns.

Actionable Tip: Maintain a cash reserve covering at least three to six months of operating expenses. This gives you a safety net while allowing you to invest in growth.

Creative Financing

Investing in growth is important, but it's easier said than done, especially when liquidity is tight. Creative financing options like sale-leasebacks can be a lifesaver.

What is a sale-leaseback? A sale-leaseback is when a company sells its property to an investor for cash and simultaneously enters into a long-term lease. This frees up capital tied in real estate, which can then be redirected toward growth initiatives. It’s also permanent capital that never has to be repaid so there is no future refinancing risk. For example, a retail chain could use a sale-leaseback strategy to free up capital and then turn around and invest in expanding its online presence.

Actionable Tip: If you own valuable real estate, consider a sale-leaseback as a way to unlock permanent capital with no refinancing risk, while maintaining operational control of your building(s). 

The Role of Financial Forecasting

Accurate financial forecasting can be a huge advantage. It helps you anticipate cash flow needs, making it easier to plan for investments and contingencies. It's another highly useful way CFOs can ensure financial stability and growth. Sale-leaseback arrangements also typically involve set lease payments over a period of many years (anywhere from 10-30 years). This predictability in cash outflows can make it easier to forecast future expenses.

Actionable Tip: Invest in financial forecasting tools and, if possible, bring in experts who can help you make the most of them.

Additional Strategies for CFOs

Navigating the financial landscape requires more than just a good compass. It requires a multi-pronged strategy. In addition to investing in teams, embracing innovation and managing cash flow, there are other tactics CFOs can use to build resilience and drive growth. 

Scenario Planning

Always have a Plan B and even a Plan C. The more prepared you are for different scenarios, the more resilient your company will be. During the COVID-19 pandemic, companies that had robust contingency plans were more nimble and able to better adapt to the new environment, ie. moving to remote work or finding new suppliers.

Actionable Tip: Use financial tools to test out the impact of different business scenarios. This helps you prepare for unexpected issues, so you can make faster, smarter choices.

Debt Management

Look for ways to reduce or retire debt. This will improve your balance sheet, boost your credit metrics and increase cash flow. Sale-leasebacks can be another useful tool in this regard, enabling companies to unlock attractive capital to pay off debt coming due. Another benefit of a sale-leaseback is there is no refinancing risk or back-end balloon payments. 

Actionable Tip: Review your debt profile regularly and consider sale-leasebacks as a way to strengthen your balance sheet and avoid expensive debt refinancing.  

Transparency 

Keep the lines of communication open with all stakeholders. Transparency builds trust, which is invaluable in times of uncertainty.

Actionable Tip: Use multiple channels like email updates, town halls or even social media to keep stakeholders informed. Transparency is about being honest when challenges arise.

Final Thoughts: The Road to Resilience

Resilience is about building a business that can withstand the shocks and disruptions that come its way and emerge stronger and even more competitive. For CFOs, this means wearing many hats — from being a strategic advisor and risk manager to an innovator and financial steward.

Remember that resilience is a journey, not a destination. It requires continuing effort, strategic planning and the right set of financial tools. Sale-leasebacks are one such tool that every chief financial officer should have in their arsenal, offering a practical solution to one of the most pressing challenges: balancing liquidity and growth.

Ready to unlock new growth opportunities for your business? Contact W. P. Carey today to explore whether or not a sale-leaseback makes sense for you!