As businesses around the world continue to brace for the likelihood of a recession, Ishaan Seth, a Senior Partner in McKinsey & Company’s New York Office, sat down with Fortune to discuss the firm’s new report based on research showing the value of effectively managing the downside of volatility while aggressively pursuing the upside. According to Seth, Chief Financial Officers will be required to adopt a mindset shift from traditional approaches to effectively navigate increasingly uncertain times.
The report, “Strategic courage in an age of volatility,” lays out the changing role of CFOs as organizations work to adapt to and overcome a seemingly unending chain of “unprecedented” events that have roiled markets and permanently changed the way many industries do business. More than just ensuring traditional financial stability, CFOs are now faced with a need to move aggressively to take advantage of uncertainty and use it to drive improved outcomes beyond simply surviving the downsides.
According to McKinsey, CFOs are building an edge in three ways: on insights, commitment, and execution—with volatility adding a multiplier effect on competitive advantages. The firm encourages financial executives to be bold and push hard to get better information from diverse, non-standard sources, and talk to front-line staff to get more human-focused insights. Strong CFOs will need to increase their collaboration with different departments to ensure resources are properly allocated to best meet identified growth opportunities, as well as have the vocabulary to measure and monitor this idea of growth. Lastly, McKinsey encourages evolving CFOs to ensure they are creating time for strategic thinking while managing urgent business situations.
The report suggests that the role of CFO has evolved significantly over the past ten years, growing from an accounting and compliance transactions-oriented role into one that owns the value-creation story for a company and leads the value-creation charge, with a new set of skills to ensure success. McKinsey states that evolved CFOs will need to be able to work across silos, pioneer technology-driven product development, and skillfully tell the company’s story on value creation, communicating to executives, investors, and the public about interim steps of progress toward larger, long-term goals.
As companies continue to lean into volatility, those committed to aggressively pursuing growth opportunities while carefully managing the downsides of uncertainty can expect to reap the rewards of being bold when others are merely being careful. Tomorrow’s CFOs with the skills needed to manage such a business environment will find themselves as key drivers of success in uncertain times.