I love to learn new words. Whether or not CFOs are familiar with this term, they undoubtedly know its connotation and are dealing with its effects every day. Permacrisis — named by the UK-based Collins English Dictionary as the 2022 word of the year — is defined as “an extended period of instability and insecurity, especially one resulting from a series of catastrophic events.” In essence, it’s a word describing the feeling of living through difficult times.
Global uncertainty, disruption, talent, culture … these are among the challenges on the minds of CFOs for both the near-term and long-term, according to the results of a recent global survey conducted by Protiviti and NC State University’s ERM Initiative. This study assessed the top risks on the minds of global leaders for 2023 and for the next decade, through 2032.
The CFO respondents, similar to board members and CEOs, see a range of people, talent and culture issues as the top risks for their organizations in the next 12 months, even amid an uncertain growth economy, inflationary conditions, continued supply chain challenges, geopolitical shifts worldwide, and ongoing concerns regarding cyber threats and ransomware attacks. Over the next decade, these issues are compounded by concerns that the rising adoption of digital technologies and the rapid speed of disruptive innovations will exacerbate talent and skills shortages and disrupt, if not overturn, current business models.
Here’s a closer look at the notable challenges CFOs see on the near- and long-term horizons.
People and culture
Talent- and culture-related risks dominate CFOs’ 2023 risk priorities, making it imperative for finance leaders to add talent management to the growing number of organizational priorities they help shape while driving corporate strategy. People- and culture-related challenges come in many forms. Most notably, in the face of the disruption that lies ahead, CFOs view resistance to change throughout the workforce as a formidable obstacle to organizational performance and success — one that can lead to strategic failure. In this era of rapid change, this risk points to a need for trust, transparency and effective strategic communications.
In addition, CFOs are concerned that the organization’s culture may not sufficiently encourage the timely identification and escalation of significant market opportunities and emerging risk issues. Such shortcomings in the culture can prevent the organization from acting as an early mover when new opportunities arise to grow or expand the business, potentially leading to missed strategic opportunities. This risk merits attention as it is vital that CFOs and their peers remain in touch with business realities on the front lines and in the back office.
Other people-related priorities for CFOs relate to attracting and retaining top talent and rising labor costs — challenges CFOs believe may limit their organization’s ability to achieve operational goals while meeting profitability targets. This organizational issue affects everyone, including the finance organization. Finally, finance leaders prioritize three “future of work” risks: fundamental changes in the overall work environment (e.g., the expansion of digital labor); satisfying employee preferences for remote work and/or collaborative hybrid work environments; and the organization’s ability to adapt its business model to embrace the evolving “new normal” driven by the ongoing pandemic and emerging social changes. These risks require reimagining recruiting and retention efforts. They limit access to needed skills, and ultimately may impede efforts to improve operational effectiveness and efficiency unless steps are taken to upskill and reskill existing employees and fully align the workplace with employee preferences.
A related CFO concern is a lack of organizational resilience and/or agility to manage an unexpected crisis. Because uncertainties abound, most realize it is not a matter of if the organization will face a crisis, but rather it is a matter of when a crisis might occur. Preparing today for tomorrow’s crisis makes good business sense. And while this is largely a cultural issue, it also involves the organization modernizing its legacy systems and embracing innovation and emerging technologies.
Technological disruptions and disruptors
The 10-year outlook for CFOs portends disruptive times ahead, particularly with regard to the rapid pace of disruptive innovations enabled by artificial intelligence, digital currencies, the metaverse, quantum computing and other advanced technologies. Not surprisingly, one critical concern centers, again, on talent: CFOs recognize that the adoption and optimization of emerging technologies hinge on the organization’s access to new skills that either are in short supply or require comprehensive upskilling and reskilling of existing employees.
CFOs also indicate that the rapid speed of disruptive innovations may outpace their organization’s ability to manage those risks appropriately, or even to compete, without subjecting the existing business model to wholesale changes.
Finally, CFOs in many companies are concerned that their organization’s existing operating processes, in-house talent, legacy IT infrastructure, lack of digital expertise, and/or insufficient digital knowledge and proficiency may result in negative consequences. Potential outcomes include a failure to meet performance expectations related to quality, time to market, cost and innovation as competitors — companies that are either “born digital” or invest heavily to leverage technology for competitive advantage — raise the performance bar. These risks sustain the ongoing narrative that the 2020s is indeed a decade of disruption.
Supply chain uncertainty
Another concern ranked highly by CFOs for the coming year is the supply chain. CFOs perceive that ongoing supply chain uncertainty — including the viability of key suppliers, scarcity of supplies, energy sources, unpredictable shipping and distribution logistical issues, and/or the lack of price stability in the supply chain ecosystem — may make it difficult to deliver products or services at acceptable margins. Fragile supply chains are not a new issue, but overlapping global crises in recent times have convinced many boards and C-suites of the need to rethink longstanding supply chain risk management strategies and capabilities. A top objective of developing new supply chain risk management approaches is to replace a dominant focus on low-cost sourcing with a more disciplined, comprehensive approach centered on fostering resilience and reliability in the face of ongoing global volatility. CFOs also recognize that supply chain strategies need to be reworked to incorporate climate change considerations along with other ESG matters.
Yes, the word both now and looking forward is permacrisis. The level of uncertainty in today’s global marketplace and the velocity of change continue to produce a multitude of potential risks that can disrupt an organization’s business model and strategy on short notice. The message of our current study and the ones we have conducted in years past is uncertainty is here to stay. For today’s CFO, keeping abreast of emerging risk issues and market opportunities has become table stakes for positioning the finance function to play a significant role in improving organizational resilience and shaping long-term success.
This article originally appeared on Forbes CFO Network.