CFO best practices: lessons from the trenches

When Betsy Ward reflects back on her first days as MassMutual’s CFO in 2016, she acknowledges the gravitas that came with being the first woman to take the life insurer’s finance reins likely bolstered one of her key initiatives — modernizing the 173-year-old company’s finance processes. 

Despite initial skepticism from some staff, she worked to convince them that change was possible. To foster buy-in she set up “go-and-see visits” to show what changes were possible and held meetings in which she pulled no punches about the need for the new processes and the potential benefits they could realize by reinvesting savings in the group.

“I do believe the big difference that I represented and that I was bringing to the table made a difference, though I don’t want to say a male couldn’t do it,” Ward said in an interview last month, noting that “it was a combination of how I was looking to bring people along as well as how I had proven my ability in the space, and the team was willing to follow me.” 

Ward, 60, is preparing to retire at the end of this month after 30 years with the Springfield, Massachusetts-based insurance giant. The company last year saw the total value of its life insurance coverage issued to policy holders pass $1 trillion for the first time in its history, while its total assets grew by over 4% to $335 billion in 2023 from the year earlier, according to its 2023 annual report. Ward, who has an easy laugh and isn’t afraid to wear a leather jacket to a business conference full of suits, is quick to note the people behind her company’s numbers: MassMutual’s oldest policy holder is 103 years old, she says. 

She believes now is a logical time for her to step down from her post as it gives her successor the opportunity to put her own stamp on the second phase of the modernization process. “We’re about to start this next phase so it’s a good time for the person who is going to be there to kick it off and own those decisions,” she said. Mary Jane Fortin, formerly the president and chief commercial officer for Thrivent Financial, will take MassMutual’s CFO seat on Jan. 1. 

Trading microfiche for dashboards

The financial team’s modernization hasn’t taken place overnight. In 2016, the year she was appointed finance chief, Ward assessed the company’s financial processes and came to see that her department’s ways were antiquated and manual — her roughly 300-person financial team still stored data on microfiche, and the FP&A team used spreadsheets for forecasting. 

But early on, she drew some initial shock with her proposed changes. At one meeting she recalls starting out by empathizing with her staff, saying she knew it was said that it was difficult to be in finance because “your numbers need to be perfect and on time.” But she didn’t stop there. “I said, ‘I’m here to tell you that’s not enough,’” Ward recalled in the interview. “The point I was making back then was, ‘you need to tell me what the numbers say, you’re so close to them if they’re coming in too late we’re not going to get the details we need.’” 

After a woman raised her hand to tell her there was no time to do more, she told them that she’d watch them go through the quarter end to see how it worked. Ward found that they were right: the process was too slow and manual and needed to be updated by bringing automation into the system so accountants and others could be freed up to analyze the data.

By 2018, she was executing the transformation. The first phase of the modernization effort has included adding bots, creating dashboards to provide information, changing the way the company is storing data so it doesn’t need microfiche anymore, moving off some databases and consolidating some actuarial reserve systems.   

A non-traditional CFO path

Ward didn’t take the typical path to become CFO: She isn’t a CPA. As a college student at University of Rochester in New York, she majored in economics and Spanish and then followed in the steps of her father to become an actuary, according to Ward and her LinkedIn profile.

Early in her career working her way up in Aetna Life & Casualty’s actuarial program, Ward was tasked with describing asset liabilities so that investment managers could invest against them. When she found that she effectively wasn’t speaking the same language as the investment side, she asked her boss if she could learn how to trade. They went on to trade corporate bonds in the utility sector, enabling Ward to gain investing experience and paving the way for her to work in a number of subsequent roles as a portfolio manager. 

In November of 2007, she took the role of chief enterprise risk officer at MassMutual just as the Great Financial Crisis was unfolding. The insurance sector was wrestling with whether to use mark to market accounting or risk management assessment to value assets correctly. “What we found is we should look at both so that you understand what your risk would be if every depositor were to leave today,” she said. 

Her predecessor in the MassMutual CFO seat was Michael Rollings, who left to become CFO at the U.S. fund manager Vanguard in 2016. Because she reported to him, Rollings got to know and recommend Ward as a potential successor, at one point asking her if she’d be interested in being CFO. She had her doubts. “I said, ‘I’m not an accountant,’” she recalled. His retort, “Neither am I.” She came to understand that there was much more to being a strategic CFO at a company like MassMutual than keeping the books.

Getting loud

Ward is stepping down as some inroads have been made by women finance leaders this year: the number of female CFOs appointed globally reached a five-year high in the first half of this year, according to a recent report by leadership advisory firm Russell Reynolds Associates. Among them: Google parent Alphabet in June named Eli Lilly veteran Anat Ashkenazi to become its new CFO. Still, just 17.8% of sitting CFOs at Fortune 500 and S&P 500 companies are currently female, down from 18.5% in 2023, according to a 2024 study by the executive search firm Crist Kolder Associates. 

Ward has some advice for women coming up behind her. She suggests younger women be mindful about picking mentors: choose people that are senior to you who are doing things that you want to do, she said. This can be particularly hard for women who often think they need to pick a perfect mentor and who sometimes also aim too low when searching out sponsors, she said. “Just pick a whole bunch,” Ward said.

She has also noticed that there is a certain power that three women can hold in a group. When she became chief risk officer, a named officer position, she said she benefited from having two other women at the meetings, the head of human resources and the head of the retirement business area. “They say there’s something magical about three,” she said, noting that when there is a trio the same two women don’t always have to team up to support one another.

Then too, in meetings, she’s also learned the importance of standing her ground. She has never been intimidated by the financial subject matters being discussed, but there were times when she has needed to force herself to speak up — sometimes loudly. 

“They get loud and I just have to get louder and keep talking until I can hardly hear what I’m saying but I just have to keep going,” Ward said. “I had something important they needed to hear. Especially as a risk officer, you have to be able to speak up.” 

From the early days of the internet, to the push to mobile apps, cloud computing and more recently generative artificial intelligence, CFOs have wrestled with how, when and what new technologies warrant funding. As the keepers of company coffers, finance chiefs are tasked with holding a tight rein on budgets while also being expected to finance tools needed to keep their organizations competitive. 

At the same time, the CFO’s role has evolved over the years to become one of a strategic growth partner for leadership, who sets success and failure milestones for tech investments, Mark Partin, CFO of enterprise software company BlackLine, said during the recent CFO Dive-CIO Dive event.

Long gone are the days of a green eyeshade contingent that would simply approve or deny budget proposals. In the case of tech, complicated enterprise resource planning systems and costly AI initiatives have pushed finance chiefs and chief information officers to team up to identify and track new tech projects throughout their life cycles.

“CFOs were the Dr. No for so long. Then we became growth, strategic-oriented, let’s put money to work. Now we’re in the profit, rule-of-40 life,” Partin said, referring to a popular growth metric, which states that software companies’ growth rate plus profit margins should exceed 40%. “You have to be able to dredge or carve out money to put to work but you also have to define those metrics of success or failure so that you can pull back when they’re not working.”

When it comes to AI, that balancing act comes with a particularly tricky twist; gauging the technology via the traditional yardstick of return on investment is challenging because data is harder to observe and price than more traditional assets like buildings and employees, CFO Dive previously reported.  

Here are six tips stemming from lessons learned and experiences shared by the panelists on how CFOs, CIOs and other C-suite leaders can work together to get the biggest bang for their firm’s buck on technology. 

1) For ROI, consider multiple measures. Developing a solid ROI on an AI project that a CFO can “take to the bank” is really hard, Partin acknowledged. Two measures he uses focus on either productivity gains or cost avoidance – meaning hourly work saved. In the case of a proprietary AI companion that BlackLine is developing, there are different sets of numbers, including that it has been rolled out to 50% of employees in 15 languages in 15 countries. But the ROI on the project is saving 3,000 to 4,000 hours worked a month, he said.  

2) CFOs must make time to dive into tech. Productive CFO-CIO relationships are built on trust, according to Ryan Downing, VP and CIO of enterprise business solutions at Principal Financial Group, a global investment management firm and insurance company. The last few finance leaders Downing has worked with have spent time building that up by “diving into” his area of business. That, in turn, also helped finance better understand the company’s growth drivers so that, for example, when a tech expense goes up, they know there is a silver lining: it means more people are interacting on a digital basis with the company, he said.  

3) CFOs help CIOs keep the score. Jaime Montemayor, chief digital and technology officer at General Mills, said his partnership with the company’s CFO Kofi Bruce has evolved over the course of their work on the consumer food company’s tech modernization initiative. At first, the team focused on figuring out funding for the tech upgrade, which Bruce and his team helped secure. The second phase involved the finance team helping identify specific business cases and value streams to target. The third stage has entailed the finance team helping the company track impact. “As we have built the capabilities and deployed them across the company, the finance team is the one that is helping us keep the score,” Montemayor said. 

4) Avoid tech solutions looking for a problem. As the early hype cycle around AI persists, it’s important to stay disciplined when vetting technology, experts said. “Vendors are creating new capabilities where it’s a little bit of a solution looking for a problem,” Downing said. Instead, companies need to make sure they flip that approach. “We have to first make sure we’re thinking about our process to say, ‘What’s the best way to solve a problem?’” 

5) Look for the “pockets” to apply new technologies. Bhadresh Patel, COO of global consulting firm RGP, said his firm broke down the concept of generative AI into “pockets” of use cases where it could get productivity, revenue, or cost efficiency gains rather than trying to find a way to apply it more broadly. “I think you have to be very careful with that because you can get carried away in coming up with thousands of use cases which you can employ for your organization,” Patel said.  

6)  Cybersecurity budgeting requires important but, yes, sometimes “boring” legwork. To properly protect your firm from cyber risks, it’s critical to understand the systems you are protecting because you can’t protect what you don’t know you have, according to Jonathan Fairtlough, partner and principal, cyber threat management at KPMG. A mistake he sees companies continually making is that they focus on the high-level risk rather than gathering the basic information on the hardware, software and data they have to safeguard. “This is boring work...It's not a cool tool set,” Fairtlough said. “But when built out properly, it provides insight both to what you're protecting and what the spend around those different tools are.” 

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As CFOs look to 2025, their plan of action might be best described as taking measured risks for growth while building stability—all with a hefty emphasis on technology initiatives. While executives understandably have concerns about continuing economic and geopolitical uncertainty, a key part of their strategy will be focusing on what they can control.

With that in mind, we identified seven key areas drawn from interviews with finance leaders that they are focusing on for growth and resilience in their organizations.

1. Use Data Visibility to Push Financial Goals

The rapidly changing prices, shifts in customer demand, and economic volatility of the last several years have left companies with added cost and complexity, driving CFOs to zero in on data to improve business performance. In PwC’s June 2024 Pulse Survey, CFOs show they’re focusing on business fundamentals with 58% of respondents saying they’re dedicating more time to business performance management compared to a year ago. CFOs have always loved their key performance indicators (KPIs), but now the leaders want to track a wider range of KPIs, in finance and also in operations areas. And they want to share those metrics more easily with operational leaders, to make metrics the foundation of performance conversations with sales, production, human resources, and similar groups. Look for software that centralizes data from across the business and includes built-in capabilities for automatically tracking KPIs, so the finance team can easily view and share up-to-date metrics via dashboards and status reports.

2. Drive AI Initiatives Forward

Most financial leaders at this point understand the potential of AI and generative AI. However, where to apply AI in their finance organization may be less clear cut. Stumped on where to start? Consider asking your employees. Many times, they’ll have a process they hate that they want to automate, or think could be more efficient. Potential areas could include bill capture or account reconciliations. As teams identify tasks on which they would like to apply AI, they should look at whether AI capabilities are available within their existing software tools. The majority of companies don’t have the resources to develop or train AI models on their own. Instead, using AI-powered features embedded within their platform can provide an easier, lower-cost point of entry.

3. Give Finance Staff Normal Hours and Fewer Fire Drills      

Having finance teams working until 1 a.m. every quarter just to close the books or working weekends scrambling to find the numbers to update a forecast for a board meeting isn’t great for morale. 53% of CFOs say retaining and attracting talent is either an “extensive” or “significant” struggle, according to EY’s 2024 Tax and Finance Operations Survey. Further, 89% say talent-related barriers are preventing their finance functions from delivering on their purpose and vision. While compensation plays a big role in talent attraction and retention, work-life balance, burnout, and low-value, repetitive work are also top-ranked reasons for finance professionals leaving a company—or the industry entirely. To increase attraction and retention, finance leaders need to focus on initiatives that will improve their teams’ work-life balance and experience, including technology that automates tedious, manual tasks and brings higher-value work earlier in the career path.     

4. Explore Growth Opportunities

Despite headwinds, CFOs are still eyeing measured risks for growth, particularly as the M&A landscape shows signs of optimism. In Dykema’s 20th Annual M&A Outlook Survey of senior executives and dealmaking advisors, 70% of respondents expect a stronger US M&A landscape in the next 12 months. Private equity is a significant driver behind the anticipated M&A resurgence, with nearly seven in 10 surveyed dealmakers believing private equity investors will drive M&A growth in 2025, as firms look to deploy $2.5 trillion in available capital. CFOs should review their portfolios to prepare for strategic deals. They should evaluate current assets’ financial performance, growth potential, risk profile, and alignment with the company’s strategic objectives.

5. Bolster Cybersecurity Amid Increasing Stakes

The stakes around cybersecurity are increasing—and CFOs are taking note. The average cost of a data breach in 2024 was $4.88 million—a 10% increase over 2023 and the highest total ever, according to research from IBM and the Ponemon Institute. CFOs are experts in risk management, making them natural allies of the CISO or CIO in their cybersecurity plans. Technology executives should consult CFOs on cybersecurity plans, making sure they reflect the company’s overall financial risk. Important areas for both executives to consider as they create plans around cybersecurity are the impact of new AI initiatives, any applicable reporting obligations, and coverage from the company’s cyber insurance policy.

6. Stay Ahead of Regulations and Policy Changes

2025 marks a major year for potential regulatory and policy changes. As a candidate, President-elect Donald Trump said he would impose 10%-20% tariffs across the board on imports and 60% on imports from China. Time will tell how that plays out, and businesses are preparing for different scenarios. In 2025, US lawmakers will confront major tax policy expirations, the majority of which stem from the Tax Cuts and Jobs Act of 2017. Consequently, finance chiefs need to be nimble around a possible “Taxmageddon,” where recent policies or assumptions dramatically change, and model how potential changes might affect them and plan for those impacts.

7. Reshape Your Finance Team’s Future

Transformation initiatives have been on the CFO’s agenda for years, and 2025 marks a noticeable sense of urgency from their bosses. In IBM’s 2024 CEO Survey, 43% of respondents said they’ll increase the tempo of their organization’s transformational change over the next 12 months. For CFOs, that emphasis brings their technology partnerships to the forefront. In IBM’s 2024 CFO Survey, leading CFOs said CTOs are their most important relationship, with 72% identifying them as highly important or critical. And 65% of CEOs said their organization’s success is directly tied to the quality of collaboration between finance and technology functions. As technology strategy and financial outcomes become increasingly interconnected. CFOs should engage with technology leaders early and often to help ensure that technology investments are aligned with financial goals and overall business strategy.

Want to learn more? Check out the full business guide, The CFO Agenda: 25 Business-Building Ideas for 2025, for 25 actionable steps in these areas to help chart a strong course for 2025.

The growing adoption of generative AI is putting software-as a-service company ServiceNow “at the center of the biggest enterprise software market opportunity and transformation in a generation,” CFO Gina Mastantuono said.

Momentum for the Santa Clara, California-based software platform has continued to accelerate throughout the year, driven in large part by the response to its new GenAI products, the adoption of which represent the quickest-growing product introduction in the company’s history, Mastantuono said in a interview.

“Growth that fast, it means that the enterprise market customers are really leaning into this AI adoption curve, much faster than any curve we've seen in the past,” she said.

The company’s swift move to integrate GenAI across its platform led to a robust Q3, with ServiceNow reporting a 23% jump in subscription revenues year-over-year to reach $2.7 billion, according to its earnings report. The segment represented the bulk of the nearly $2.8 billion in total revenues it reported for the quarter ended Sept. 30.

Getting ahead of the AI agent curve  

The software provider has moved swiftly to establish its bona fides in the budding generative AI sector, announcing its AI-powered “Now Assist” tools in September 2023 — bringing GenAI into its IT service, customer service management and HR service delivery offerings, among others, according to a company press release.

The company’s push to bring AI into its offerings has led to strong results over its past several quarters, with the jump in subscription revenues for its Q3 following after such revenues also increased by 23% in the prior quarter, according to the company. ServiceNow has been investing in AI for some time now, which puts it in a strong position to “continue to be successful because of all of the innovation that we've been driving,” Mastantuono said.

The company also raised its full year guidance following the quarter, now anticipating subscription revenues between $10.65 billion to $10.66 billion, compared to the $10.57 billion to $10.58 billion range forecast in Q2.

At the top of September, the company announced its AI-powered Xanadu platform, and, in a separate release, announced its plan to integrate so-called “AI agents” or “agentic AI” across its platform to assist customers with everything from customer service to IT management.  

“If you just think about having teams of these AI agents that can independently solve problems and tasks and multi-processes using human-like reasoning and comprehension, it’s pretty remarkable,” she said. Mastantuono has served as the CFO for the SaaS company for three years, with previous roles including a stint as CFO for Ingram Micro and as SVP, controller and chief accounting officer for Revlon, according to her LinkedIn profile.

The AI agent solutions can help to add value to customer service or IT representatives in a way that saves both money and time for companies, Mastantuono said.

Interest in so-called “agentic AI” or “AI agents,” the use of the technology to execute manual tasks automatically in a way that mimics human assistants, has ramped up among business leaders in recent months. OpenAI-backer Microsoft recently announced it would be adding 10 new autonomous assistants to its Microsoft Dynamics 365 platform, for example, while Big Four firm KPMG is in the midst of prototyping several such agents as it looks to become a leader in the space, CFO Dive previously reported.

Interest in AI agents is growing at a time when more and more workers are reporting concerns over how AI’s introduction is impacting their own roles — a recent survey by Grant Thornton found 28% of U.S. employees are worried AI will replace them in their current positions or reduce their roles, CFO Dive recently reported.

However, AI agents don’t represent a tool that can supplant human employees, but rather ones that can provide key assistance, Service Now CEO Bill McDermott said. Utilizing AI agents is like “hiring an additional workforce to support people by doing the jobs they've never wanted to do in the first place,” McDermott said during the company’s Q3 earnings call.

AI agents can utilize human-like reasoning skills to help provide customer service agents with all the key information they need during a customer interaction — aggregating all of the information on the customer and what they’ve asked for ahead of time to cut down on friction, Mastantuono said.

ServiceNow will be launching the first use cases for its AI agents this month, and is “really excited about the future of how AI is going to really shift and shape enterprise technology in a pretty meaningful way,” she said. 

Moving from experimentation to implementation

While GenAI remains in the early innings, the opportunity it offers is “enormous,” Mastantuono said. The company’s remaining performance obligations for the quarter “is really signifying the long term momentum” for the business, she said, with RPOs for Q3 reaching $19.5 billion, a 36% increase year-over-year.

AI could fully transform the way many businessesa are working today, and the technology’s adoption curve is already much steeper than that of the cloud—the last major technological shift. 

“The move to the cloud was all about efficiency. The move to AI is not just about efficiencies,” she said. “It's really about how are business models going to shift, how our workflows going to change, to get products to market faster, to get customers to value faster? And I think that's a real game changer for business in general.”

ServiceNow’s AI growth comes as CFOs and other business leaders weigh the pros and cons of the emerging technology, seeking the best use cases and return on investment for such tools.

“One of the things that I'm talking to customers about is, how do we move from experimentation in AI to real implementation?” Mastantuono said. “And what is an enterprise that's fueled by AI going to look like?”

Today’s CFOs have seen their responsibilities expand rapidly over the past decade, a shift that affects the entirety of the C-suite. Finance leaders are finding themselves weighing in on areas of strategy, technology implementation and operations, impacting how they interact with others in the C-suite — and, in some cases, reshuffling the chains of command.

For example, in some organizations today, the “CIO actually reports into the CFO; that's an evolving trend,” said Darren Heffernan, CEO of Trintech in an interview. “And we're seeing the role of a COO really kind of go away.”

The change in the CFO’s role from one of a numbers-focused position to one of strategy has been ongoing for a number of years, but was really cemented by the COVID-19 pandemic, “because the first thing we all did was run to that person to check for 50 different things, no matter what you were doing,” Heffernan said.

The pandemic represented a “sea change” for the finance chief, he said. In particular, CFOs saw their areas of responsibility overlap more and more with the chief operating officer, leading to an environment where, in Heffernan’s mind, the two roles have “morphed into one another,” he said.

The disappearing COO and the CFO ‘sea change’

Heffernan’s over two-decade career at the financial close and reconciliation software provider spans a number of roles, including stints as the Plano, Texas-based company’s CFO and as its COO, according to his LinkedIn profile. He became Trintech’s CEO in April of last year as part of a succession plan, he said.

Over the course of his career, the office of the CFO has steadily become the “cornerstone” of the organization, he said, with business leaders looking to their finance chiefs to manage everything from cash flow to human resources to technology implementation. 

For many businesses, this evolution has meant granting their CFOs the dual title of COO; software provider Qualcomm added COO responsibilities to the remit of its CFO Akash Palkhiwala this January, for example. Other businesses that have made similar choices over the past two years include electronics and entertainment company Sony as well as teen accessories retailer Claire’s, CFO Dive previously reported.

Other companies, meanwhile, have simply elected not to appoint a COO, or have not replaced them if the executive leaves. About 35% of businesses have utilized a COO over the past decade, according to data from Crist Kolder Associates’ midyear 2024 Volatility report.

Additionally, there have been 37 departures from the COO role so far in 2024, according to the report, which analyzed 671 companies in the Fortune 500 and S&P 500. Of those 37 departures, 73% resulted in a vacant COO position.

In the face of the evolving C-suite, the COO role has become less common in part because the position was something of a catch-all, which is no longer needed for many organizations, Heffernan said.

“There's more functions that are aligned in their own respective areas, [and the] COO kind of covered a lot of different functions, and we don't see that as important anymore,” he said, adding Trintech itself does not have a COO.

Presenting a united front

With the CFO role having evolved into a joint financial and operational position, maintaining an open, transparent relationship with other key members of the C-suite — notably, the CEO, Heffernan said — is essential for an effective business.

The CEO and CFOs need to be able to speak openly to each other, but also, “once you go outside the door to face, if you like, the wider world, it's critical that you're on the same page,” Heffernan said. “So a large amount of trust has to exist between the two positions as well…it can't be, a boss and a subordinate. It has to be very much [a relationship between] equals.”

Failing to be in sync with each other can lead to problems down the line for the business, Heffernan said, which is also true for other key relationships in the C-suite. For example, there’s more overlap today between the CFO and the role of a chief information or chief technology officer, so keeping those two areas siloed “is not conducive to a growing, inclusive organization,” Heffernan said.

Trintech, for example, has a centralized group which comes together to make purchasing decisions to ensure there is no duplication with the technology they are buying. Involving the users of those technologies from the start is both key from a procurement perspective and to making the jobs of both the CIO and CFO easier, Heffernan said.

Heffernan spoke to CFO Dive at a time when Trintech has reported ongoing growth, with bookings growing by approximately 20% year-over-year for the first half of its fiscal year, according to a recent press release.

The company’s owners, private equity firms Summit Partners and Vista Equity Partners, are also reportedly looking into a potential sale of the firm that could grant it a value of approximately $2 billion, Reuters reported Monday, citing people familiar with the matter. Trintech did not respond to requests for comment regarding the possibility of a sale.

CFO agility —  challenged in recent years by the COVID-19 pandemic, Silicon Valley Bank’s failure and war in Ukraine and the Middle East — is facing a new test as turmoil in the U.S. Presidential election has quickly ratcheted up domestic geopolitical risk and uncertainty, corporate finance experts say. 

In a one-two punch of extraordinarily unusual political events that played out over the course of about nine days, the attempted assassination of former President Donald Trump on July 13 was followed by President Joe Biden's subsequent announcement on July 21 that he was not seeking reelection and had decided instead to endorse Vice President Kamala Harris. In the midst of it all, a CrowdStrike software glitch unleashed massive technical disruptions across industries on July 19 in what’s been called the largest IT outage in history that will hit Fortune 500 companies with more than $5 billion in direct losses, according to CNN. 

“It’s really tough when you put together these three massive events in a two-week period and try to find the right combination of crystal balls to figure it out,” Bobby Mikkelsen, CEO and CFO of the Las Vegas, Nevada-based Tego Cyber, said in an interview. “You put all those three things together and if anybody says they have all the answers today they’re full of [it] because all the different scenarios that could be developing out of those three things are large.”  

Like many executives and voters, Mikkelsen said he was still evaluating the potential fallout that the events could have on his cybersecurity software company. But already he’s concerned about the impact on the climate for financing which is the lifeblood of early stage companies like his. He’s not expecting capital to be “coming out in droves over the next three and a half months — and even less so because of the last two weeks,” he said. 

New threats in a ‘polycrisis’ era

The election shakeup is only the latest disruption in what some call a “polycrisis” era. The term, coined by Adam Tooze, a Columbia University history professor, denotes a world buffeted by crises that can spill into one another, like climate change that can dislocate people and lead to immigration, the Financial Times reported. 

To be sure, finance experts and executives hold a range of views on the relative import that the presidential election’s turmoil will have on business as compared to other crises CFOs have grappled with in recent years. But many say that the political shakeup, at least for CFOs, pales in comparison to the pandemic and the regional banking crises which slammed the corporate finance world squarely at its core. 

“When you think about SVB, that led treasurers to really have to think, ‘is my liquidity really what I think it is, do I have to rethink my banking partner?’ It was a direct impact on the financial system,” Stephen Philipson, head of wealth, corporate, commercial and institutional banking at Minneapolis, Minnesota-based U.S. Bank said in an interview. During the pandemic, there was a fear of what “tomorrow was going to look like” along with “zero visibility” on cash flow, he said.  

In comparison, the tenuousness of the election’s outcome does not have a direct and immediate impact on businesses, even as the unprecedented nature of the turmoil around the events is very “front of mind” for CFOs and treasurers, he said. “There’s visible uncertainty,” Philipson said. “There is predictability in that we have two potential paths and I think people have a general idea of what each party would do if [they were] in office.” 

Blind corners

Even before the singular political events of late scrambled the presidential race, executives — as they typically do ahead of all major elections — were bracing for the election and the potential policy changes that different outcomes can bring. 

In early June, nearly one-third of CFOs signaled that their companies were postponing, scaling down, delaying or permanently canceling investments due to uncertainty around the upcoming election, according to a survey that closed June 3 that was a joint initiative of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.

In contrast, after Biden announced he was getting out of the race, the CFO Leadership Council sought to gauge finance chief sentiment in a one-question LinkedIn survey that asked whether CFOs felt the upcoming U.S. elections would impact their strategic planning. A majority (78%) of the more than 800 finance chiefs surveyed felt the upcoming U.S. elections would affect their plans in some way, with 20% anticipating a significant impact, 31% a moderate one and 27% a minimum impact. Only 22% said it would have no impact at all. 

The bottom line is that CFOs are divided on their views of the impact of the election outcome, in part because the varied nature of businesses mean policies affect them very differently or not at all, Jack McCullough, founder and president of the CFO Leadership Council said in an interview. For example, a company that competes with goods made outside the U.S. would welcome the 10% tariff on all imports proposed by Trump while one that buys imported goods could see their margins squeezed, he said.

But what the survey didn’t tackle was the angst that the new uncertainty piles onto CFOs who crave strong data they can use to support the solid forecasts and strategies that they need to deliver to their boards and companies. “For CFOs, the thing they like best in their professional lives is certainty…and when you’re living in a volatile environment as we have been for four years it’s probably the worst-case scenario,” he said, noting that a previous tongue-in-cheek survey found that the most popular super power craved by finance leaders was “seeing around corners.” 

Accelerated issuance, hedging

CFOs have been dipping their toes into the market to offset some of the risks they are seeing. In a U.S. Bank survey back in January and February of more than 2,000 executives, the share of respondents who named geopolitical risks as a top worry rose to 26% from 17% in the year earlier, CFO Dive previously reported, with an increasing number of CFOs and treasurers hedging against interest rate risk and shifts in foreign exchange and commodity prices.

“Even though the market seems to react in a less volatile fashion to these big news headlines that would have been major market movers in the past, I think finance executives are still very cognizant of identifiable risk, whether it’s the presidential election or the wars going on around the world,” Philipson said in an interview last week. “And the last two weeks demonstrate that there’s also unidentifiable risk that can pop up.” 

As a result, he said one of the things the bank has seen a lot more this year is an increased use of FX option strategies that companies are using as a way to cap their downside risk. For example, they’re buying call options, effectively locking in the ability to buy or sell a currency at an out of the money price as a potential against downside risk. That’s no longer just for the biggest corporations; even middle market companies are increasingly using such hedges to offset the possible impact of an election or central bank policy move that can affect the dollar’s strength relative to other currencies, he said.

At the same time, many companies have already accelerated corporate debt issuance this year, a pull-forward of activity that Philipson attributes in part to companies seeking to avoid any potential election volatility. The volume of U.S. investment-grade corporate bond issuance passed the $1 trillion mark on Wednesday, well ahead of the September date it crossed that threshold in 2023, Philipson said. That's the second earliest date historically that investment-grade corporate debt issuance has reached that level, according to U.S. Bank data. Only in 2020 did the issuance surge any earlier, an outlier year that saw the $1 trillion milestone passed in May as companies across industries scrambled to shore up their balance sheets.

While financing volumes are always slower in the second half, Philipson said that as long as risk markets remain stable there could still be a steady amount of supply in the second half of the year, especially given that there’s a big wall of early pandemic debt that will need to be refinanced next year.  

Of course, there are political changes afoot outside the U.S. that could have a range of implications for various corners of the global economy. For example, the U.K. election earlier this month led to Labour Leader Keir Starmer becoming prime minister, but it’s not clear what that’s going to mean for M&A, David Dean, managing director of M&A at Willis Towers Watson, said in an interview.  

Do get educated, don’t overreact

While Biden stepping down is a clear signal of coming change, the important thing for CFOs to do right now is “get educated, but be patient,” Connor Augustyn, director of financial operations and private equity at West Monroe told CFO Dive.

It’s important for CFOs to pay attention to any key differences that may emerge between the Biden and Harris platforms. Ultimately, this juncture should serve as a catalyst for finance chiefs to ensure their organizations are well-prepared to weather change, Augustyn said in an interview.

“I would say since COVID, this has become the second-largest business disruption that's forced CFOs to pause and say, ‘How do I plan for agility?’” he said. “So it's become a good catalyst for them to look introspectively and say, when the change comes, ‘How do I quickly pivot my organization to make sure that we are not behind the eight ball?’”

Finance chiefs also should be sure not to overreact — for West Monroe’s part, the consultancy has been coaching finance chiefs through a “standard election” where both parties have different views on corporate policies, taxes and regulatory, he said, despite the tumult of recent events.

What CFOs can do in practice to prep for any coming changes is examine their core business processes to make sure they have the flexibility they need — if new tariffs are placed on imports, for example, and subsequently impact product costs, “how quickly can my organization put a product cost change and a pricing change out to the market?’” Augustyn said.

The FP&A team will play a critical role — ensuring that needed flexibility “comes through making sure that your FP&A organization is very sound…but then it's also taking a look across the organization and understanding where you may be slower to move because of inefficiencies in processes, technologies,” he said.

With so much coming at businesses today, the real challenge for finance chiefs is making sure you’re being proactive and not reactive, said Myles Corson, global and Americas strategy and markets leader, financial accounting advisory services for Big Four firm Ernst & Young said.

“I think for CFOs, the big challenge is, if you don't have a clear vision of where you're going as an organization, and where you're going as a function…you can get overwhelmed by reacting to all of that disruption,” he said, adding that the outlook for interest rates and what that means for capital investments probably remains a bigger concern for CFOs. It’s critical, he said, for CFOs to be able to “see through some of the short-term noise of the news cycle.”

 

When fast-casual restaurant chain Cava went public in June — raising $318 million and vaulting to unicorn status at a valuation of approximately $4.7 billion — some investors seized on its success as a promising green shoot in yet another moribund year for IPOs.

For Cava, however, the IPO itself was “not a destination, it was just another step in our journey,” said CFO Tricia Tolivar. Still, the Mediterranean fast-casual restaurant chain’s path to going public required extensive preparation over the course of about 18 to 24 months, Tolivar said.

“We conducted five mock earnings calls, we prepared ourselves as if we were public,” Tolivar said in an interview. “We drafted earnings releases, drafted scripts, prepared mock public filings, and that really prepared us very well so that when we went public we weren't doing a lot of things for the first time.”

Tolivar joined the Washington, D.C.-based company in 2020 in its top financial seat, having previously served as CFO for health and wellness company GNC, according to her LinkedIn profile. Her previous roles also include several positions at Big Four firm Ernst & Young over a seven year span, including as director of finance, as well as various vice president roles at AutoZone.

Practice makes perfect

Cava went public at a time when IPOs were in the midst of another down year, albeit one with more kick than 2022. High profile IPOs for companies such as Instacart and Arm Holdings, as well as Cava, represented signs of life returning to the space in the latter half of last year, CFO Dive previously reported.

Cava’s IPO also contributed to a surge of renewed interest in the fast-casual space as the restaurant jostled with competitors including Sweetgreen and Chipotle, as well as speculation that its IPO — which reaped about $30 million more than expected — set too high a bar for Cava to clear, Reuters reported at the time.

For the restaurant brand itself, the focus throughout its IPO path was on ensuring the business was “operating in a very consistent, predictable way, delivering on our commitments and making sure we did that whether we were public or private,” Tolivar said.

In addition to making sure Cava was ready to operate as a public entity, the company also did a lot of its hiring ahead of time, she said.

“That is one of the things our board has been really thoughtful about is, we're always thinking ahead,” she said, with leadership focusing on understanding what would need to be done two or three years in the future and executing on that in the present to avoid playing catchup.

That included identifying needed talent in areas like finance. Prior to going public, Cava hired a senior leader to lead both its FP&A team and investor relations, as well as a chief accounting officer, Tolivar said. Since she joined the company, Cava has also expanded its FP&A team, growing from two employees when she started in the CFO role to more than six or seven, she said.

“Right now, we're investing from an internal audit perspective, leveraging a third party,” Tolivar said of the finance team’s future expansion. “So that's an area where I see, over time…we could possibly bring pieces of it in house, but that's something we haven't done yet. And we've consciously decided to wait and leverage our third party resources to do that.”

The team’s extensive preparation allowed Cava to respond effectively to surprises that cropped up after going public — for example, information regarding its results for its most recent quarter was reported ahead of its earnings call, according to a report by CNBC. The team “had to quickly pivot and release our earnings almost a day earlier than we had intended,” Tolivar said.

“Luckily, the team was well prepared and so we were able to adjust and pivot quickly so that we weren't leaving the public confused about anything that was going on,” she said.

Charting a path to expansion

The fast-casual chain has continued to see strong growth in the months since its public debut. For its full-year fiscal 2023, Cava opened 72 net new restaurants, the company reported. Revenue grew 59.8% to reach $717.1 million in fiscal 2023, compared to $448.6 million in 2022, with same restaurant sales expanding by 17.9%.

As with other players in the food and restaurant industries, the company will also need to weather ongoing macroeconomic pressures on its path to continued growth, such as a tight labor market and inflation that is squeezing both consumers’ spending while bolstering the prices of food. Cava, which paid a starting $13 wage for its workers in 2016, has hiked wages to remain competitive when attracting labor, Tolivar said, including an incremental wage increase of 8% in its third quarter. Currently, wages at Cava range between $17.31 to $19.71, according to data from ZipRecruiter.

As far as managing inflation, Cava has historically hiked menu prices between 2% and 3% annually, something Tolivar does not see changing in the future, she said. The company does not have any future price increases planned for the year at this time, she said.

For the upcoming year, Cava is focusing on continuing to grow its footprint across the country, including investing in opening new restaurants that are “performing well from an investment perspective,” Tolivar said. Its strategy for the next year also includes engaging with diners further via its loyalty program and other products, she said.

“We've invested in our foundation for growth,” Tolivar said. “So we've got the infrastructure, we need to be able to grow and scale, and now we're finding even more and more that Cava can continue to perform in a meaningful way.”

Richard Galanti was two weeks shy of his 28th birthday when he left New York City to join a startup retailer named Costco in the state of Washington. He had gotten to know the company while working with them on a Series A financing round as a young investment banker with Donaldson, Lufkin & Jenrette. 

It was 1984, a time when it was not an altogether typical career move for a Stanford MBA with a degree in finance from University of Pennsylvania’s Wharton School to walk away from Wall Street. But he took a chance when the company that was just then opening its first three locations in the Pacific Northwest told him their original CFO was leaving and asked if he’d like to come work for them.

Galanti, now 67, told CFO Dive in an exclusive interview this week that he figured he’d likely be there four years and then return to live “happily ever after” in his hometown of Atlanta. Instead, he is preparing to step down next week after nearly four decades at the finance helm of what turned out to be a retail juggernaut. Costco operates well over 800 warehouses and reported that net income for the 53-week fiscal year ended Sept. 3 rose to $6.29 billion from $5.84 billion in the prior year’s 52-week period. 

Morningstar analyst Noah Rohr, noting that Galanti is known as the company’s “voice” to Wall Street due to the many earnings calls he has presided over, credited him with providing good insight into how the business is performing and added that the company typically doesn’t have one-time adjustments in its earnings that would “blur earnings quality” even if it has long avoided giving investors forward looking guidance. “Galanti and the rest of Costco’s executive team have long focused most of their energy on meticulously running the business — providing an enjoyable shopping experience and offering low prices to its consumers — while trusting that financial results would inevitably follow,” Rohr wrote in an emailed response.

In the wide ranging talk looking back at his career and the company’s business strategy, Galanti repeatedly stressed how fortunate he was to have gotten to play the role he did in the company whose story and “folklore” he appears to cherish. “Whenever I speak to students they say, ‘How did you get where you got?,’” Galanti said. “I say, ‘a lot of hard work, which creates more chances and good luck.’” 

Editor’s note: The following interview has been edited for clarity and brevity. 

CFO Dive: You reportedly got your first taste of the business at your family’s grocery stores. What was that like?  

Richard Galanti: It was more of a grocery store than the big supermarkets we have today. Today, the big ones are 50-60,000 square feet, these were 18 or 20,000. Anyway, I grew up in them, my dad and his three brothers had four stores, two grocery stores and two other retail stores. I along with some of my cousins grew up working in the business, you know, bagging groceries when we were kids, stocking shelves and mopping floors. When I got a little older I got to cut meat. Then of course our summers in college tended to be my dad and my uncle’s mini vacations from the standpoint that we kind of managed the store. But there were four stores and fifteen cousins so I never thought I’d be in retail. 

CFO Dive: You were one of the youngest executives when you started at Costco. Was that hard? 

Richard Galanti: I think having grown up in a grocery store helped. I used to joke that Jim [Sinegal], our founder, liked me not necessarily because of my Wall Street experience or MBA but [because] I grew up in a grocery store and had actually stocked the shelves and cut the meat and mopped the floors. Also, if you think about the first ten or 12 merchants and operators that started Costco starting with the two founders, they were all in their early to mid 40s and most of them came from San Diego, from a company called FedMart. So it wasn’t a startup of a bunch of smart 22 year olds. It was a startup but with people that had been in retail and in big discount and box retail for 20 plus years. Notwithstanding the fact that there were challenges early on in IT and challenges with getting the bills paid, operationally we knew how to run the company. 

CFO Dive: I’m sure you’ve had offers to go elsewhere. Why did you stay so long in the CFO role, which some view as the number two or “wingman” position?

Richard Galanti: Years ago our founder, my boss for the first 28 years, said if I ever wanted to be considered for a role other than the CFO I’d have to go work in operations. Frankly I enjoyed my job, and in a way while there is travel involved in my job, I wasn’t traveling three weeks a month like many people in merchandising and operations have to do. I guess I was a little spoiled in that regard as well. But certainly I had no problem with being number two or three or four in a company that is such a wonderful company with great people. 

CFO Dive:  Did your family play a role in that, not wanting to be on the road all the time?

Richard Galanti: Well, my dad worked six days a week in the store and came home after dinner two or three nights a week so he worked hard but he was in town. I don’t know, maybe that’s part of it. But again, you look back, you say nothing could have been planned. When I think about it, the two founders of Costco went to New York to interview three or four boutique Wall Street firms, fortunately for me they picked DLJ, fortunately for me, I was available to work on it.

CFO Dive: People talk these days in the CFO world about classic CFOs versus strategic CFOs with the classic typically being a CPA. Where do you feel like you fit in there? (Note: Galanti is not a CPA) 

Richard Galanti: I hate to use the word strategic. It sounds a little fancier than I am. I’d probably lean a little more toward classic. Certainly I’m part of the team. Ultimately the merchants and the operators come up with many of the ideas. But nobody has a monopoly on that and over time we all work together. I think the role of the CFO starts with the basics of, [you] learn the traditional functions under the CFO at a sizeable company, the entire accounting function, both all the financial statement preparation plus all the information tools that are used by the people in the company. You’re providing timely, accurate and useful information to the buyers, to the warehouse managers, to the people that run our manufacturing businesses.

CFO Dive: What was the hardest time being CFO for you?

Richard Galanti: I think COVID was up there for a lot of reasons. It impacted everybody personally. It impacted your employees in different ways and it impacted our operations of course. With all the challenges of supply chain and shortages of of containers and shipping and not knowing where the merchandise was and not knowing what impact it would have on our business. In March or April of 2020 we, like many companies, as strong as a balance sheet as we had and still have, we went out and borrowed an additional $4 billion not knowing what that spring, summer or fall would bring.

CFO Dive: It’s been said you’re good at pointing out patterns. Is that one of your strengths?

Richard Galanti: Usually from an investor relations public company standpoint it’s the CEO who is the one on the phone and the CFO is providing more of the financial stuff and the CEO is talking about direction or whatever else. Here, from Jim to Craig [Jelinek] and now Ron [Vachris] generally speaking they’ve said, ‘you go do that, I’m running the company.’ I’ve done it with consistency, transparency and straightforwardness and not over-promising. I’ve always tried to not just regurgitate the numbers but give them trends. While we don’t provide any forward looking statements, we won’t do that, we try to respond to the likely questions we’re going to get.

CFO Dive: You said you would hold the soda and hot dog combo at its $1.50 price potentially “forever” to emphasize value. Given that you’ve said you don’t like to over-promise, can you stick with that?

Richard Galanti: Look, that’s certainly our goal. We went out years ago and built a hot dog plant that makes two items, the big hot dog that we sell one at a time and then 12-packs or 10-packs of a smaller size for families. That’s a plant that makes 300 million hot dogs a year and we did that to take a few cents of the cost out by doing it ourselves in such huge efficient volumes and to try to keep that price lower. It’s become part of our folklore, both of those items you mentioned [the hot dog combo and the $4.99 rotisserie chicken]. In terms of changing prices those will be two things that would be last on the list and I don’t see it happening in the near-term.

CFO Dive: How involved are you in pushing efforts [such as keeping health care benefits costs down for employees]?

Richard Galanti: We’re all involved in pushing it because we understand the goals of the company and this operating framework we’ve talked about from the beginning here. I think part of my job is, I’ve been a good communicator, particularly when Wall Street says, ‘why don’t you charge more for that item.’ Because that’s not how we do things, we try to figure out other ways to do things. It gets back to that discipline. Now, one can only be so noble. If you’re not rewarding the shareholder, none of this matters because you’re not going to be around to manage the company.