We asked our survey respondents what are the biggest risks they face in achieving their 2022 goals. These are the top seven responses that we received.
1. COVID shutdowns
The pandemic has shattered businesses since its widespread onset in 2020.
8.5% of businesses in the US have permanently closed down in the last year due to COVID-19 related market shutdowns. Shutdowns resulted in businesses having to stop operations overnight, payments getting stuck in the
cash cycle, employees being laid off, and inventory wasting away.
How to tackle it: In 2020, businesses were forced to manage operations remotely overnight as governments worldwide announced the shutdown of public spaces due to the spread of coronavirus. But, today, many businesses have suitably prepared themselves for remote work, investing in a wide range of technology tools for collaboration, IT security, and cash management. Investing in business continuity preparations and disaster recovery is something that businesses should look at considering the volatile environment.
2. Input price increases
Finance leaders are always concerned about costs, no matter what other responsibilities they might handle. Ensuring costs do not go above a threshold and optimizing expenses is the top-most priority for mid-market CFOs. But 2022 can prove a difficult year for this and CFOs are much concerned about the rise in input prices. The ongoing war between Russia and Ukraine has further worsened the situation, leading to higher
inflation rates.
Input price increases raise the cost of doing business by making the components required for manufacturing a product or delivering service more expensive. It may also lead to supply disruptions. Input prices on a variety of
commodities including oil, natural gas, coal, energy, agricultural products, and shipping costs will continue to remain high and put pressure on businesses.
How to tackle it: Reimagine your budgeting and financial planning processes. You may need to rework them to suit the changing conditions such as higher input costs, discounts for customers, etc. Widen your supply chain base and re-evaluate contracts to minimize wastages. Look for good hedging opportunities and design a rolling, scenario-based planning approach to manage demand at least one cycle ahead.
3. Cyber risks
As businesses go increasingly digital and adopt a remote-only or hybrid work model, the chances of cyberattacks also increase. Cyberattacks cause thousands of dollars of loss, crippling business operations. Cyberattacks increased by over
50% in 2021, at the rate of 1,353 weekly attacks per organization. Damages related to cybercrime are estimated to have cost businesses
$6 trillion in 2021. This trend is expected to continue into 2022, with increased intensity.
How to tackle it: CFOs need to work with CIOs and the IT team to ensure that their networks and digital assets are secured against all known and potentially emerging types of cyberattacks. Conducting regular security assessments and investing in the right IT and data security tools is crucial.
4. Increased competition
As businesses emerge from the pandemic, CFOs are ‘double-optimistic’ about revenue growth than they were in 2021.
28% of businesses expect revenues to grow over 50% in 2022 compared to only 14% in 2021. As businesses gear up to acquire and poach customers, increase marketing spend, and enhance the budget for product development and market expansion, CFOs are worried about increased competition dampening their goals.
How to tackle it: Work with the other C-suite executives—CMO, CIO, CTO—to prioritize action items, chart business goals and plans, and decide on budgets and spending that’ll help beat the competition. Analyze the moves that competitors are making, study market predictions by leading analysts, and track the ROI on your investments to measure productivity and value creation.
5. Non-compliance with regulatory mandates
Regulatory mandates around data security, privacy, and financial reporting have been tightened in the last few years. Companies that violate any of these regulations are fined heavily, not to mention the reputation damage that they suffer. CFOs are primarily concerned about finance-related regulations such as tax codes, antitrust laws, insurance, and data-privacy laws such as GDPR. Mid-market teams often do not have sufficient resources (such as a legal team) to ensure compliance and this could be worrying the CFOs.
How to tackle it: Work with third-party agencies, if needed, to ensure regulatory compliance. Conduct periodic internal and external audits to review financial reports and statements. Use financial reporting tools to centralize data, reduce errors, and drive compliance.
6. Lack of IT modernization
Many mid-size businesses continue to struggle with their IT systems. The lack of IT investment planning has resulted in companies spending randomly on popular solutions, leading to disparate systems that are data silos and often not the most efficient tools. More than half of the finance leaders (58%) we surveyed felt that lack of IT modernization was a big risk to achieving their 2022 goals. More than two-thirds (68%) of the respondents say outdated technology stacks and manual processes negatively impact the efficiency of their operations. These are also voted as the top challenges in managing accounts receivables, along with the lack of digital payment options (60%) and centralized customer data repository (58%).
How to tackle it: The technology landscape is dynamic. Stay up to date with trends and changes in this space. Evaluate possibilities of adopting emerging technologies to stay ahead of the competition and improve productivity and efficiency. When evaluating software solutions, check if they are intelligent solutions powered by AI and ML that can self-learn. Update your legacy systems and invest in cloud solutions, wherever possible.
7. Attracting and retaining talent
Attracting and retaining talent is increasingly becoming a concern for business management teams, including the CFO and his office. According to a report, 75% of all Certified Public Accountants (CPAs) will retire in the next 15 years, and fewer millennials are interested in taking up these roles. The ‘great resignation’ has also hit this industry with firms finding it harder to attract and retain accounting staff.
Nearly a quarter of our respondents said that the shortage of staff is a gap in their current AR and AP teams. 70% of CFOs want to hire more people to close the skills gap in their AR and AP teams. Organizations that lag in implementing technology such as AR automation will find it difficult to attract talent, according to 33% of our respondents. 43% of our respondents also say they’ll be focusing more on talent acquisition and retention.
How to tackle it: Look at upskilling and retaining your existing talent. You should empower your teams with technology to improve their productivity and ease their work. Potential hires would also be more interested in your organization if you offer them cutting-edge technology to work on. Also, offer remote and hybrid work options as these are among the most sought after in the post-pandemic years.
