Veteran banker, vice chairman and CEO of Housing Development Finance Corporation Keki Mistry on Thursday said that chief financial officers (CFO) should not look for a quick fix and should focus on the long-term plans of their companies.
“Do not ever look for quick fix solutions. Short-term solutions will never help you in the long-run,” Mistry said at the financialexpress.com CFO Connect Conclave 2022.
In the financial services sector, profits can be enhanced by taking on risks, he said, adding that HDFC has avoided mismatches in the asset liability management (ALM). There is a need to focus on long-term stability rather than maximising short-term profits, he said.
Mistry also emphasised the importance of not ignoring the perils of over-leveraging as economic uncertainties, which are more prevalent in the current scenario, in the past too, drastically impacted the ability of companies to raise funds. Citing examples of economic shock of 2008, taper tantrum of 2013 and IL&FS crisis of 2018, Mistry said that financial markets became risk averse and borrowing costs for even the ‘AAA’ rated rose significantly.
Thirdly, CFOs should not ignore early signs of distress in their companies, which will enable management to prevent crisis which are about to occur down the road, he said.
Currently, risk management has become most imp function of a CFO, which can be both on and off the balance sheet. Going ahead, key concerns for CFOs will be cybersecurity, data protection and legal compliance. Non-financial responsibility such as those related technology, are putting many CFOs at a disadvantage, he said citing surveys have that shown that majority of CFOs have admitted that their companies do not have the capability that they believe is necessary for digitisation and are not prepared to deal with cyber security threats.
Additionally, along with maximising shareholder returns, it is also CFO’s responsibility to meet the company’s long-term ESG goals and they should questions on the ESG data provided from within the organisation to ensure that the goals are being met, he said.
Speaking at the same event, Jaspal Bindra, chairman of financial services firm Centrum India said that CFOs need to remain open to new learnings and scenarios and keep upgrading themselves in a fast changing environment. CFOs should give up their biases and attempt to learn and relearn in order to cope with such challenges, he said.
“There will be disruptions and black swan events which might come more often. It is impossible to prepare, prioritise or become an expert. I think the only secret or trick is to remain open,” Bindra said.