CFO: Corporate Flexibility Officer

Quarterly results add up to annual results, and – woosh – we are looking back on a decade. At this point, the CFO who aims at long-range objectives may ask himself how he can turn the next decade into a prosperous one. How to weather storms and deal with delays at the airport just when he promised his family to be home early for the weekend? In situations like this, the most flexible CFO senses a seemingly old-fashioned craving for stability, constancy, monotony even. Let the world be as dynamic as I also wish it to be, but dynamite, why can’t the plane take off as it’s supposed to?

Stability and reliability, letting us plan ahead: these have become valuables, not only on business trips. Tightening regulation can render tax planning obsolete, with significant costs. If specifications for product approval change and the product can’t be launched, the back-to-square-one affects more than just liquidity. Companies are used to uncertainty, but can you as a strategically thinking CFO a) put a figure to uncertainty, and b) minimize unpleasant surprises?

Yes, uncertainty can be minimized, especially in Europe where the crisis happens on a high economic level. Yes, companies must adapt to new market requirements: the food giants have realized that “poverty returns to Europe”, as Unilever’s Jan Zijderveld put it in the Financial Times a few months ago. Small-scale packaging, e.g. shampoo or detergent for only five washings, is no longer an Asian or South American “privilege”. Nestlé already generate one eighth of their European revenue through small packages, thanks to increasing sales Popularly Positioned Products, as they are called. The consumer pays less for a single buy, but ultimately more, and Nestlé’s Corporate Flexibility Officer books a higher profit.

“Flexibility for markets, stability for planning” seems to be a formula for success. Easiest to practice in an environment with sound public finances and a strong middle class acting as an equalizer in any society, preventing abrupt changes in politics and legislation. The country I know best is Switzerland, which may serve as example here: low deficit and debt, thanks to a debt brake introduced through a public vote back in 2003. The Swiss debt brake reduces not only new, but (more importantly) accumulated debt: politicians may only spend what is earned, allowing overspending in a recession but then, in better days, requiring extra saving to make up. This is the backbone of Swiss financial stability, or at least one of the ribs, among others such as democratic control over anything from building a new community pool to levying toll. The Swiss budgets on federal as well as municipal level must pass parliament, the Swiss voters decide if they sponsor a new swimming pool and will therefore pay 3% more municipal tax for five years, say.

The CFO of a European headquarters in the Zurich business region will have to pay his way too, but he can rely on transportation, regulation, product approval. Surely there must be other countries granting such basic rights? Switzerland certainly does.

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                                                                About the author

Marc Rudolf is Director for New Markets at Greater Zurich Area AG and he has broad experience in advising technology and life sciences companies, in particular regarding tax aspects of creating and exploiting intellectual property rights. Prior to his current position, he promoted Swiss technology in the US and later worked with British chartered accountants and lawyers on continental expansion projects. Marc Rudolf has been with Greater Zurich Area AG since 1999. He speaks English, German, French, Spanish, Swedish, Italian, Russian and Portuguese.