How can financial leaders manage uncertainty skillfully? The first step is to determine what kind of uncertainty we are talking about, says Hilary Norris, CFO of financial management software company GTREASURY.
Uncertainty is provided in at least three different types, which are from a macro perspective. Currently, US companies have experienced two out of three, one of which is related to AI.
In the interview below, Norris, whose year of corporate finance brought her to the UK, Asia Pacific, the Netherlands and the US, explains why CFOs tend to handle uncertainty better than others. The Oxford University Grade also reveals how CFOs can distinguish between innovative emerging technologies and vendor hype, and why the successful adoption of new financial systems requires them to surpass the general RFP.
What is the most challenging time of economic uncertainty in your financial career? How did that experience shape your approach to lending leadership?
I tend to classify economic uncertainty into three buckets. There are “rational” uncertainties such as recession and Covid-19, which mainly follows a predictable pattern. Next is the “irrational” uncertainty. This is what we are experiencing now in the current, repeated customs environment.
But the third and most challenging kind of uncertainty is what I consider to be a “frameless reference” bucket. This is where the CFO sits with the AI. Unlike previous confusion, there are no real historical similarities that confidently predict what will happen, or to what extent, what will happen. The only comparable shift was when computers first joined the workforce, but that transition took 10-15 years. AI talks about similar magnitude changes that occur in 10-15 months.
This “no reference framework” uncertainty makes the mental flexibility of CFOs extremely important. People with rigid thinking struggle. Many CFOs are relatively comfortable with reasonable uncertainty. They know they cut back and prepare for a bounceback during the recession. They can even play the game in their own way through irrational times. However, many are extremely uncomfortable with the potential impact of AI.
Think about whether features like FP&A, traditionally driven by human analysis, are being augmented or even replaced by Agent AI capabilities. The problem is: How do you restructure your finance team to operate effectively in this new paradigm? I think many CFOs will need a fundamentally different leadership approach that embraces uncertainty and sees it as an opportunity for change rather than a threat to manage.
Can you personally go ahead of emerging financial technologies and trends? And what filtering processes do you use to separate real innovation from industry hype?
My approach to emerging technologies is based on two principles: adopting a “systems and digital first” mentality and being prepared to take risks calculated in the “fail-first” philosophy.
“The question is: How do you restructure your finance team to operate effectively in this new paradigm?”
Here is an example. When evaluating business intelligence tools, I experimented with several options. After a modest investment, we quickly abandoned it as it was clearly not working for us. When separating valuable innovation from hype, it is important to have a willingness to dispose of things that don't serve a particular need.
More importantly, the filtering process starts with being honest and clear about your business goals. Many organizations make the mistake of using generic RFPs with endless tickbox requirements. If you are doing that, you are missing the point.
What would you use instead?
I like to focus on identifying our main and secondary goals. For example, if risk management is our number one priority, five on a one-to-five scale, other features such as cash positioning might be worth three. The hierarchy drives our technical decisions.
When I chose the ERP system, I started with a standard template and mercilessly eliminated any unrelated questions. Many companies, especially large companies, mistakenly believe that they are incorrectly thorough by asking 700 questions in an RFP. They are hurting themselves by not focusing on what is essential to the organization.
The universal truth about technology that many overlook is that success depends not on the technology itself, but on the application. In many cases, we believe that the system magically solves these problems without clearly defining them. This inconsistency leads to implementation failures.
The most effective approach is to start with “why”. Before evaluating your technology, understand the business challenges you are solving. Without this clarity, you will find yourself putting your budget on solutions that don't provide value, regardless of how “innovative” they look or claim. Technical capabilities are far less than appropriate applications for a particular business context.
What have you learned about the CFO's Treasury perspective in your five years at Greasury?
I observed a widespread dichotomy between CFOs who actively maintain knowledge of financial management and their potential, and CFOs who actively maintain knowledge of those who are not. I'm not saying that CFOs need operational Treasury skills, but they should strive to understand what the Treasury is doing and the strategic value it brings.
The responsibility for this disconnect can lie to both parties. The Ministry of Finance brings valuable functional expertise, but there is an opportunity to more effectively communicate how new Ministry of Finance opportunities and innovations will impact broader business goals.
I also think that the Ministry of Finance is often seen as a tactical back-office function when it is very strategic. The Ministry of Finance controls dry powder, financial resources and capacity. Understanding how the Treasury's work on debt management, capital costs and cash positioning affects a broader business strategy can help unlock the major competitive advantages.
