The Global CFO’s Playbook

A global CFO must possess a deep understanding of international financial markets and how currency fluctuations could impact their operations. Depending on their entity and multi-currency setup, CFOs need to have varying degrees of familiarity with the suite of financial instruments available to control FX volatility, including intercompany rates, forward contracts, and derivatives.

Minimizing the impact of currency fluctuations on financial performance can seem straightforward … until it is not. In 2008, the Tata Group, a large Indian multinational conglomerate, acquired Jaguar Land Rover (JLR) from Ford for $2.3 billion GBP. At the time, the British pound was strong against the Indian rupee, and Tata Motors decided to hedge its GBP exposure via a series of forward contracts. These contracts obligated the company to buy pounds at a specific (GBP-favorable) exchange rate at a future date. Six months later, a global financial crisis unfolded, resulting in a significant depreciation of the pound against the rupee. The forward contracts ultimately cost the company nearly $300 million in forex losses, ~15% of the purchase price. This misstep highlights the importance of understanding and managing currency risk effectively and serves as a reminder to continuously monitor market conditions, reviewing hedging strategies, and being prepared to adapt to unforeseen circumstances.

Innovative global companies take this very seriously. At Meta, one of the world’s largest global advertisers, the currency hedging program involves a systematic process of identifying foreign currency exposures, selecting appropriate hedging instruments, and regularly monitoring and adjusting the program to manage exchange risk effectively. Even so, currency remains a thorn:

“Foreign currency remained a significant headwind to advertising revenue growth in all international regions.” — Susan Li, CFO at Meta, Q4 2022 Earnings Transcript

A global CFO must be highly adept at navigating the complex web of international reporting and compliance. This requires an appreciation and understanding of operational procedures items like transfer pricing, tax treaties, VAT reporting, and compliance requirements in each jurisdiction where the company operates. As a part of that, the CFO should have a process to stay on top of evolving legislation and utilize local legal and financial counsel. One surefire way to ensure better decision making is to make sure the CFO has the right systems and processes in place.

Install a centralized spending system and ERP wherever possible

Global CFOs should look for consistency in their systems and processes to maximize visibility and minimize errors. Where possible, aim for a unified, cloud-based system for tracking employee spend across different countries, all in one interface. Whether a company has remote workers in Brazil or a full-time operations center in Indonesia should not matter. Spending tools should work and look the same for employees of every country and this is now possible. Uniformity will streamline training, expense reporting, approvals, and reimbursements while maintaining a centralized record of expenses. Brex is a great tool for this and now works with many global companies including Coinbase, Doordash, Roblox, Zscaler and others.

Ideally, a CFO should have a singular view of their business, but this can be notoriously difficult given disparate local ERPs, spend solutions, and employee management systems. This means integrations are critical. CFOs should favor an ERP and spend solution that integrates with payroll, CRM, and local ERPs and that creates a singular, clean view in one central dashboard. Brex’s global nature and ERP integrations support this source of truth model. Our customer CFOs believe that change management is always easier when done earlier. Many CFOs mentioned struggling with integrating systems years after an M&A, the wait having made everything harder.

“Brex allows us to spend and pay bills for our entities in the US and Netherlands in local currency. ... Consolidating onto Brex’s global cards for our teams around the world allows us to see and analyze spend across our entities in one dashboard — all while operating in local currencies.“ — Lemonade (NYSE: LMND), Brex customer

Managing global tax reporting can be a huge operational challenge

The global CFO must navigate complex tax regulations across jurisdictions, optimizing tax strategies, and minimizing tax liabilities. They should hire an experienced team to develop tax strategies that align with the company's business objectives. This includes considering transfer pricing policies, intellectual property management, and using tax-efficient structures and entities in different jurisdictions. As an example, the global CFO should know when and when not to repatriate cash to their headquartered country. Specifically, some CFOs favored Bloomberg’s transfer pricing software to more easily ensure compliance in different jurisdictions.

Tax reporting and management as a key concern for CFOs is not new, judging by Mastercard’s commentary from a decade ago: “We have been working on our tax rate quite considerably. There are a number of factors that you work on from a tax planning point of view…[one being] you make earnings in lower tax jurisdictions. It's lower tax there to the extent you can actually lock those earnings into those jurisdictions and then you have the whole issue of how you can bring the cash back. I have to tell you, we are in the very early innings of this game. Mastercard essentially was a two-country kind of company…and we have been diversifying quite significantly from that.” — Martina Hund-Mejean, CFO of Mastercard Q1 2012 Earnings Transcript

Besides managing the overall global tax rate, CFOs must manage regulatory and VAT to ensure tax compliance across countries. The CFO will be the primary point of contact for tax authorities and will need to respond to inquiry, manage audits, and negotiate disputes. As geographic locations multiply, the tax profile gets exponentially more complicated and the CFO will need to tailor their reporting, and ensure they have a strong team that is properly trained on VAT/tax reporting.

Luckily, there are numerous tools available to help international businesses streamline VAT management and ensure compliance. These include:

Expense management platforms like Brex also offer embedded features like VAT tracking to support inputs and validation at the point of expense and integrated into connected ERPs. You can also choose to partner with a leading accounting firm to assist.

Global cash — best to be centralized in approach and decentralized in holdings

Efficient cash management is crucial for any multinational company, and the spotlight is being shined brighter after Silicon Valley Bank’s failure and the reverberations from companies that held all of their cash in a single institution. The global CFO must effectively manage working capital, forecast cash needs, and protect liquidity. However, with multiple accounts around the world, implementing a centralized cash management system — for example, global cash pooling arrangements or automated sweep programs — becomes increasingly necessary to gain better visibility over a company's cash. This approach allows for more efficient cash concentration, investment, and funding, reducing idle cash balances and lowering borrowing costs. Global CFOs must also develop strategies for repatriating cash from foreign subsidiaries to the parent company while minimizing tax liabilities and adhering to local regulations.

One of the biggest lessons from the Q1 2023 bank failures is not to allocate all your cash in one bank. Global CFOs must establish strong relationships with numerous banking partners, both money center banks (large, globally recognized institutions) and non-money center banks (regional or specialized banks). This will allow a company to access different financial products, services, and expertise and most importantly, not concentrate cash in one single institution. This diversified approach should leverage the strength of each bank.

For example, a CFO might choose to use a Brex business account as an operational account given the strong user interface and automated workflows. The global CFO might deposit one year’s worth of company spend into Brex and link it for use with corporate cards, payroll, and bill pay through Brex’s all-in-one spend platform. This would leverage Brex’s technological strengths and global ability in local currencies around the world. Then, the CFO might utilize a money center bank like JPMorgan Chase for its yield, global reach, and sophisticated international deposit solutions. The CFO might further open a Citibank account to move large deposits across APAC more efficiently.

By implementing a cash management strategy that diversifies globally across money center and non-money-center banks, a global CFO can effectively manage the cash resources, reduce risk exposure, and capitalize on the unique strengths and capabilities of different financial institutions.

“The new tax legislation enacted in December [2017] gives us increased financial and operational flexibility from the access to our global cash. It allows us to invest for growth in the United States more efficiently, and it also provides us the opportunity to work towards a more optimal capital structure. As we said in February, our goal is to become approximately net cash neutral over time.” — Luca Maestri, CFO Apple, Q2 2018 Earnings Call

Effective communication is essential for any CFO as they interact with stakeholders: vendors, employees, and customers. This is magnified when engaging with stakeholders across offices.

Building cross-cultural empathy is challenging, as the global CFO must harness their cultural biases and improve their emotional intelligence to adapt to local contexts. Luckily, EQ can be taught and improved, and a global CFO must adjust to build relationships with their international colleagues and clients. This is something that is best taught through international cultural immersion.

Some of the best global executives have extensive international experience. The CFO of Apple, Luca Maestri, is an Italian national who has held positions in various geographies throughout his storied career, including across the EU, Brazil, and Singapore while working at General Motors, Nokia Siemens Networks, and Xerox. The consensus from top global CFOs is that companies cannot “be a tourist” with a satellite office, a passport, and a US HQ. Take it from the COO of Netflix:

“It's a constant process of learning, but then you're also trying to manage this tension of being specific and optimizing for [a] country… but also trying to do it in a way that leverages scale... Are you speaking the right language?…how do you feel natural to consumers…What are your go-to-market partners?...How does the product feel…relatable to that group of people?” — Gregory Peters, COO of Netflix, MS TMT Conference 3/2/2021

Lastly, companies are facing mounting pressure from investors, regulators, customers, and other stakeholders to demonstrate their commitment to sustainability. For global CFOs, this means integrating ESG considerations into their financial decision-making.

Today, ESG factors should play a role in financial decision-making processes — for example, evaluating new location buildouts, capital allocation, and more. Transparent and comprehensive ESG reporting has become a critical aspect of corporate communication with investors. Global CFOs must ensure that their company's ESG disclosures comply with relevant regulations and industry standards, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) guidelines. Some companies have even gone ahead and hired a head of ESG strategy and engagement.

As sustainability and ESG factors gain prominence in financial markets, CFOs can explore innovative financing options that align with their company's ESG objectives. Examples include issuing green bonds, sustainability-linked loans, or other ESG-focused financial instruments that can help fund environmentally friendly or socially responsible projects. Global CFOs could establish performance metrics and incentives that incorporate ESG considerations, both at the company-wide and individual employee levels. This can help promote a culture of sustainability and encourage employees to make decisions that support the company's ESG goals. S&P now has an ESG Evaluation that assesses public company ESG strategy to prepare for potential future risks and opportunities:

“We've just been through S&P's new ESG evaluation. I have to say it was a great process for us. You've done many of them. It's the first time we've been through it. It was demanding. It was a fantastic dialogue. It was exactly what you'd expect from a ratings process.” — Graeme David Pitkethly, CFO at Unilever, Corporate Presentation 12/11/2019