In today’s increasingly disruptive business environment, the role of the CFO has evolved beyond traditional financial oversight. Companies now require a leader with a strategic vision, capable of transforming financial decisions into objectives that drive long-term growth. This evolution transforms the CFO into a Strategic Financial Officer (SFO), with a clear mission to maximize the value of the company.
The SFO’s Mission: Maximizing Corporate Value
The SFO has one primary task: to maximize the present value of cash flows available to shareholders. This not only increases the company’s equity but also facilitates the distribution of dividends and improves the company’s potential to be sold at a higher value in the future.
To achieve this, value maximization can be divided into three key questions:
- What do we invest in?
- How do we structure the investment?
- How do we distribute profits?
These questions must be clearly answered in three essential documents: the investment policy, the financing policy, and the dividend policy.
Investment Policy: The Heart of Strategy
The investment policy is fundamental, as it defines the financial and commercial criteria for identifying strategic investments. Here, the SFO must assess the expected return, considering risk, economic projections, human capital needs, and integration with existing investments.
Financing Policy: More Than Debt
The financing policy goes beyond leverage capacity. The SFO must evaluate how new debt would impact shareholder equity, the risks of the project, and how financial institutions perceive the company’s new debt. Additionally, it is crucial to properly structure the legal and financial mechanisms for each project.
Dividend Policy: Growth vs. Distribution
An inadequate dividend policy can harm the company’s long-term growth. The SFO must analyze whether reinvesting profits into new projects would be more beneficial than distributing dividends. This analysis is essential to avoid unnecessary increases in leverage and liquidity pressures.
Final Reflection
The SFO’s role is critical in guiding the Board of Directors and shareholders in an environment full of uncertainty. A scientific and strategic approach to financial management can ensure long-term value creation and the sustainability of the company.
Article created by Eric Molino Ferrer.
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