Capital Raising

Capital Raising

Changing times have thrust the role of the CFO well beyond bean counter. For sure the CFO retains the role of financial tactician, as well as all statutory reporting, tax, treasury matters, but, increasingly in a post-GFC world, risk management in regard to growth opportunities has come to the fore. Not only are internal demands placing increasing demands on the traditional role but a complex economic environment with a scarcity of both debt and equity capital, is putting greater responsibility onto the CFO in managing capital.

Quite suddenly, the CFO is playing a critical role in rasing capital and capital raising skills are not in the same class of technical accounting skills. It is not so much a case of a crisis mentality that is driving this role expansion but rather, the emerging economic recovery which bringing with a need to identify and exploit opportunities.

Capital raising is a leadership team activity. The CFO needs to present to investors and the capital market at large a picture of a company worth investing in. The CFO needs to keep the leadership on track with the right financial metrics. The CFO more than ever is seen right alongside the CEO as a business leader.

Capital – of the equity type – seeks returns and with the ROI equation comes an assessment by the investors of the risk –reward relationship. The CFO role in satisfying the markets and the specific investor’s needs are twofold. In the first instance is the period prior to capital raising. And then comes the analysis of how well the capital will be used in pursuit if profits.

The precursor role of the CFO is in addressing the business’s finances. This may involve the traditional aspects of managing forecasting and managing the balance sheet. Both structural and operational aspects would fall into the CFO’s vision with an augmented role in capital raising. In other words, the need is for a forensic attention to short term debts, debtor and creditor ledgers etc.

The CFO is central to the raising of capital required by the company and would include negotiating with banks and other credit providers. Investors present as a special challenge, requiring the CFO to be attuned to investment markets and, in the case of raising private equity capital, establishing a network of contacts within the private capital market. For some CFOs this may present as a new challenge.

Presenting forecasts to investors based on a ‘clean’ set of accounts is of course essential but equally, a compelling picture of future accounts is essential to win equity capital. Forecasts based upon timely data will be placed under extreme scrutiny. The world is changing, and so is the role of the CFO, especially in regard to raising capital.

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Tags risk managementforecastingcapital raisingcapital investment

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