In today’s dynamic landscape, businesses are constantly looking for opportunities to expand beyond their borders, either by investing to establish themselves abroad, or through inorganic growth, i.e. by acquiring other companies.
In both senses, the figure of the CFO is more than relevant to exercise leadership in the different stages of international expansion, which begins with the definition of the business strategy to be followed, segmenting those strategic markets that represent the greatest interest and opportunity.
The CFO’s participation in this type of process is yet another example of the change in its role in recent years, which has been oriented towards the development of a much more strategic role, which implies a more active intervention in the organisation's key decision-making.
While in the past, their functions did not go much beyond analysing the costs involved in making an international move, this is no longer the case, where their financial acumen, together with their analytical skills, represent fundamental aspects in the design and execution of the company's growth strategy.
However, in the process of these types it is critical that the CFO is capable of giving responses to two basic questions that are interrelated, in the sense of giving shape to’why’ the expansion is necessary, as well as defining the steps to be followed to guarantee ‘how’ the expansion will be carried out.
Their leadership in a joint and coordinated effort with the CEO, should seek to ensure that other members of the management team know the relevant reasons for the organisation to start a new growth process and thus be able to answer the first of the critical questions i.e. the ‘why’.
Evaluation of the risks and design of an optimal finance structure In the initial analysis to be carried out, the CFO must be capable of evaluating not only the business opportunities that are presented, but also measure the risks associated, establishing the necessary actions, to mitigate their impact should they occur.
In order to do this, a comprehensive analysis must be carried out, something that goes beyond the strictly financial, considering key factors such as the political and social stability of the country where the investment is sought, its legal security, local regulations, aspects linked to taxation or the exchange rate, in the case of a market with a different currency.
The objective to be achieved is to ensure that investments can be made as ‘safely’ as possible and that this does not affect the expected levels of profitability. At the same time, control systems must be put in place to protect the company's assets abroad.
All this implies defining the best financial structure to be implemented, where it will be necessary to indicate whether it is necessary to create subsidiaries, optimise cash flow at an international level, carry out a study of the associated tax aspects, so that these are as efficient as possible, among other issues.
At the same time, the CFO is responsible for ensuring access to appropriate financing at all times, where special lines for international expansion can be defined, as well as optimising the capital structure.
For this, it must define the best alternatives to evaluate when it comes to financing (debt issuance, financial partner, reinvestment of own profits, etc.).
It is also part of its functions to manage and maintain the relationship with investors and shareholders, ensuring that defined financial expectations are clear and achievable.
A key aspect to achieve is to understand and adapt to the local context, while respecting the existing culture, as international expansion is far from being a purely financial issue, where cultural and organisational issues represent the biggest challenges to overcome.
In short, the CFO’s role as a leader of international expansion goes far beyond ‘numbers’, where combining financial expertise with strategic vision and an understanding of international markets is critical to the organisation’s long-term growth.
