*This is the first in a three-part series on the new imperative for oil and gas producers.*
Call it the moment of truth.
Though hardly out, oil is still down -- and the same goes for Canada's high-cost producers. And though this particular bust is not altogether like the last one, a comparison to the 1980s can be helpful. The early part of that decade saw rising U.S. domestic production and, like today, Saudi Arabia's reaction was to flood the market in an attempt to price out marginal players relying on less cost-efficient sources. It took 19 years for prices to recover from the 1985-86 downturn, and producers are looking at today's conditions concerned volatility will continue well beyond a 12-month window.
If it does, what's their best chance to get through it? We think the core of the solution is a more strategic CFO and Finance function.
Alright, easier said than done. CFOs and their teams already have difficult jobs. They must balance four complementary roles, or "faces," all of which rightly belong to every CFO -- just in different proportions, depending on the organization:
• As Stewards, CFOs concentrate on protecting and preserving the organization's critical assets and accurately reporting its financial position and operations to stakeholders.
• As Operators, they concentrate on the efficiency and effectiveness of the core transaction processing processes and systems to ensure a 'rock solid' quality-based foundation.
• As Catalysts, they drive behaviours across Finance and, more importantly, across the entire organization, to execute strategic and financial objectives while also creating a risk-intelligent culture.
• Finally, as Strategists, CFOs act as financial leaders helping to shape and define the organization's strategic direction and aligning the organization's financial people, processes and systems accordingly.
While the Steward and Operator roles are foundational, focused primarily on activities within the Finance function itself, the roles that play "above the line" -- Catalyst and Strategist -- focus on partnering with and enabling the business.
Of course, leveraging financial perspective and insight that will ultimately create new value is easier said than done. More on that, next time.
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