How can CFOs drive strategic investment decisions that deliver long-term value amid ongoing disruptionHow can CFOs drive strategic investment decisions that deliver long-term value amid ongoing disruption?

Answer 1

Is your capital allocation strategy a long-term plan or a short-term fix?

The pandemic shows that CFOs need to remain agile as they focus on long-term value.

Chief financial officers are recovering from a once-in-a-generation shock to their capital allocation strategies. Even as they deal now with the upheaval induced by the COVID-19 pandemic, they must make plans to improve long-term business performance. This means developing a capital allocation process that is fit for a future that may be radically transformed in a few short years by the impact of digital technologies, a changing workplace and evolving business models.

How can CFOs develop the right capital allocation strategy and process while investment decisions are being scrutinized by investors and employees, regulators and society at large?

To better understand how businesses are addressing market changes — and how they should adapt their capital allocation strategies going forward — EY teams surveyed 1,050 CFOs around the world and across industries in the first weeks of 2021. Findings include:

1. Over half (56%) of CFOs say their capital allocation strategy needs to be completely rethought.

2. Four in five CFOs say their capital allocation process needs to be improved.

3. About two-thirds were unable to fund all planned projects in 2020, which could have consequences going forward, especially as the pace of transformation quickens.

4. Only 47% say their capital allocation process effectively meets total shareholder return (TSR) goals.

Answer 2

CFOs can drive strategic investment decisions that deliver long-term value amid ongoing disruption by adopting a forward-thinking approach grounded in data and analysis. They should prioritize investments that align with the company's long-term goals and are supported by a solid business case. Additionally, CFOs should constantly evaluate and reassess investment decisions to ensure they remain relevant and adaptable in the face of ongoing disruption. Collaboration with other departments and staying informed about market trends and emerging technologies is also crucial.