Three critical areas of change faced by CAOs and Controllers

The world is always changing, in ways both predictable and unforeseen. That mix is particularly turbulent these days. Regional wars in Europe and the Mideast carry the potential to escalate. Trade tensions splinter supply chains and also forge new alliances. Large flows of refugees - fleeing economic blight, terror, climate change — seek sanctuary. And not least, voters in numerous recent national elections — in Europe, South America, Asia and the United States — have picked new leadership, leading to sharply different policies and programs, some with regional and global impact.

In Washington

As the Trump Administration takes office again, the business community should focus on six areas of change: trade and foreign policy, tax reform, the regulatory environment, climate, technology and the workforce, said John Hallmark, US Political and Legislative Leader at the EY Office of Public Policy in Washington.

As 2025 takes shape, “you’ll see very rapid policy pivots and advancements” on priority topics for the incoming administration, including tariffs, cryptocurrency and more. “Trump thrives on unpredictability — by design,” Hallmark said. The bottom line is: “There’s a new sheriff in town.”

Key points discussed at the CCLN meeting are already in motion: withdrawing again from the Paris climate accords; replacing the Biden Administration’s executive order on artificial intelligence with another; and, of course, a sharp focus on the Southern border and a remaking of the federal workforce.

And what about tariffs, perhaps the biggest change agent in the new Administration’s trade agenda? Trump can act quickly, Hallmark said, “because he has significant authority to do so without Congress,” although he would still be subject to court challenges. He doubted that Trump would impose all of the tariffs he has discussed. Sweeping actions like instituting the 100% tariff on imported Chinese goods that Trump has described could be enormously disruptive, he added.

Around the world

For the past decade or so, uncertainty in the global order has become more pronounced, thanks in large measure to trade, immigration and climate shocks, according to Oliver Jones, the Markets, Sustainability and Geostrategy Leader in the EY-Parthenon Global Strategy and Transactions network.

The economic cooperation that led to offshoring, and intricate and lengthy supply chains, is giving way to onshoring, as companies are bringing their operations home to de-risk interdependencies and align with governmental economic security goals. Companies are also trying to mitigate the economic damage from wars and other conflicts triggered by geopolitical rivalries. Now, as numerous incumbent governments have either been kicked out by voters or forced into coalitions, the global landscape is experiencing “a large policy churn,” said Jones, a co-author of “Geostrategy by Design: How to Manage Geopolitical Risk in the New Era of Globalization.”

“In order to thrive and not just survive,” companies and their finance functions “have to identify the signal within the noise,” Jones said.

The business community was relatively late to recognize the growing tumult, he added. In the wake of the war in Ukraine in 2022, “almost everyone is making alterations in their strategic investment plans.”

One senior financial executive described “the evolution” of her function’s enterprise risk management. The assessing and updating of risks, and then the reporting of the potential impacts to the audit committee and board, have become both more “fluid” and more frequent, she said. “It’s not just an annual thing.”

Careful assessments can produce teachable moments, another executive noted.

“We had some real-life examples that didn’t reach materiality thresholds, but it took some time to come to that conclusion. As we were working through the case, we were keeping our audit committee updated. And that was an opportunity to educate them on our process and governance and what their role as the audit committee was.”

Indeed, Jones said, “we are seeing that businesses are approaching geopolitics as a broad opportunity, and not solely as a risk, and are incorporating their assessments into the strategy and planning process in addition to the risk process.”

“It’s such a big issue,” he said.

For Controllers, a gap remains between the skill sets and mindsets required today. That includes what is needed to make the leap from value protector to trusted advisor and value creator, such as capturing the potential of artificial intelligence while managing its unknowns.

To close that gap, today’s Controllers will have to reshape and rebuild their teams while remaking themselves, said Myles Corson, the meeting’s facilitator and sponsor of the EY 2024 DNA of the Financial Controller Survey, “How can the Controller transform to shape the future with confidence?” They and their teams will have to embrace uncertainty and disruption and develop a broad range of business, personal and technological skills.

Here are a few highlights from the survey: