The importance of external stakeholders

As a finance leader, it is important to manage external stakeholders effectively to maintain positive relationships, support the success of your business and keep them updated on the progress of your company.

During this video, GrowCFO’s Founder Dan Wells shares thoughts on the importance of your external stakeholders:

There are many different types of external stakeholders, each with their own interests and agendas.  It is essential to identify and understand these different groups to engage with them effectively.

In this lesson, we will outline the importance of these external stakeholders and provide examples of how strong relationships will benefit both parties.

Your perception

Your finance function is the face of your business for many external stakeholders.  The way that you interact with them will have a huge impact on their perception of your company.  It is vital that you create strong and long-lasting external relationships from these interactions.

Here are some examples:

Shareholders

It is important to provide shareholders with the right level of information and to illustrate the link between your financial performance and commercial activities.  You also play a key role in providing reassurance and demonstrating management’s ability to deliver the strategic business plan.

Investors

Investors will request significant amounts of information from you.  A key part of your role is to help generate excitement in your company, link the business story to the numbers and showcase your team’s ability to realise the opportunity.

Banks

It is no secret that finance functions need to have strong relationships with banks. To get the best deals on loans, lines of credit, and other banking products and services, finance teams need to be able to work closely with their banking partners.

Bankers have their own language and will require you to supply reports in a bank-friendly format.  You need to meet their demands and demonstrate your company’s ability to comply with financial conditions.  You must also be transparent with them, whilst creating confidence around your ability to effectively manage cash flows and become an attractive opportunity to request future funding.

Regulators

Your relationships with regulators are essential towards maintaining compliance.  You must demonstrate strong levels of governance and generate their confidence in your ability to maintain a robust control environment.

To maintain good relations with regulators, your finance function should:

• Understand the regulator’s role and priorities;
• Follow the regulator’s guidelines closely
• Cooperate fully and promptly with any requests from the regulator; and
• Respond quickly and effectively to any inquiries from the regulator.

Customers and suppliers

You will also have ongoing dealings with customers and suppliers.  For example, during negotiations, contract agreements, invoicing, ad hoc queries and cash settlements.

Creating strong relationships enables you to establish a culture of trust and transparency, which will help to retain your customers and suppliers, and to swiftly resolve any arising issues.

Professional advisors

A finance leader’s external relationships with professionals are important for a variety of reasons. Professionals can provide insights and advice on financial matters, help the finance function stay up to date on regulatory changes, and act as a sounding board for ideas and strategies.

These relationships are created with a wide range of professionals including auditors, tax specialists, investment bankers and management consultants.

Summary

Finance leaders play a key role in managing relationships with external stakeholders, regardless of your position.

Your interaction, communication and ability to work together effectively will affect their perception of your company and their ongoing willingness to support your success.

Assess your skills

Which external stakeholders do you typically interact with during your role?

How well do you manage each of these relationships?

Do you need to improve your relationships with any of them?

What are their likely perceptions of you and how do you make them feel?

Is there anything else that you could do to build a stronger relationship with them?