Most industries are facing significant change in the wake of the global pandemic. For life sciences companies, the challenges of COVID aren’t the only thing causing change. Life sciences companies are in a constant state of innovation and breaking ground. David Johnston, CFO, says chief financial officers are driving change in life sciences companies as they reimagine financial strategies.
David Johnston,CFO Explains Life Sciences
Businesses, institutions, and organizations that study and cater to organism life are all considered part of the life sciences industry. This includes environmental sciences, biotech, pharmaceuticals, cell biology, neuroscience, immunology, and more. Simply put, life sciences companies deal with plants, animals, and human life.
Some life sciences companies deal with very focused studies, while others cover large parts of the industry with a much broader focus. But the bottom line is – life science companies research, develop, and manufacture medicines, devices and other products to help save people’s lives.
What is the Role of the CFO in a Life Sciences Company?
Within a life sciences company, the chief financial officers (CFO) is in charge of managing the finances. This might include overseeing grants, gathering funding, reporting on finances, setting a budget, guiding compliance, and much more. A CFO should be able to help assess the current market and plan a future trajectory for the company.
The position of CFO is rising in demand with changes due to the pandemic, increased regulations, and shifting tech. Balancing a budget sheet is no longer enough. Many CFOs serve as right-hand advisors to the CEO, helping navigate complex financial responsibilities with great intuition about where things are headed. Some CFOs even act as de facto CEOs—especially if cash flow is a concern.
David Johnston, CFO has nearly 30 years of experience in the role of c-suite finance leader. Currently, he is Principal of dbj consulting llc., where he offers experienced advice to life sciences companies.
How are CFOs Driving Strategy in 2021?
Most life sciences companies are now reporting a desire to reconsider their strategies and try new angles. While the pandemic has forced some uncomfortable changes, it has also opened the door towards being comfortable with increased change. In fact, if the pandemic did anything, it only increased the focus and funding on life sciences. According to David Johnston, CFO trends mean managing the following issues.
Rethinking Capital Allocation Strategies
A holistic approach to capital is needed—the focus has to be on all involved parties and not just the decision-makers. Capital allocation should always be done with a long-term vision in mind. Companies might want to push capital towards the biggest projects.
However, niche projects can improve lives as well and deserve consideration. Additionally, companies may spend more funds on improved communication with other life sciences companies to share findings or tools that improve patient outcomes.
Reducing Barriers that Cause Inefficiencies
Finding bottlenecks and hurdles in the process could mean reducing the time and money spent to take a project through R&D and to market.
One of the biggest barriers to most CFOs is a lack of data, says David Johnston. Identifying the issues is the best way to eliminate them and move towards increased productivity without increasing workloads.
Monitoring and Managing Performance According to David Johnston, CFO
Establishing key performance indicators (KPIs) is the best way to clearly set expectations and manage goals with a team. It is important to set KPIs that are very specific in nature—telling the team how to measure outcomes and exactly what outcome is the current goal.
Consistently setting KPIs can help a company adapt and grow for improved strategy. KPIs shouldn’t just come down to revenue or funding but should come from a wide range of crucial, top-priority issues, including:
● Improving customer/patient satisfaction
● Impact of treatments on patients
● Regulatory requirements and compliance
● Workforce safety and fair trade
● Return on investment rates per project
● Diversity and social goals
● Environmental issues
Structuring Project Priority Strategies
Establishing a hierarchy in projects is also crucial when building a strategy. CFOs can have the insight to help companies choose the right direction that is most likely to improve outcomes or get the highest return on investment (ROI). The CFO should play a crucial role in helping guide the right strategies at the decision-making table of life sciences companies.
Ultimately, companies are facing unknown waters as they slowly sail ahead after nearly two years of the pandemic. The upheaval in the industry has led to leaning heavily on CFOs for guidance and insight. David Johnston says this increase in responsibility and authority marks an indefinite shift in the role of the life sciences CFO.
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