How to Lead Your Organization through an Election Year

The world’s biggest election year is upon us, with 4.2 billion citizens across more than 60 countries voting in elections in 2024. In a “make-or-break” year for democracy, the 2024 election outcomes will not only determine the immediate future of individual nations but could also set the tone for global economic policies and investor confidence.

Just over halfway through this significant global election year, those elected include a self-described “world’s coolest dictator” (El Salvador), a military-backed coalition (Pakistan), and an anti-establishment, anti-corruption candidate in an election hailed as a major win for democracy (Senegal).

In the United Kingdom, a landslide victory by the Labour Party ends 14 years of Conservative Party rule, while France faces a potential political impasse after this summer’s elections resulted in a fragmented parliament.

In less than 100 days, the United States votes in a pivotal election, where the Republican and Democratic nominees are locked in a tight race. While later in the year, both Moldova and Georgia will hold elections where voters must balance European Union and Russian relations.

The impact of these elections extends far beyond the ballot box. For instance, during the 2016 Brexit referendum, the pound sterling dropped by 8% against the dollar in a single day – it’s biggest one-day fall since 1985. The FTSE 100 followed suit with its largest one-day decline since the collapse of the Lehman Brothers in 2008.

As over half of the world’s population heads to the polls, change is on the horizon, and many voters are experiencing feelings of hopelessness, despair, anxiety, and dread. With these feelings of uncertainty comes a desire to tighten the purse strings. Traditionally, national elections have had a significant impact on consumer sentiment and spending intentions, with consumer confidence falling in the months leading up to an election.

Other effects of a volatile global election year include significant fluctuations in currency values, market uncertainty, supply chain finance disruptions, regulatory changes, and investment delays as corporations rethink strategic decisions until there is more stability and clarity. Although the election cycle is just one aspect of the broader economic outlook, historical data indicates more subdued market movements. Typically, returns in the final year of an election cycle are modest, averaging just over 4% with a median of around 7%.

CFOs play a pivotal role in navigating their organizations through these turbulent times. Their leadership is crucial not only in managing immediate financial impacts but also in strategically positioning their companies for long-term success. To ensure financial resilience and agility, it’s never too late for CFOs to develop and implement proactive strategies that mitigate risks associated with geopolitical events.

Finance Strategies for Volatile Times

As we face this year of significant political events, managing election uncertainty is crucial for organizations worldwide. With finance strategies for volatile times, corporations can successfully navigate change and stabilize the effects of political instability. As the CFO of a global organization, here are my top 5 strategies to successfully navigate an unpredictable year and achieve “election agility”:

1. Adopt robust risk management practices to get ahead of election volatility:
   • Strong cash management strategies: Incorporate comprehensive risk management programs to manage liquidity and minimize external borrowing. Building strong foreign exchange management strategies includes understanding the impact of currency fluctuations on financial statements, balance sheets, revenue, and expenses.
   • Hedging: Employ hedging strategies to either reduce earnings volatility by focusing on near-term exposures or to maximize returns by opportunistically managing currency risks when benefits outweigh costs. Automate and optimize hedging strategies for foreign exchange management to continuously monitor and adjust to market conditions and currency movements.
2. Leverage real-time, integrated data to react swiftly to electoral disruptions and seize opportunities:
   • Single source of truth: Centralize data management to eliminate discrepancies and errors from multiple data sources. By ensuring that all team members work with consistent and accurate data, finance teams gain quicker access to reliable information, enabling faster and more informed decision-making.
   • Real-time insights: Implement a liquidity performance platform that provides timely insights from both internal and external systems. Adopt technologies like cloud computing, AI, and advanced analytics to enhance decision-making and anticipate potential risks.
3. Enhance financial resilience to ensure operational stability and reliability:
   • Regular forecasting and scenario planning: Maintain a robust balance sheet with ample liquidity and manageable debt levels. Regular stress testing and scenario planning help anticipate and prepare for economic downturns that election volatility can bring.
   • Borrowing and finance costs: Manage both internal and external liquidity effectively to optimize borrowing and finance costs. By implementing strategic liquidity management, organizations can navigate financial fluctuations and secure favorable financing terms during economic uncertainty.
4. Identify and manage preventable risks to gain predictability:
   • Basic business best practices: Know your market; strive for balanced growth; pay your bills; and keep up-to-date on industry trends, news, and research to identify potential risks. Clean up as much as you can internally to control costs, streamline operations, and increase efficiency.
   • Data awareness: Understand the data in your systems to fully comprehend your risks, aid insightful decision making, and streamline operations. Regularly assess risk exposure instead of waiting for quarter-end or year-end results.
5. Stay calm and prepare for the risks political volatility can bring:
   • Emergency preparedness: Anticipate and plan for worst-case scenarios that political instability can bring, including problems related to currency volatility, cybersecurity threats, supply chain interruptions, financial market disruptions, and trade barriers.
   • Continuous improvement: Build organizational resilience by promoting a culture of adaptability, innovation, and ongoing learning to quickly respond to changing circumstances. Encourage employees to monitor and share concerns about potential risks

By focusing on these key areas, CFOs can help their organizations navigate the uncertainties of an election year, ensuring financial stability and resilience. This proactive approach enables companies to maintain agility and confidence, regardless of the political landscape.

Manage Election Uncertainty

As the CFO of a company that specializes in technological solutions to optimize liquidity performance, I can confidently say that by integrating real-time data, leveraging predictive analytics, and automating risk management, the right technology empowers financial teams to manage election uncertainty with greater confidence and effectiveness.

As the world watches election results roll in, let’s focus on what we can control: our financial agility and resilience. By implementing finance strategies for volatile times, we can confidently maneuver through this unpredictable year. The key is to stay calm, prepared, and agile as we steer our organizations towards stability and success, no matter who ends up in office.

The long-term impacts of this “super election year” may reshape the global financial landscape for years to come. As we navigate these changes, the most successful organizations will be those that not only weather the immediate storms but also position themselves to thrive in the new economic realities that emerge. By embracing technological innovation, fostering organizational adaptability, and maintaining a global perspective, we can turn political uncertainty into a catalyst for positive transformation and sustainable growth.

Kyriba helps organizations mitigate risk in uncertain times by providing a comprehensive suite of liquidity performance solutions to enhance visibility, control, and decision-making across liquidity, risk management, and cybersecurity functions. Start managing uncertainty today by scheduling a demo with one of our experts.