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The FAR 5 Tips Corner – 2024 Strategic Considerations
By Christian Spencer, Partner, Public Sector Practice, RSM, US, LLP
How much office space should we have and what should be the terms of our next lease? What is our optimal level of reserves? Have we thought about a CEO and CFO succession plan? Are there holes in our technology infrastructure that expose us to a cybersecurity event? Is your accounting staff providing timely, meaningful, and accurate information to facilitate decision making?
These are just some of the questions facing organizations in 2024. As organizations navigate their 2024 priorities, the following are some key operational and financial considerations that they should factor into management and board discussions.
1. Office Space: In our post-COVID world, nearly all organizations have modified how they conduct business. Some organizations have sold buildings or not renewed lease commitments in connection with their strategy to go fully remote. Many organizations permit a hybrid work model combining in-office and remote days. A byproduct of this evolution in workforce practices is the need for an organization to evaluate future office space needs. Future space requirements need to be robustly reviewed and aligned with your organization’s remote work policy as part of lease renewals. Depending on the terms of your current lease there may be opportunities to consider subletting excess office space. As rent is generally one of the larger line items in an organization’s annual budget, taking the time to optimize your current and future office space needs may present an opportunity for significant cost savings.2. Targeting Reserves: The overall level of challenges and growth opportunities facing organizations continue to grow during 2024. Key risks include enhanced cybersecurity threats, meeting constituents evolving needs, lobbying efforts, and internal succession planning. Successfully navigating these risks while simultaneously taking advantage of growth opportunities requires a healthy level of financial reserves. The appropriate level of financial reserves is predicated on the specific risks and opportunities facing an individual organization. While many organizations propose 9-12 months of expenses as a standard reserve benchmark, there is no magic formula that can be uniformly applied across all organizations. Organizations must identify specific risks and opportunities and quantify a projection of reserves necessary to address the risk or opportunity. A key element of this process is to identify the potential timing of the event so that the quantified reserves can be invested in a manner to make liquidity readily available when necessary.
3. Succession planning: By the end of 2024, it is predicted that the largest segment of our workforce will be age 55 and older. As the workforce ages and retirements increase, boards and management need to identify critical positions within an organization and develop an action plan for transition to a successor. Key positions generally include the Chief Executive Officer and Chief Financial Officer. Outlining the key qualifications and expectations of the position and aligning them with the organization’s strategic plan is an essential starting point in the process. In addition, any potential internal candidates should be considered and the need for a professional recruiter contemplated. Once a final successor is selected, arranging for some overlap of time between the incumbent and successor will help to facilitate a more seamless transition.
4. Cybersecurity: Criminals continue to devise new and innovative ways to infiltrate organizations and disrupt their operations. Rectifying a cyber event can prove to be costly to an organization, both financially and reputationally. Many cyber events are the result of an employee erroneously clicking on a link that provides a criminal access to the organization’s information technology system. In other cases, the criminal will mask themselves as the CEO or other high-level employee and authorize a fictitious wire transfer be made in an expeditious fashion. Providing annual training to your employees on how to identify these fraudulent emails and establishing a clear internal policy on wire transfers (which includes verbal verification with the authorized initiator) are two easy ways to address this ever-present risk.
5. Outsourcing: Many accounting departments face issues that include incorrect reporting, untimely financial information, and high levels of staff turnover. Leadership and the board must have information that they rely on when making strategic decisions. If you fall into this scenario, then outsourcing your accounting department could be an option. With the right outsourced partnership, your outsourced team will bring expertise to your organization. Outsourcing provides the right mix of people, processes, and technology to the organization. A successful outsourcing relationship provides accurate, meaningful, and timely financial reporting. Furthermore, outsourcing can in many situations result in cost savings to the organization by being executed for less than the costs of maintaining an internal accounting staff.
