CHIEF VALUE OFFICER – THE IMPORTANT EVOLUTION OF THE CFO | 2. THE CHANGING CFO ROLE
2.3 The reality of the CFO role Most of the roundtable participants considered that their role has moved significantly beyond a traditional perception of the role. In fact, it has progressed beyond the definition offered in ACCA / IMA 2020. Some commented that the pandemic had been a significant factor in changing their role. The economic uncertainties had caused their organisations to increasingly seek their advice as relevant to the rapidly changing circumstances. In providing the advice that was being sought there had been a significant refocusing away from assessing historic data to predicting potential outcomes by analysing data and developing forecasts that present a range of options. The pandemic and post-pandemic disruption in supply chains and increased geopolitical uncertainties have meant that the level of certainty of the 2010s has not returned. The need for critical advice has been increased. The CFO now has a forward-looking rather than a backward-looking role. One CFO commented, ‘I think disruptions are going to intensify over time. We need to be aware of the risks of devaluing as well and what can impact that. It is not just that you are not selling things. It is a much bigger picture around “how do the customers perceive your business?”, or “[are you] adding value to your employees more than just what they are getting paid?”’ A CFO from Australia added, ‘CFO’s are not driving the lag indicators, which are the financial results: they are driving the lead indicators, which are often not financial results’. For many of the roundtable participants the CFO role is encapsulated in Figure 2.3. The core need for financial acumen remains, together with responsibility for the financial processes, performance management and external reporting. The CFO requires an increasingly deep understanding of the business model. One CFO, who had transitioned to the role from being an audit partner, commented that one of the first realisations upon taking up the role was the depth of the understanding of the business model that the role required, beyond their initial expectations.
The CFOs also see that they have a responsibility for value creation in the organisation: not just for its financial performance but also for other aspects of value. Some of the CFO contributors saw this discharged solely through the reporting requirements for non-financial disclosures, while others categorised it as a stewardship of all the assets that produce value. All agreed that to discharge this element they needed to be actively involved in the management of data across the organisation to ensure that there is an appropriate level of integrity. This applied especially to non-financial data that might form the basis of external reporting. For some CFOs, this represented a particular challenge, especially, as one commented, because for many aspects of reporting against the required environmental disclosures they are essentially dealing with ‘single entry bookkeeping’ when an accountant’s premise of internal control is firmly based on the concept that ‘double entry’ provides the checks and balances. Ensuring that the data has an appropriate level of integrity is something that other functions were not used to and therefore it falls to the finance team to control the
data flow. This was something that other CFOs noted was exacerbated by a lack of up-to-date systems, with many calculations being performed on ‘unreliable’ spreadsheets. To support these core roles, the CFO needs to be a strong project manager and an effective change leader. Finally, there is an expectation that the CFO is an effective communicator, a key stakeholder manager. This requires a breadth of consulting skills that include influencing, conflict resolution and strategy development. Running through all these aspects of the role is a moral and ethical core. A CFO from Southern Africa commented that it is, ‘interesting how the CFO is normally the one with the moral compass. That resonates with the term “value” and understanding the long-term consequences of the decisions that you take today: “doing the right thing”’. Value and how the organisation represents itself to others is at the heart of the CFO role of today.
FIGURE 2.3: The reality of the CFO role
Stakeholder management
Consulting skills
Financial acumen
Business acumen
Value acumen
Data acumen
Project management
Change management
18
Made with FlippingBook - professional solution for displaying marketing and sales documents online