Chief financial officers, or CFOs, have always been known as the people primarily responsible for managing and controlling financial risks, financial planning, and reporting to higher levels of management within the business. However, in this new era, the role of CFOs is no longer limited to the above tasks. According to a recent study by Accenture, there is a 70% correlation between a high-performing company and a company with a high-performing Finance team. This means that the responsibility of the CFO has changed to a new page. Other studies have also shown that the role of the CFO has changed from providing a “mirror” perspective to being a strategic advisor, steering the business through difficult times and shaping the future direction of the business.
The New Roles of the CFO
Today’s CFOs operate in a volatile and competitive environment that requires almost daily change to steer the business in the right direction. A recent report by Deloitte & Touche LLP classifies the CFO role into four major categories that have transcended the boundaries of the traditional roles above. Here are the four new roles of the modern CFO:
- Manage: Accounting, control, risk management, and asset preservation are the main responsibilities of the management team, who must ensure that the business complies with financial reporting standards and control various requirements.
- Operation: Efficiency and service levels are key areas of focus for the executive team, who must continually balance cost flexibility and service levels within the financial responsibility of the business, and apply financial operating models where necessary.
- Strategy The strategist helps chart the company's future path to enhance business performance and shareholder value, while providing financial insight to innovate and increase profits.
- Catalysis:
The catalyst team is the face of change to achieve alignment in business strategy and serves as a business partner to other decision makers, including department heads, chief information officers, and sales/marketing managers.
The role of the Management and Operations team is to control and enhance performance, more in line with the traditional role of the CFO, while the Catalyst and Strategy team represents the “strategic advisor” to other members of the company.
In addition to the traditional values of the finance function represented by the Management and Operations team; today, the CFO plays a more important role as a Catalyst and Strategist for the other members of the C-suite. They help the business ensure that all plans are on track, all strategies are supported by reliable analytics, and all operations are reaching the intended level.
This begs the question, “What is driving this change?” The answer provides a deeper insight into what the CFO needs to achieve in the new era. While there are many factors that contribute to the overall situation, the main one is the lack of stability for CFOs.
So why the lack of stability?
The reasons behind the instability of CFO
The first is a decline in CFO confidence due to continued concerns about the economic outlook. In the UK and North America, CFO confidence has fallen significantly, with limited confidence in the ability of businesses to sustain themselves over the next year. In the Middle East and Asia-Pacific, the outlook is slightly more positive. However, confidence levels are still quite low here, with just 50%so and 72% CFOs optimistic about the current situation in the Middle East, 31% in India and 16% in Australia. Furthermore, business uncertainty has hit its highest level in over a year in Australia.
Increased corporate consolidation is the second reason, although in some cases it is also a side effect of the economic crisis. According to the study, mergers and acquisitions occurred across almost all sectors, totaling $86 billion with 369 deals in 2011, of which more than half were deals involving informal assets. This record number continued to rise in 2012.
The final source of uncertainty that we cannot ignore is technology. Technology can be a valuable asset or a daunting obstacle when it comes to applying technology to meet their changing needs. As business needs change and the role of the finance department evolves, businesses are realizing that most of the technology they are using is outdated and cannot help them meet all of these needs anymore. At the same time, new technologies such as mobile, cloud computing, social media and big data are developing independently every day, forcing companies to adopt them before they can fully adapt to their business processes. These four technologies are described as the “super four” that help bring new information systems and business thinking.
The CFO's role, beyond the traditional responsibility of managing financial reporting, is also expanding to simultaneously lead the finance department and the business, by determining which technology is right for the business, and leading the business into the future.
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