The changing role of the Chief Financial Officer

The changing role of the Chief Financial Officer: facing a future of more risk management and more regulation

Global economic uncertainty and volatility, fluctuating energy prices and turbulent currency markets, along with a shift in economic power are among the many challenges which Chief Financial Officers (CFOs) around the world face now, and in the future.

This future landscape for the CFO was recently presented in a new report called The changing role of the CFO published by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants).

It gathered together discussions with CFOs from roundtables held in Shanghai, New York, Moscow and Zurich in late 2012.

The global report highlighted the emerging priorities which will have an impact on the future role of the CFO and cited nine future key issues shaping the finance function’s top job, including more regulation, risk management and technological impacts.

What was heard loud and clear from these events was the fact that we see more pressure on the CFO role than ever before. Apart from the sheer breadth of the role now, many questioned having enough time in the day to prioritise and deal with all the issues that need dealing with in their careers.

It was also clear that businesses are asking a lot from their top finance leaders and that many did not see this getting any easier, particularly with the global level of business uncertainty.

All this places the finance function and its leaders under great pressure and scrutiny, but it also continues to provide great opportunities for finance to influence the organisation and its stakeholders.

CFOs with accountability

The CFO of the future will be truly unique, requiring a really special blend of capabilities and skills. CFOs have an increasingly personal stake in, and accountability for regulatory compliance.

They invest more personal resource dealing with regulatory matters and in engaging policy makers to ensure new regulatory requirements provide benefits to business.

Tomorrow’s CFOs will need to play a role in preventing overly onerous and burdensome regulations, and they will need to lobby on behalf of business, put in place business processes and protocols that negate the need for more regulation, and influence relevant policy development.

One attendee at the Shanghai roundtable said: “Yes, there are challenges with complying with all the regulatory requirements and the needs of investors, but we try and use this to or benefit to drive clarity over our strategy and how we are delivering it.”

The nine priorities

The report’s nine issues offer an insight into what needs to be tackled now and in the future. These are:

1. Globalisation: The impact of globalisation and the further development of global finance functions dispersed more equally across the world will call into play finance leadership skills which can unify finance and present a consistent vision for the finance function across different cultures, working practices, languages and time zones.  The finance function will need to work effectively across the global stage, while also embracing diversity in its broadest sense.

2. Regulation: The roundtable attendees reported that there will be no slowing down in regulatory requirements for CFOs, at a time when they are working to meet rising expectations, but also influence regulatory policy development. Significant pressure continues to be expected on finance resources and CFOs continue to question how they can deal with so much regulation. As businesses grow across borders, managing the complex city that comes from regulation also increases – the speed of regulatory change will become an even greater issue.

3. Technology: Fast developing technology will continue to provide enormous potential for CFOs. It can be used to redesign finance processes and drive business insight, whether using big data, social media or new software applications. It will also provide enormous challenges for CFOs,  and if they want to secure influence across the organisation, CFOs will need to own the technology agenda in the future.

4. RiskManagement: CFOs will have to manage a greater breadth of risks facing organisations in a more uncertain and volatile global environment. CFOs will face more scrutiny on the effectiveness of risk management approaches and will need to continue to develop more effective integrated approaches to risk management. They will also need to ensure an appropriate corporate attitude and appetite for risk.

5.Transforming finance: Ongoing pressure to transform the finance function will be important. Whilst cost reduction may have fallen slightly down the agenda, the focus for CFOs will shift to continue to drive process efficiency and ensure finance is a valuable strategic partner to the organisation. Tomorrow’s CFO will need to ensure finance makes change happen, not just for the short-term finance outcomes, but also for the long term too. Reducing costs, improving efficiency and becoming a better partner to the business will continue to be important.

6. Stakeholder engagement: As the role of the finance function and the remit of the CFO broadens, so too does their stakeholder base, from traditional relationships such as banks and auditors through to the media and more customer-focused relationships. “Speaking the same language” with different stakeholders will be key as CFOs increasingly become the face of the corporate brand. CFOs will of course have to be excellent with numbers, but they also need to be good all round communicators.

7. Defining and Delivering Strategy: An even more important role will arise in two key areas of strategy – confirming and executing strategy.

There will be more pressure on the finance function to develop more effective processes to gauge the effectiveness of different business strategies, as well as shifting the function to better support future decision making. The analytical skills of CFOs will be really important.

8. Integrated reporting: The advent of broader integrated reporting – or <IR> as it is known – means that stakeholders will seek more meaningful reporting and commentary on the true performance of the organisation. The finance function will play a key role in reporting on the environmental and social dimensions of performance. Increasingly, CFOs will need to help the business understand financial, social and environmental tradeoffs and be involved in major investment decisions with social and environmental impacts.

9. Talent and People: A key priority for future finance leaders as they seek to develop and retain the capabilities that will be needed in tomorrow’s finance function will be about people and talent.

Making people and talent strategies work across geographic, language and cultural barriers will be a significant challenge for the CFO, but the need to develop global finance leaders with the skills needed to run global functions is a clear need for the future.

Connected challenges

These nine issues are all connected and relate to each other. For instance, globalisation has an impact on all the issues raised. In this connected world, the challenges for the future mean that CFOs need to prioritise and balance short term and long term trade-offs as businesses seek to reduce costs but also plan for growth in the future.

These nine issues have an impact on the skills and abilities CFOs have themselves, and also for their new recruits and new hires.

Experience and skills, with a new blend of technical, business and behavioural capabilities will be needed. All attendees at the roundtable agreed that finding the right talent was important, and that the finance leader needs to work much closer with the personnel or human resources departments so they share views to recruit and develop the best people in finance for the future.

The future challenges also focussed on the need to retain talent; a reality for many CFOs is that building up staff, developing them, means that the staff member becomes attractive to other organisations - they become in demand and can be head-hunted.

The future environment presents enormous challenges for CFOs; but these challenges provide great opportunities for ambitious finance professionals seeking a rewarding and enriching career in a profession that has an illustrious past, and an equally illustrious future.