Savvy senior management members are beginning to appreciate the value that the CFO can provide beyond finance. Clear demonstration of business acumen is needed from the finance chief to convince those who haven’t yet bought into that philosophy.
The new charge of the CFO carries with it a more demanding and complex set of expectations and responsibilities, which only promises to expand as time moves on. In order to compete, a CFO must maintain perspective on commercial drivers such as customer behaviour, demographics and consumer trends, as well as communications, sector insights and how to leverage value to support the business. All of this, of course, comes on the back of the financial prowess the role has traditionally required. The modern CFO now finds themselves sharing a leading role with other C-level executives.
Astute C-level executives are realising the untapped potential of their CFOs and taking full advantage. Geetu Ahuja, Head of GCC, Chartered Institute of Management Accountants, Cima, explains how the new CFO relates to the rest of the company’s executive team. “The CFO is pivotal to an organisation,” she says. “We depend on them for counsel and direction. Typically, the CFO shares and maintains four key relationships in an organisation – the head of HR, the CEO, management team members, and Executive Director of the company. These relationships cement the role of a CFO as a change leader.”
These relationships demand more from the modern CFO, from lending objectivity and integrity in human resource matters, to providing checks and balances for the CEO who is making decisions about a company’s future. As expected, this influx of new responsibilities requires a new skillset for the successful CFO to draw upon.
Much of this change in the expectations placed on CFOs can be attributed to companies recognising the value the role can bring to future channels of growth through analysis of financial data. As a result, the position of CFO now carries much greater influence within a company, and has the potential for a much more direct impact on the overall operation and strategy of the business.
Michael Armstrong, Regional Director for the Middle East, Africa and South Asia, FCA, ICAEW, believes that strategic decision making skills are imperative to the new CFO. “CFOs need to have the vision to see how individual projects fit into the business’s overall mission and how this can be taken to the tactical level,” Armstrong says. “CFO’s are about measurement and management and this means taking the evidence and being the ‘voice of reason’.”
Strategic sensibility is not the only skill CFOs need in the modern business world. Hisham Farouk, CEO, Grant Thornton, UAE, explains how CFO’s these days need to be, amongst other things, an innovator. “I don’t think CFOs can ignore the importance of innovative thinking, no matter which sector their business operates in. In order to truly capitalise on technology, promote efficiency within the business, and reduce operating costs, CFOs need to take an innovative approach.” This doesn’t always mean an overhaul of company policy and practice. An innovative CFO can find myriad small changes to make within a company that can culminate in reduced cost, greater efficiency, and happier customers and C-suite executives alike.
These new expectations of the CFO do not replace the core of what the title suggests, which is, of course, finance. With an increasingly complex job description, it’s imperative for a CFO to maintain mastery of a company’s financial state.
“First and foremost,” says Ahuja, “The CFO needs to ensure that the organisation is financially secure. Regardless of how financially conservative a company may be, market turmoil can be such that there may be a real prospect that the bills can’t be paid. Financial stability in the short-term can therefore not be ignored. But it’s also important to work through the longer-term financing issues, such as the management of the most significant liabilities such as pension contributions. To be truly on top of the numbers, the CFO needs to understand what is driving the business.”
In light of all these changes the position of CFO is encountering, it is important to assess where the CFO fits on the board. “This depends on a number of variables such as company size, industry sector, company structure, and where they are located,” Armstrong explains. “The difference between the role of a Group CFO of a multinational company and the CFO of a small family business in a traditional market can be tremendous. What is certainly true is that more and more CFOs are expected to be strategic business leaders. ICAEW is seeing increased demand for knowledge-sharing, peer-learning and networking opportunities like the CFO clubs and finance leaders forums that we have been running across the GCC.”
Change is not only a central part of how a CFO fits into a company, but how the companies in the region move forward. According to Ahuja, “As the Middle East markets expand and businesses open up to new ventures and investment opportunities, CFOs have a huge responsibility to present an understanding of how parts of an organisation can create value whilst being mindful of the potential pitfalls.” Hence, the CFO acts change agent for a company.
Armstrong supports the idea of CFOs acting in this manner, recognising their ability to offer their company great support in facilitating change. “Managing change is dependent on having a clear strategy, a reliable and robust measurement system, recognising the necessary steps to implement and winning the hearts and minds of stakeholders,” he says. “Measurement and management are the lifeblood of any CFO, and the best and brightest will also have the leadership skills to communicate well and take the company with them on the right journey.”
Change seems to be the only constant these days, and as market demands, technology and new regions continue to expand and develop, so does the role of a company’s Chief Financial Officer.