The changing role of a Chief Finance Officer

If Legal is a key pillar of corporate governance in any institution, Finance is the Ring Beam that holds the entire structure together. Yet, many finance officers continue to occupy the seats at the edges of the high table, instead of centre stage. This has not only alienated the finance function as a support role, instead of a mission-critical one that is given all the resources -in terms of skills and tools – it requires to transform the business or enterprise.

In this era of VUCAP – volatile, uncertain, complex, ambiguous, and pandemic, the role of the finance department under the leadership of the chief financial officer has become more critical than ever.

First, CFO and finance professionals, in general, must understand their place within the organization. What is are the primary expectations of the immediate bosses and other key stakeholders? You must understand the organizational structure in which you operate and the needs of the business. Thereafter develop a finance function strategy that seeks to offer value to the modern era enterprise for a transformative advisory to optimize resource deployments.

The role of the CFO in the business is like that of the heart to the human body.  The heart pumps blood and ensures all body organs have adequate blood requirements to operate optimally. Once blood fails to reach a certain body part or organ, problems manifest instantly. That is what happens when the finance department under the stewardship of the chief finance officer fails to manage the cashflows adequately and strategically.

Regardless of the size of the business or the type, a great CFO must demonstrate the following skillsets

1. Performance management. The CFO must be at the forefront of improving the performance of the business through developing models to explore revenue growth initiatives. Which branch is breaking even? Which projects are profitable and which ones are not. Finance must provide insightful data to the executive leadership to inform decision making. They are the custodians of data analysis, business process analysis, and re-engineering based on data and insights. Finance must attack a figure to all decisions to improve the odds of success.
2. Strategy and execution. What is the company’s business model? What is the revenue growth strategy? What is a sustainability strategy? Which are the company’s top 10 products and services? Which customers, delivery channels, geographical markets, and customer segments are critical to the survival of the business? Which is our most profitable segment? Which products will be relevant to our most critical segment in the next 5-10 years? The CFO and the entire finance team, whether in a large company with a strategy department or a small and medium-sized company without the department, must provide insights that all managers and topmost executives need to win now and in the future. Businesses that craft strategies informed by data are more successful than those which use hearsay and opinion. A great CFO must champion data analytics, business intelligence and strategic information to win against the competition and create a sustainable position.
3. Portfolio optimization. When it comes to many and making the most of it, the quality of the chief thinker can make or break the business. When it comes to the corporate balance sheet or statement of financial position, the CFO is the chief thinker. They must think and provide clear analyses and strategic investment options to make the most of the investment. Recently, we have seen banks preferring securities investments as a way of risk management owning to the high risk of giving out loans, this is a good move from a business profitability point of view. Indeed, great CFOs must provide investment alternatives to make the most of the balance sheet.
4. Automation and cybersecurity investment. The role of finance is to protect shareholder assets and deploy to generate maximum returns cognisant of other stakeholders. The best way to optimize shareholder value is to leverage new technologies like platform business and software applications, fully optimized for machine learning and artificial intelligence, big data analytics, and interconnectivity. Because a modern CFO must interest itself in risk management, with automation comes cybersecurity risks. The modern CFO must embrace cybersecurity and prioritize resources to provide for real-time threat intelligence by investing in both cyber weaponry capabilities for defensive and offensive. This critical role cannot be left to the IT department or a cybersecurity officer. A modern CFO must attain skills in cyber defence or have a team member or requisite skills within finance who understand the cybersecurity arena.

To be continued.

Are you a CFO? What do you see as the future of your role? What kind of changes in terms of skills and training are you undertaking to prepare and win in the current times?

Copyright Mustapha B Mugisa, 2020. All rights reserved.