Capgemini : Changing with the times – what it means for today’s CFO

Historically, a chief financial officer (CFO) has been responsible for managing a company's fiscal actions through cash-flow tracking, financial planning, and analysis of the firm's financial strengths and weaknesses. In essence, CFOs were numbers' crunchers who balanced the books. Gradually, as modern business became more complex and subject to greater risks, the CFO function began to evolve into a more diverse role that addresses many aspects of the organization. Times have changed, and roles have evolved.

Today's CFO is:[1]

1. Business integrator: Identifies problems to improve efficiency, standardization, quality, and operational agility. Assesses the firm's holistic picture, not merely one-track or short-term goals.
2. Anticipator: What is happening? What does it mean? What will happen next? Evaluates by projecting financial needs, modeling new ideas, or preparing what-if
3. The face of the company: As the CEO's strategist and righthand person, the CFO leverages his/her span of view and control and is ready to lead the organization and enable change and corporate objectives. Stakeholders (vendors, investors, bankers, and employees) look to the CFO for corporate credibility.

Today's CFO is often a proactive go-to person who works to achieve business objectives beyond the traditional scope of finance.

Strategy:

CFO responsibilities have decidedly changed. No longer merely stewards who protect an organization's finances, today's CFOs are strategists that provide overall corporate direction. Chief financial officers and chief strategy officers offer unique insights when it comes to developing a corporate strategy - and when working collaboratively, they can strengthen the overall corporate strategy process.

Consider resource allocation. The CFO's office can help to ensure that an organization is dynamic in its resource investment approach by regularly assessing business unit performance, accordingly acquiring and divesting assets, and justifying effective allocation based on each division's relative market opportunities. Astute resource allocation will eventually drive performance and shareholder value.

These days the finance function isn't about looking in the rear-view mirror. It is about visualizing the future and being the voice of the shareholder to drive business decisions.

Operations:

Accounting, investor relations, and treasury are only a handful of functions that report to the modern-day CFO. Risk management, regulatory compliance, and IT, and - as KPIs begin to encompass broader organizational goals - strategic leadership, organizational transformation, and performance management often round out the finance office's functional team.[2]

With technology taking the forefront in the CFO's office, there is a significant push to proactively and systematically invest in people and identify and cultivate skills necessary to harness the benefits of digitization.[3]

Finance staff, acting as leaders in performance management, are broadening their experience to include strategy, marketing, operations, etc. A proactive finance team can clarify the big strategic picture to sync with the execution of operational details.

Financial control

The CFO's office will maintain traditional responsibilities such as financial planning and analysis, budgeting, and forecasting. However, the focus and time spent on the operational aspects of such activities have significantly decreased due to automation, which has freed resources for more value-adding, strategic roles.[4] Automation quickly analyzes data, closes the books sooner, and mitigates human error - which frees the CFO to focus on responsibilities that add value and expand market share.

Impact of technology

More and more, technology is transforming the role of the CFO to imply chief future officer, as the position evolves from oversight of past transactions to uncovering future revenue streams, new financial models, and exploring new business opportunities. Here's how.

Process standardization: Digital transformation will shift the finance function paradigm from operational to strategic, as innovation and automation streamline core finance operations, thereby improving productivity and freeing time and resources to create value.

Data analytics: Organizations handle a vast amount of data each day, making it difficult to derive value. Improvements in data science and analytics are helping CFOs to make informed decisions from large data sets, as skills such as advanced statistics and predictive analysis become a part of a CFO's portfolio.

Modern challenges

Smart technologies and bright resources are no longer enough to ensure a CFO's success. Today, the emotional intelligence and interpersonal skills of talented people are equally critical. Hire the right people with the right skills, and they will learn the technologies and also play an essential part in the organization.

Another priority is digital readiness to reduce process costs and automate daily operations through technologies such as the cloud, analytics, mobility, and robotic process automation. However, only one out of three CFOs say their organizations are ready to embrace new challenges digitally.[5] A new age CFO should leverage these technologies and reimagine the finance function to gain a competitive advantage.

The way forward: inverting the finance pyramid

The finance division has long been responsible for reporting data and ensuring practical analysis to identify areas that require corrective action. Then, together with senior leadership, the results were explored, and plans developed to optimize business performance jointly. Today, however, CFOs are spending less time in this action stage. As the CFO of the future oversees vital business operations, expectations will grow beyond balance sheets and the bottom line to the creation of business value and finding new investment opportunities through agile and cross-functional teams.

Technological advancements and growing responsibilities have significantly altered the way finance as a division functions in an organization.

And, the best way to adapt to this change is by inverting the finance pyramid! The CFO's finance division needs to be significantly involved in more strategic problem solving than data reporting.[6]

Inverted CFO pyramid

New, enabling technologies and the automation of repetitive, administrative tasks are paving the way for proactive management. Organizations can now devote more effort to innovation and to building new business models that support the CFO's ability to access the business as a whole - every area, at any time, from anywhere, without disruption.

To learn more on the topic, feel free to get in touch with me on social media.

The author would like to thank Devika Mathur, Muhammed Ahmed, Vaishnavi, and Tamara Berry for their contributions to this article.

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[1] StrategicCFO.com, '7 Habits of Highly Effective CFOs,' November 2018, http://strategiccfo.com/wp-content/uploads/2018/11/7-Habits-of-Highly-Effective-CFOs-Updated-November-2018.pdf

[2] McKinsey, 'Avoiding the quicksand: Ten techniques for more agile corporate resource allocation', Michael Birshan, Marja Engel, and Olivier Sibony, October 2013, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/avoiding-the-quicksand

[3] Capgemini, 'Is your Finance Function Ready for the Future', April 2019, https://www.capgemini.com/2019/04/is-your-finance-function-ready-for-the-future/?utm_source=elevate&utm_medium=social&utm_content=bsv_grouporganic_image_blog_none&utm_campaign=optimize_bsvblog

[4] McKinsey, 'Bots, algorithms, and the future of the finance function, April 2017

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/bots-algorithms-and-the-future-of-the-finance-function

[5] Ibid

[6]D!gitalist Magazine, 'Does Your CFO Know the Whole Truth About The Business?' Christoph Himmel, May 13, 2016, https://www.digitalistmag.com/finance/2016/05/13/does-your-cfo-know-whole-truth-about-business-04204280