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Adapt to survive: the changing role of the CFO
A report by ACCA and IMA (Institute of Management Accountants) finds that finance functions need to adapt quickly to the demands of the modern world

The role of the CFO is becoming more complex and demanding as the business world responds to economic volatility and innovative technology changes the way we all work, according to a new report.

The research, Tomorrow’s finance enterprise, is based on the views of 1,631 ACCA and IMA members from around the world on the priorities for current and future CFOs and the skills they will need to meet future demands. It found that CFOs and their organisations are preoccupied with economic volatility and risk; the participants named these as the two most significant influences affecting the top finance job.

Organisations of all sizes are seeing not only economic uncertainty but increased competition and disruption in the form of new market entrants and radically different business models. Senior leaders are looking for more and better information on which to plan a strategy in a world where they are forced to take more calculated risks and encourage innovation in their own organisation in order to drive growth. 

Broader risks to the fore

CFOs see this happening – the report found that 79% agreed that the finance function will be focused on broad business risks and not just on finance risks in the future – but the forces that are creating this change are also impeding CFOs’ ability to help. Amir Hafiz, CFO of TDM and one of the senior finance professionals interviewed in-depth for the study, said that CFOs are increasingly in the spotlight over ‘the performance gaps between what the business wants to achieve and what it actually does achieve. To make sure that strategy is translated into results is an integral part of the CFO’s role.’

The report argues that economic volatility and a fast-changing world decrease the capacity of the finance function to plan and forecast, and impair the ability of CFOs to give rapid and accurate support to the rest of the C-suite in their decision-making. 

The need for the CFO and finance function to adapt to a world of far greater ambiguity is a theme running through the report. Quin Thong, finance director, Greater China, for Baronsmead Consulting, sums up the dilemma: ‘CFOs are so used to seeing things in just black or white, but we don’t have the luxury of that any more.’

Smarter service delivery

The report argues that smarter delivery of finance services is essential. There is already evidence that CFOs are placing a greater emphasis on their role in business strategy, but the report makes the point that it is imperative that the finance function has the right operating model – agile, scalable and capable of meeting the changing needs of the organisation. The finance team, says the report, ‘must ensure the right processes, systems and metrics are in place to aid strategy execution, deliver richer information insights and drive cost and process effective finance operations’. 

The report identifies a number of areas where finance professionals will have a critical role to play in the near future. One feature of modern business is that the assets driving corporate wealth have changed in the knowledge economy; intangibles such as data, branding and talent have become central to value creation. This has a number of implications for the finance function, which are discussed in the report. Data quality and collection, for example, will be central to success and the finance function, says the report, ‘will have a critical role to play in getting their organisation’s basic data right as a starting point for better decision making’.

‘Enterprises that use the data at their disposal drive competitive advantage,’ agrees Jamie Lyon, head of corporate sector at ACCA, but challenges remain in finding data that will enable finance to track, report and help the organisation take the right commercial decisions.

Technological transformation

Technology will, of course, also transform the finance function itself over time; 78% of the CFOs questioned for the study said that they believed many standard finance processes would be automated in the future. At this stage, though, the rate of innovation in technology and data collection is, in the view of many CFOs, creating too much confusion. ‘The current finance technology landscape remains overly complex for most, and simplification is sought,’ says the report. ‘The CFO function needs to get better at influencing the business on the information that really matters. It must articulate the outcomes it is trying to drive and use the right data to report effectively.’ 

Rita Purewal, CFO of Wolverhampton Wanderers Football Club, makes the point in the report that the availability of data, and our increased ability to analyse it, has raised expectations of what finance professionals can and should deliver. CFOs and the finance team are more than capable of rising to the challenge, but it is also important to understand that the skills – and especially the leadership qualities – demanded of finance professionals has changed.

The report says that volatility, risk, customer centricity and other modern challenges are demanding new levels of leadership performance: ‘For the CFO function, the classic challenge now is how to transform talented individuals from having a narrow focus on functional perspectives to embracing the broader strategic CFO leadership capabilities needed in this environment.’

Communication skills and the ability to think strategically and innovatively are fast becoming prized skills, and the CFOs interviewed for the report acknowledged that they needed to have a far greater understanding of business than in the past – or at least know enough and have the confidence to gather people around them who together, produce the best result. ‘The scope of a CFO’s responsibility has become so big that you cannot be an expert in every area,’ said Holger Lindner, CFO of TÜV SUD. ‘Do you need to have experts? Yes. Do you need to understand what they say? Absolutely. But do you need to be able to be the expert in every area? I don’t think so.’

The report concludes that traditional finance career paths should now ‘rest in peace’ and that finance departments need to think quickly about how they ‘future proof’ the potential talent gap. ‘One of the biggest questions facing the future CFO function is this: where will your future finance leadership talent come from?’ says Lyon. ‘It’s a critical question, and businesses need to think very carefully about how they will develop the next generation of finance leaders.’

Liz Fisher, journalist

This article was originally published in Accounting and Business magazine. Read the original article