Who was, is & will be the CFO ?

The?chief financial officer?(CFO) is assigned the primary responsibility for making decisions for the organization's finances. This implies that she is ultimately responsible ?for financial planning, financial risks, and?financial reporting?via financial data analysis, accounting and record keeping. The CFO, thus, has ultimate authority over?the finance unit?and is the chief financial spokesperson for the organization.?She directly assists the?chief operating officer?(COO)?or the chief executive officer(CEO) on all business matters relating to budget management, cost–benefit analysis, forecasting needs, and securing of new funding.

CFOs (often)?hold professional accounting certifications or degrees given that their responsibilities extend to tax and?financial reporting. In large companies, they may hold additional?postgraduate?qualifications?since the classical accounting perspective can be complemented with general?management , strategic?management, leadership?management, and?financial market?management considerations.

Let us go back in time as to the origin of this designation.

In the U.S.A, the Chief Financial Officers Act, enacted in 1990, created a CFO in each of 23 federal agencies. This was intended to improve the government's financial management and develop standards of financial performance and disclosure.?The CFO Act also established the CFO Council?whose mandate was to work collaboratively to improve financial management in the U.S. government and "advise and coordinate the activities of the agencies of its members" in the areas of financial management and accountability.

In India, as per the provisions of Section 203 of?Companies Act 2013?every publicly listed firm having a paid up share capital of Rs. 10 Crores or more is mandated to have a whole time CFO who shall also serve as a KMP.?The Act does not outline any specific qualifications required for the appointment of a CFO. However, according to Section 134(1) of the Act, the CFO, regardless of her status as a KMP, is required to sign the financial statements as she is responsible for overseeing the financial operations of the entire company.?

The?role of the CFO has evolved significantly.

Traditionally being viewed as a senior accountant & ?financial gatekeeper, the role has expanded and evolved to an advisor and a strategic partner to the CEO.?In a report released by?McKinsey, 88 % of 164 CFOs surveyed reported that CEOs expect them to be more active participants in shaping the strategy of their organizations. Half of them also indicated that CEOs counted on them to challenge the company's strategy.?As a result, the 1990s saw the rise of the strategic CFO, in the West, and more recently many companies have created a?chief strategy officer (CSO)?position.?A?2016 survey of CFOs across the globe suggested?that their role is focused more on financial reporting, with 52% of CFOs still finding themselves bogged down in the basics of traditional accounting practices such as transaction reporting and unable to make time for business partnering.?The rise of digital technologies and a focus on data analytics to support decision making impacting almost every industry and organization will only add more pressure on CFOs to address this tension on finding the time to meet the expectations of their senior colleagues.?

Many large organizations have embarked or are embarking on the journey to help achieve this by creating a finance function based on four distinct pillars :

1. Pillar One : an Accounting organization structured as a shared service,

2. Pillar Two : a?FP&A organization responsible for driving financial planning processes as well as driving increased insight into financial and non financial KPIs that drive business performance,

3. Pillar Three : a Finance Business Partnering organization that supports the leadership of divisions, regions, functions to drive performance improvement and,

last but not least,

4. Pillar Four : expertise centers around the areas of Tax, Treasury, Internal Audit, Investor Relations, etc.

Another crucial insight?

CFOs play a more critical role in shaping their company's strategies today, especially in light of the highly uncertain macroeconomic environments,?where managing financial volatilities is a centerpiece for many companies' strategies, based on a survey held by Clariden Global.?The duties of a modern CFO now straddle the traditional areas of financial stewardship and the more progressive areas of strategic and business leadership with direct responsibility and oversight of operations (which often includes?procurement) expanding exponentially.?This significant role-based transformation, which is well underway, is best-evidenced by the "CEO-in-Waiting" status that many CFOs now hold. Additionally, many CFOs have made the realization that an operating environment that values cash, profit margins, and risk mitigation is one that plays to the primary skills and capabilities of a procurement organization, and become increasingly involved (directly via oversight or indirectly through improved collaboration) with the procurement function?according to a 2011 research report which looked at the CFO's relationship with the procurement function and the Chief Procurement Officer.?

What if you are CFO for the first time ?

Interestingly, Heidrick and Struggles highlight nine steps for incoming finance leaders that resonate across sectors and regions. They had conversations with more than 60 sitting and former CFOs across the globe.

1. ?Building strong stakeholder relationships & communicating effectively to nurture them

2. Working with the Board

3. Nurturing relationships with the CEO

4. Graduating into a Business Strategy role

5. Achieving full functional leadership

6. Building high performance teams & harnessing talent

7. Influencing digitization & technology implementation

8. Taking responsibility for ESG

9. Fine-tuning your personal leadership style

Who will be the CFO of tomorrow ?

The CFO of tomorrow will possess the following qualities :

- a big-picture thinker, rather than detail-oriented,

- outspoken rather than reserved,

- prefer to delegate rather than be hands-on,

- emphasize what gets done rather than how things are done,

- make collaborative rather than unilateral decisions.?

The most underappreciated part ( to date) of a CFO’s role is that she is also a salesperson for the company. In short, the CFO, of tomorrow, is a financial, strategy, commercial, business officer all rolled into one, in other words, the CHIEF FUTURE OFFICER.

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