A decade ago, the role of a CFO may not have been the easiest role, but it was pretty clearly defined, and the responsibilities were relatively stable and manageable. The CFO was usually a qualified accountant with extensive years of financial experience within multinational companies. Their role was largely about putting in place a series of measures and best practices that would facilitate processes to create financial stability across multiple interconnected departments.
The CFO made sure that these departments were sufficiently funded and had the necessary financial support in place to help them deliver on their respective responsibilities. A good deal of financial planning, managing budgets and expense forecasting was needed in the job as well as the ability to interpret and examine business cases for further investment.
New pressures
Today the role of a CFO is very different-many of the previous responsibilities are still there but the CFO also has to contend with a wide range of new responsibilities that have emerged as a result of this new digital economy companies operate in today. This has resulted in a set of new expectations and additional pressures that the modern CFO must contend with- this person must also deal with these things in a very public spotlight as the CFO of today is under more scrutiny than ever before. Bad decisions are suddenly very public decisions, and the consequences of poor judgment can bring financial difficulties but also reputational damage that can be hard to recover from. It is not a role for the fainthearted and a strong analytical mind is needed to cope with the demands.
Strategy skills
A key feature of the CFO role in the last five years has been a sharp move towards strategic thinking. It is not that financial skill sets are no longer needed; it is more of a case that these financial skills are now assessed in the light of a wider strategic ability. The CFO now plays an influential role in the overall strategy of a multinational and is called upon to help develop a competitive advantage. A company's finances may dictate its ability to operate and thrive in the digital economy, but this is only one element of a bigger picture. The CFO must now add strategic value in the shape of long-term financial stability, investment opportunities, raising capital for mergers & acquisitions, and making calculated decisions around what current innovative technology is worth significant investment.
Comfort with technology
The way in which multinationals do business has changed, the employee demographic has changed, and the level of new technologies utilized by businesses everywhere has grown at a rapid rate. This technology and digital transformation has resulted in a new set of expectations being placed upon a CFO -they are expected to have a keen understanding of how technology disrupts and influences the market and consequently, they are required to make future proof decisions about investments in technology. Their core skill set in their previous roles may have had little or nothing to do with technology- therefore many find themselves out of their comfort zone and scrambling to learn as much as they can about the impact of digital processes and how they affect both operations and profit margins. It is steep learning curve in a digital environment that never stands still. A CFO’s tenure can be judged on their decision making around major technology investments and finance transformation so the importance of getting it right first time is something they are very much aware of.
Understanding how digital disrupts
It is not so much about gaining an understanding and a level of comfort with the current technology deployed by a business- it is more about developing an awareness around how digitization can influence and create new business models, opportunities for advancement and revenue streams. A CFO is expected to participate in the strategy for bringing new revenue into a company and in today's business world, any new revenue stream is likely to be heavily influenced by digital technology such as cloud or cybersecurity tools. Not understanding how such technology works, and the wide-ranging impacts it can have is simply no longer an option for finance leaders -knowledge is essential but it is becoming a minimum expectation. As a result, many CFOs find themselves reading a lot of material on things like digital transformation, cloud-based technology, robotic process automation, advanced cybersecurity, blockchain, machine learning and a host of other digital focused trending material.
Many CFOs are finding this digital revolution to be something of a double edged sword- on the positive side, this new environment can help open up their business to a host of new revenue streams based on digital advancements, but on the negative side, their business model is vulnerable to new competition and the many security risks often associated with new technology. It is a delicate balancing act and CFOs, along with other members of the finance teams, navigate a tightrope between generating revenue in the present and establishing a business model that can work in the long term.
The Public Eye
20 years ago, a CFO could operate quietly and efficiently in the background- they could focus on accounting, balancing the books, meeting compliance and delivering year-end financial reporting for the annual report. New initiatives could fly under the radar and be allowed the time and space to produce results. This level of limited exposure no longer exists, and the CFO does not have the luxury of taking a risk that will not be criticized should it struggle to match expectations.
The CFO has become a public person- they now have media duties similar to a CEO and they are required to answer to shareholders in a very public environment. Technology and financial magazines regularly do features on CFOs and they monitor their decision-making for various commentary pieces that they produce. The CFO is simply under the spotlight like never before and this brings considerable pressure to an already difficult decision-making process. It is one thing to take a risk and fail, it is quite another thing to do so publicly.
CFOs are supposed to be risk averse by nature, huge public scrutiny does little to encourage them to take a leap into the unknown. They also face a strong level of scrutiny from international business regulators and various compliance bodies. There are a lot more stakeholders, a lot more risk and a lot less patience from shareholders when it comes to delivering results.
A volatile landscape
Most CFOs would like to operate in a landscape of stable market behavior to find out if their ideas can work in the long term. Inevitably, something major happens to disrupt the landscape, changing market conditions can force leadership teams to dramatically change their strategic course. These disruptive headwinds come in many forms, but a few common ones are new or unexpected regulatory reforms or major cyber security issues. Of course, right at this moment, CFOs like everyone else, are dealing with the most unexpected game changer possible to the business landscape - the global pandemic that is COVID-19. There can be no certainty when things are so volatile and it is impossible for any CFO to offer guarantees, all they can do is make their best judgment based on the information that is available to them at the present time.
The global pandemic has brought home the new reality that a major global economic shift can occur much faster than we might have thought possible. It has served to highlight the fact that CFOs are now operating in a generally volatile, and rapidly changing business landscape. CFOs today are more likely to be exposed to negative disruptive trends than anytime in business history. This presents challenges when it comes to both short-term and long-term financial planning at finance organizations. Now more than ever, level-headed thinking, patience and a keen understanding of the digital landscape is required by the chief financial officer. This person must now lean on all available resources from people expertise to innovative technology to data driven insight. Informed decisions are crucial, and the CFO must take advantage of all the tools at their disposal to get it right the first time.