The role of the corporate Chief Financial Officer is one that's changed considerably in recent years. It wasn't long ago that the CFO was seen largely as a quantitative position - the job was all about crunching the numbers, figuring out where the company stood financially and using that information to advise other decision-makers on the way forward.
The CFO is no longer an advisor to the decision-makers - instead, he's one of them.
Things are different now in that the CFO is no longer an advisor to the decision-makers - instead, he's one of them. As we're now well and truly into 2017, CFOs will quickly discover that a new set of skills are required, while embracing innovative processes and technologies could be the key to paving the way forward.
What the data says about the CFO's role
Not long ago, the CFO's main responsibility was to be a data scientist. This individual would crack open BI applications, pore over numbers and unlock key insights about what it takes to run a successful business. To a certain extent, this is still the case, as analysing data obviously still matters. But, according to global research from McKinsey and Company, being a CFO is now broader than that.
At a majority of companies today CFOs are being asked to do numerous other things besides manage finances. On average now, five functions other than finance now report to the CFO, which brings additional responsibilities such as evaluating risk, ensuring regulatory compliance and even in some cases managing cybersecurity and digitisation. This suggests just how diversified the list of demands are on the CFO.
Instead CFOs must build skills in other areas of the business, play a more active role in leadership and rethink their usual approaches to overcoming external pressures and uncovering new investment opportunities. According to McKinsey outside of traditional finance related roles, the CFO spent the majority of their time on strategic leadership (46%), organisational transformation (45%) and performance management (35%). Looking ahead the preference seems to be spending even more time within these domains.
The bottom line is that providing leadership, encouraging innovation and shaping the future strategies of the organisation are core responsibilities of the CFO.
CPM solutions can support innovation and growth
Of concern in McKinsey's research is that roughly two in three CFOs say their companies do not yet have the capabilities for agile decision making, scenario planning, and decentralised decision making they'll need to be competitive moving forward.
Likewise, many say their companies use basic financial controls in their decision making—but few report the use of more advanced practices. When asked about their capital-allocation processes, most CFOs agree that their companies set capital-expenditure budgets at the project level, use comparable metrics across business units, and track the results of specific projects. These practices support the foundation of a strong capital-allocation process. Fewer CFOs, though, report using tactics that would foster further learning or innovation. Just 30 percent of CFOs say their companies formally review investments made three to five years ago, and one-quarter say they're using new methods to identify funding opportunities.
If new technologies are adding to the evolution of the CFOs role, they also have the potential to make it easier for finance leaders to understand current business complexities. Business ntelligence software (BI) can help CFOs benefit from Big Data while Corporate Performance Management (CPM) software can digitise financial processes. Modern CPM software in the cloud can improve speed to decisions, with the ability to quickly make changes and adapt to business scenarios. Automating repeatable manual tasks, easily integrating sales, operations and financial data within enterprise budgeting, forecasting, financial consolidation and financial reporting. Too often these processes can be bogged down by the use of Excel or overly complex solutions.
