tough role of the CFO, The

Accountancy SA,  Mar 2005  by Parkin, Veronique

• E-mail
• Print
• Link

The difficult job of being Chief Financial Officer (CFO) has become a lot tougher in the wake of widely publicised business failures and instances of fraudulent financial reporting. Positioned squarely at the centre of the turbulence, boards and investors are increasingly turning to the CFO to help restore public trust not only in the individual institution, but in the broader capital market system as well.

The CFO has become not only the critical, strategic partner to the CEO but also the symbol of vigilance and the voice of reassurance to the Board's Audit Committee, and the corporate face to lenders, investors, analysts and credit agencies. The next few years promise to be especially active on the finance front, as business reacts to a tide of new legislation and regulation written in the wake of recent global corporate governance scandals.

More than just numbers

While the position demands a high degree of technical competence in financial control and reporting there has been a steady evolution and expansion of the CFO's portfolio. It now encompasses many different corporate activities and thus calls for an equally wide range of competencies. Successful CFOs must be multi-talented, possess experience that is both functionally broad and industry specific, capable of managing several important tasks simultaneously and effectively managing and motivating the financial organisation.

In partnership with the CEO

The CFO is one of the CEO's strategic partners - not just 'running1 the numbers but also providing valuable counsel on running the business. The CFO is expected to contribute to a strategic assessment of the company and develop corporate strategies - sometimes leading those strategic efforts. It is essential for the CFO to have a close working partnership with the CEO and the rest of the senior leadership team as well as with the board. In fact, one of the most challenging elements of this very demanding job is the work of developing and maintaining lines of communication with various internal and external constituencies.

Integrity and Trust

The position requires executives who are - first and foremost - leaders and the very essence of integrity. The current environment, with its intense focus on corporate governance and transparency calls for a CFO with the ability to build confidence and trust. It is as important among internal stakeholders as it is with crucial external stakeholders, especially regulators, banking institutions, investors and the media. The CFO, along with the CEO, is increasingly the public face of the corporation. Many organisations will designate governance reform as a major strategic initiative, and CFOs will be at the centre of the effort, often as de facto chief governance officers. In coming years, we believe demand will continue to grow for CFOs who can step up to a prominent leadership role and show the face of business at its best - successful, yes, but also honest, ethical and straightforward.

Communication

With corporate information of all kinds, but especially financial information, subject to unprecedented levels of scrutiny, an organisation can differentiate itself with a CFO who can communicate clearly, forcefully and above all, credibly.

Leadership and team building

CEOs and boards are looking for CFOs who can assemble strong teams to produce meaningful and accurate financial reports, run tax and treasury operations, oversee pension and venture capital investments, handle mergers and acquisitions, and manage relations with creditors and shareholders. In particular, companies will be competing to field best-in-class financial reporting and compliance teams, and they will look for CFOs to lead the effort.

CFOs also have a responsibility to attract and develop a line of leadership succession within their group. Shaping a culture of excellence, integrity, and accountability, articulating a vision and focusing the team's energy are all vital components of a CFO's skills set, as important as technical proficiency.

Change Agent

In future, even the best-run organisation will have to contend with numerous attempts at legal and regulatory corporate reform. By working to make the process collaborative, CFOs can help government produce genuine reform rather than rules that stifle innovation or otherwise burden business. The organisation of the future is taking shape today and the CFO is a key collaborator in the transformation.

Chartered Accountants

Clearly, the CFO position has evolved from a technical function to a senior leadership position requiring extensive intelligence, integrity, judgment, vision, diplomacy and insight. There is no doubt that the CFO of any corporation has one of the toughest and most important roles in business today. From a local standpoint, CAs(SA) are ideally placed to fulfil the function of CFO because of the broad nature and high standard of education and training required to earn the qualification, as well as the enforced professional code of ethics that it embodies.