The transformation of the modern CFO


Chief Financial Officer - Cfo

Chief Financial Officer - Cfo

The world today has undergone significant transformation over a remarkably short period of time. Increased globalisation and regionalisation advance cross-border business to the extent that businesses have to reinvent themselves just to stay relevant. The added dynamic dimension of the cyber-world also means that barriers that have previously slowed businesses down have virtually vanished, and digital has become to byword of the day.

“As the landscape changes, so too has there developed the necessity for strategic thought shifts at the uppermost levels of corporates, at the CXO level. CEOs have become increasingly dependent on their CFOs to guide them through the turbulent times of both economic challenge as well as internal shifts. The role of the CFO has grown and as such, so has the required support needed to play this role evolved,” said Bernard Chiang, Managing Director of SAP Malaysia.

The modern CFO

Where the traditional CFO was responsible for many day-to-day operations such as accounting, treasury, finance and other internal controls, changes in the pace of business today requires finance to be more closely aligned with strategy in order to provide greater agility and risk management. In essence, they have developed from a technical role to one in which they act as business partners to the CEO.

Bernard Chiang  (1)

Bernard Chiang  (1)“These CFOs need to be possessed of three basic pillars; Views, Vision and Insight,” said Chiang (pic).

“Now, as the steward of the organisation, the CFO must be able to act a single source of truth. Armed with the right decision-making tools and automated finance processes that are strictly compliance-aligned, the modern CFO will have unmatched insight as well as foresight,” he added.

Strategist and business partner

0As a strategist, the CEO-CFO relationship at the board table has become one of the closest and most important. As business partners, they engage at almost every level of leadership, with the CFO acting as key advisor to all stakeholders. Ernst & Young has aptly described the partnership as the successful combination of “practical economic theory and the effective allocation of scarce resources to achieve financial objectives”.

Fig.1 Role of the modern CFO (source: E&Y)Fig.1 Role of the modern CFO (source: E&Y)Role of the modern CFO (source: E&Y)

Externally, CFOs are also spending more and more time developing outside relationships in emerging markets. Given the now global role, CFOs have started to look towards where investments will come from and the right markets to venture into internationally. As such the CFO also needs to be one of the best communicators both in and outside the boardroom

“Due to the enormous impact of technology today, the CFO must have a strong relationship with the CTO/CIO. The fundamentally changed businesses of today have been impacted be technological advances and this trend is gaining momentum. What used to be brawn has become replace by brain and CFOs are increasingly dependent on technology to help them drive transformation to streamline processes and drive collaboration,” said Chiang.

“It is important for the CFO that his organisation has the technology tools that offer the most vital of characteristics: Trust and reliability,” he added.

The next generation CFO

Even as the role has already changed significantly, it will continue to evolve into the future. Succession planning and the development of the next generation’s CFOs must be considered now as the twin roles of financial management and co-leadership meld even closer.

Experience has never before been so crucial to the role of CFO, and they must gain even greater breadth of experience to assume the position. Increasing fragmentation of the finance function and splits between specialist accounting and commercial contribution will make talent development exceedingly difficult. The progression of the role has not only moved upwards, but sideways as well.

“Overall, the role’s expansion is so significant that the future CFO has become exponentially difficult to groom. Such depth and breadth of responsibility is questionable for one individual to shoulder, but the greater question should be if there are enough people willing to assume this level of personal accountability and risk,” concluded Chiang.

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