Boards: Are You Being Served By Your CFO?
Chief financial officers (CFOs) have a key responsibility to present high-quality financial information to the board. But these financial “brains” of the organisation can contribute far more, according to experts.
Based on a recent discussion hosted by the Chartered Institute of Management Accountants (CIMA), “The role of the CFO on the modern board,” the participants found that boards are faced with increasing complexity and uncertainty following the global financial crisis, including the disruptive impacts of the digital revolution.
Investors and other stakeholders are seeking greater transparency, with boards under pressure to provide effective oversight of corporate strategy, performance and risk, including protecting a company’s reputation.
The CFO serves as guardian of the integrity and quality of management information, being required to provide quality metrics as well as “connecting the dots” on performance and communicating with impact.
An example is in the retail sector, where the growth of online sales has led many retailers to adopt a “bricks and clicks” model of physical and online stores. For CFOs, the challenge is presenting shifts between the fixed cost business of established stores and the variable cost business of online, focusing on customer profitability instead of sales/channel profitability and identifying suitable performance measures.
4 Key CFO Tasks
CIMA identifies four key tasks of the modern CFO, comprising:
(1) Financial security: Both short- and long-term financial issues must be addressed, requiring the CFO to understand the key business drivers;
(2) Compliance and control: Beyond financial controls, broader business controls must be “fit for purpose” as the organisation adds complexity;
(3) Strategic direction: The CFO must help navigate external changes and advise on strategic direction, making it essential to “act and react in a speedy manner”;
(4) Building capability: The CFO must lead the company’s finance function and help build future capability. This requires maintaining close relationships with the head of HR for finance, the chief executive officer, chairman, executive directors and other management team members.
CIMA’s panel participants emphasised the need for CFOs to show strong business acumen, while also embedding the right values and behaviours to ensure the “right tone” is set from the top of the organisation.
Maximising Board Time
CFOs can help boards maximise their valuable time by planning carefully ahead of meetings to ensure important issues are properly addressed; by managing expectations concerning strategic issues, including recognising that these may need to be supported by site visits or longer meetings; and by utilising opportunities for discussion, such as at separate lunch or dinner meetings with non-executive directors.
It is important to think carefully about what the board needs to hear and not assume that the 40-slide PowerPoint presentation is always the best approach. Technology should be used as an enabler to keep communications flowing, not as a prop for poor speakers, CIMA says.
From compliance captain to top performance overseer and guardian of shareholders, the modern CFO has far more to deliver to the board than just a “beautiful set of numbers.”
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