There has never been more information at the fingertips of Chief Financial Officers (CFOs) – and yet their job has never appeared to be more complex.
Is this due to an information overload? Perhaps, but how this wealth of new information is handled is a daily battle for today’s CFO. In many ways, the old job description of the head bean counter hardly applies now. The modern incumbents of this critical position are expected to bring much more than balanced books to the higher management table. They need to be proactive and add commercial value while also acting as guides to higher management.
Here we pinpoint the top five CFO challenges:
Amid all this data, this potential information overload is crucial insights into a firm’s performance: business intelligence. The efficient monitoring of this data is the key to ensuring that higher management receives the most up-to-date – and relevant – insight. This insight will, after all, be the driver for smart decision-making. Successful CFOs need to have the ability to plan, budget, forecast and provide effective insight based on their monitoring and reading of the data available to them. More often than not time (or distractions) and resources (or lack of) are blocking their ability to effectively carry on these duties. Today’s CFO has the benefit of real-time data and trends can be detected in an instant. In addition, they have the tools to communicate their insights instantly (thus improving efficiencies), no matter where they are located. On the flip side, this use of business intelligence inevitably leads to increased demands for quick, accurate, and smart decision-making. New technology offers the CFO a suite of options, however, they also require the time to analyse the most effective options.
Jeff Bezos wanted every Amazon to hire to improve the company by 10%. It was this high standard of hiring that led to the eCommerce giant’s success. How many CFOs treat hiring with similarly exacting standards? The ability to attract and retain talent as well as foster an environment of an engaged workforce is seen as a key requirement for the CFO of the 21st Century. Their ability to lead is critical to the well-being of the firm. To prove this trait they also need to be able to identify the talent required for the firm to achieve its stated aims: their selections will have a major impact on their performance and that of the firm.
This new technological age has allowed today’s CFO to take a place at the top table of higher management. They come armed with real-time data analysis, mined by their team of (carefully selected) highly qualified people. Higher management now leans on their insight to aid and shape key decision-making at the top level. They don’t have the final say on core business decisions but their input is vastly changed from that of the person simply presenting a set of figures on a Powerpoint presentation. CFOs need to be able to provide critical insight to enable smart decision-making. This requires a deep understanding of big data and analytical tools, crucial to the strategic thinking and planning of the firm.
4. Regulatory compliance
The critical need to keep abreast of potential new laws that will affect the firm’s financial bottom line remains a key challenge. CFOs have a personal interest in what new laws are coming down the track. The knock-on effect of new laws can have a serious consequence on the firm’s strategy. Take, for example, the second coming of the Payments Services Directive (PSD2 as it is known) that is currently winging its way through the legislative chain at Berlaymont in Brussels. When passed, one element of PSD2 will require banks to offer their customers the services of third-party providers. The customers, of course, retain the option to accept or reject but banks will not have this choice. For CFOs involved in banking, PSD2 can revolutionise their industry: a new era of OpenAPI Banking has been predicted where all banks and third-party providers have access to millions of account details allowing them to tailor their offerings accordingly. CFOs need to be aware of such legislative changes to future-proof their firm from the consequences, but also to embrace ideas that can lead to new revenue streams. A lack of awareness around regulatory frameworks that impact on the firm’s treasury outlook feeds into strategic risk. The uncertainty that surrounds such rule changes needs to be quickly identified, and carefully managed, so as not to negatively affect future performance and strategy.
5. Manage complexity
All of the above challenges lead to increased complexity in the role of the CFO. Complexity is – typically – deconstructed by asking simple questions. Do we need to do this? Have we got the time to do so? Do we have the resources at our disposal? Do our people have the necessary skills and/or technological resources to achieve our stated aims? For many CFOs, “no” is the frustrating answer to at least one of these questions. That’s why more and more large corporations are incorporating the use of business services into their models. Let others take care of the micro-tasks, this allows the modern CFO to concentrate on the bigger, strategic, picture. Complexity also comes in the form of external factors, such as market volatility. One of the core responsibilities of a CFO is to protect his firm from foreign exchange fluctuations.
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