How CFOs can adapt to disruptive forces

CFOs, like the companies they work for, must adapt quickly to be able to stay ahead of technological changes, ever-growing risks, and increased stakeholder scrutiny and regulation.

The role change from scorekeeper to strategist has been ongoing for many years, but the pace of that change has accelerated, according to data from an EY study,The DNA of the CFO.

The CFO role is facing pressure on several fronts. More than half of finance chiefs globally say they can’t focus on strategic priorities:

• Because of time spent on compliance, controls, and costs (56%).
• By delegating responsibilities because of a lack of necessary skills in the finance team (52%).
• Because of increasing operational responsibilities (51%).

The EY report used the responses of 769 finance leaders around the world to come up with four forces disrupting finance leadership. The four forces are:

Stakeholder scrutiny and regulation. Seventy-one per cent say they will increasingly be responsible for the ethics of decision-making in support of their organisation’s purpose. There is no cure-all for increased regulation, which is widely viewed as a top challenge for CFOs.

Digital. Fifty-eight per cent of finance leaders say they need to build their understanding of digital, smart technologies and sophisticated data analytics.

Robert Fowles, CPA, CGMA, the CFO at Opus One Winery in Oakville, California, said e-commerce has been a growing part of his company’s business. But with e-commerce comes the risk of fraud. If a stolen credit card is used to purchase wine, the rightful owner of the card disputes and successfully reverses the charges, then the seller must issue a refund. But the seller rarely will recover the wine it shipped.

Opus One has increased security on its website and takes more time to vet the authenticity of online purchases.

Data. Fifty-seven per cent believe that the delivery of data and advanced analytics will be a critical capability for tomorrow’s finance function. A lack of data analysis skills is regularly cited as a challenge to growing the strategic role of finance.

Risk and uncertainty. Fifty-seven per cent believe that risk management will be a critical capability in the future. This may seem obvious, but, Fowles points out, risk management formerly was viewed as a box that could be checked by having the right insurance. “It’s become much more sophisticated,” he said.

At Opus One, Fowles has worked with the company’s board and other stakeholders to plot risks based on the likelihood of their occurrence and their effect on the company. Those that are seen as high likelihood and high impact are prioritised, and the company is developing plans to further mitigate those risks.

“With risk management, the most important message is that the one thing you can’t do is nothing,” Fowles said.

Escaping the comfort zone

Developing a risk heat map was something yesterday’s finance leaders weren’t often guiding. CFOs also weren’t counted on for strategic leadership the way they are now. That change in role comes more easily for some than for others. The EY report mentions two skills that can help finance chiefs grow: big-picture guidance, and relationship and influencing skills.

Getting out of finance and learning about all segments of the business is important, Fowles said.

“Broaden your perspective as much as possible so that you can be your CEO’s most trusted counsel on running the business, and add value to the sales, marketing, and operations functions,” he said.

How to accomplish that isn’t easy. A mentor to Fowles told him that when he became a CFO, he did all the accounting work at the end of the day, when most other employees had gone home. The mentor spent most of the day meeting with other departments and talking about strategic issues.

Fowles has tried to take that approach at Opus One, where he has been the CFO nearly ten years.

“A good CFO has to be a great communicator. You need to get out and talk to the sales, marketing, and operations people to find out the challenges they are facing and find a way to help,” he said. “If you sit in your office and wait for them to come to you, it will never happen. But if you can find out what they’re working on and then help and provide value, they will always come to you. You want to be the guy that people go to, not the one people avoid. It’s hard to add value when the problem’s already occurred and you’re the last to find out.”

Source : GCMA