It is no surprise that the finance industry has shifted. This shift has been brought on by the growing digital landscape that has created new job functions, business operations, and even a new work culture. With each new technological advance, creates a disruption in this sector.
The development of technology continues to move forward, and since it is so disruptive, it is forcing business professionals to adapt to new techniques in order to keep up with the constant developments of digital transformation. Among those business professionals, you will find the CFO, a critical, necessary and crucial part of an organization’s structure.
The Role Of The CFO
“The chief financial officer position is accountable for the administrative, financial, and risk management operations of the company, to include the development of a financial and operational strategy, metrics tied to that strategy, and the ongoing development and monitoring of control systems designed to preserve company assets and report accurate financial results.” Accountingtools reports.
The CFO has a complex role in the finance sector, responsible for many duties and according to Investopedia, it can be broken down into three main components.
The CFO carries out controllership duties, being the lead accounting executive in the company. The duties associated with this role are determined depending on the size of the company, based on how many people are employed and how many people make up the accounting department. Basically, the controller provides leadership in this department when it comes to conducting strategies.
All in all, the CFO is responsible for reporting a timeline of financial information that will be viewed by the stakeholders, shareholders, analysts, creditors, and employees, so basically everyone in the company, will be using this information in order to make decisions. That being said, it needs to be accurate!
This role will deal with accounting, internal controls, financial planning, and financial analysis. So, there is a lot of components involved, hence why the CFO is a complex role.
The company’s financial condition, meaning what is being invested, and what is at risk, is what comes to play during the CFO’s treasury duties. The CFO is in charge of the company’s current financial infrastructure, determining what will be the best decisions for the company, which involves figuring out risk, and balancing debt and equity internally.
Basically, the functions of this role determine what and where to invest the company’s money, which as you can imagine, is a huge responsibility.
“The CFO oversees the capital structure of the company, determining the best mix of debt, equity, and internal financing. Addressing the issues surrounding capital structure is one of the most important duties of a CFO.” Investopedia reports.
Economic Strategy and Forecasting
Of course, the current state of company affairs is important to the CFO, but the future is just as important. The CFO is responsible for putting together strategies that will position the company in a place to succeed. This can be done by forecasting the future in order to make the proper decisions.
Taking information from the past allows CFOs to pinpoint where the problems are, in order to create solutions. CFOs are also responsible for figuring out what makes the company the most money, which ultimately is the end goal for most financial institutions. The duties that economic strategy and forecasting include predicting scenarios that will ultimately position the company to be successful.
These Roles Are Changing
Digital components are making their way into business operations in the finance industry, especially when it comes to using big data to make business decisions. The CFO has more duties than ever, because of all of the IT components that have emerged in this sector.
“Over the last half-century, finance leaders have gone from bean counters to the boardroom; the responsibilities of finance leaders have evolved to encompass everything from business strategy to operations to IT risk management. The role of finance now permeates all areas of business as its influence continues to grow.” Sysco reports.
The role of the CFO is evolving and changing and is now facing new challenges, like successfully integrating technology into the infrastructure of the company, which brings risk and concerns, influencing business decisions. Now, CFOs must learn how to make strategic judgments when it comes to the outcome of the company.
EY put together a report that emphasized and revealed the changing role of the CFO by conducting interviews 19 CFOs who have a lot of experience in the industry. The findings of the interviews indicated that CFOs believe that their role is changing as the development of technology continues.
“We have been required to develop skills not always traditionally associated with the accountancy profession — including business planning, risk management, influencing and strategic thinking,” EY reports.
The Industry Is Changing
The role of the CFO is changing alongside the financial industry. According to EY’s report, finance professionals are experiencing a massive shift in the industry. Expectations are increasing, as new challenges are emerging that involve ensuring the finance department is functioning properly. A new set of demands has been introduced, like making sure you and your team possess appropriate skill sets that match the development of technology.
With new skill sets, comes a new kind of leader. This leader must know how to support and carry out the strategic functions that are necessary to keep up with innovations.
“When asked how their workload has changed over the last five years, 63% of finance chiefs say that nowadays they spend more time supporting their organization’s development and its strategic goals. Indeed, more than half say they are increasingly taking the lead in developing and defining overall strategy.”
Managing technology is a big concern for CFOs, since it is the most important force in business, but also the fastest growing. Because of this, business professionals are having a difficult time reshaping business to meet the requirements that technology has on the organization.
Because of this, CFOs are taking on different roles in addition to their current job expectations. These roles involve managing IT departments and all technology that is integrating into business operations. That being said, CFOs must be familiar with what the financial expenses are when it comes to deploying new technology.
“Because CFOs have such a deep understanding of all the organisation’s operational units, they are a natural fit to oversee the technology that integrates these units. Also, as a result of growing technology demands in the workplace, technology has become both a major expense and capital asset.” Sysco reports.
New Challenges For The CFO
The CFO is now faced with new challenges as the sector changes. According to KPMG, there are 5 challenges that CFOs are beginning to tackle in the face of the digital age. (Taken from KPMG).
Growth is important to CEOs, which means CFOs are relied on to make sure there are proper strategies in order to achieve growth acquisitions and expansion.
Changing Regulatory Burden into a Competitive Advantage
“Regulatory environment will have the most influence on the future of the CFOs, but this should not be viewed negatively. According to the KPMG survey among business leaders of the world´s leading enterprises, 61% of them see the regulation as an opportunity to derive competitive advantage and 51% of CEOs see it as an opportunity to utilize data analytics. CEOs, therefore, do not rely on CFOs only to ensure that the business adapts to changing regulations but also to get as much value for the business as possible in the process.” KPMG reports.
Data processing and analysis
“Applying financial data to achieve profitable growth is considered as a major strategic value a CFO can bring to an organization, say 85% of CEOs. Strengthening the alignment between financial planning and corporate strategy will likely be one of the CFOs top five priorities going forward. CEOs expect their CFOs to take the initiative to apply financial data analysis to explore new products, markets, and channels. In addition, CEOs believe the CFO should be able to understand how financial and HR data can impact each other.” KPMG reports.
“Therefore it is not surprising that 70% of CEOs say technology will have the greatest effect on the future role of the CFO. CEOs expect them to constantly explore and implement the best new technology.”
Investing and Maintaining IT Talent
“Almost all CEOs (97%) said that attracting and retaining top finance talent is part of the role of the CFO. However, only 33% of CEOs give their CFOs a passing grade in talent management. This area is therefore expected to evolve very significantly in near future.” KPMG reports.
As CFOs integrate technology, they must build strong teams that can support the innovative strategies that will be implemented. Putting together a strong IT team is crucial for the survival of the technology established in the work environment. Finding talent is not as easy as it seems, and keeping it is not as easy either. CFOs find this to be a challenge as they move forward in the innovative age of finance.
In order to create IT teams and manage them properly, CFOs must adopt a new mindset that involves being open to new technology, innovation, and other components that come with digital transformation. Since the finance industry is constantly in flux, business professionals must approach challenges and strengths with an open mind, in order to fully address and combat the new role that the CFOs are transitioning into.
As we see fintech companies arise, we are faced with a new set of finance professionals who are driven toward new technology, innovation and new frameworks to follow. It is important for the industry to accept the change by adopting these techniques into their companies.
Join experts from North America’s major financial services and insurance organizations like Keynote Speaker Scott Dillon, EVP, CTO and Head of Technology Infrastructure Services at Wells Fargo and Company. Scott will be providing unique insight into how his team provides availability, security, and global interconnectivity for the more than 70 million customers who interact 12 billion times a year in person through the company’s 9,000 stores and 12,000 ATMs, on the phone, or online at www.wellsfargo.com.
As the finance industry is expanding to integrate technology tools and digital components into organizations, the role of the CFO is changing. The new CFO gives us a clear understanding that the finance industry is shifting towards digital transformation. Business leaders in the finance sector must be prepared and equipped to meet the growing challenges and demands that this digital age brings forward. Embracing the challenges that technology can bring on the finance industry can be beneficial and bring forward many opportunities for organizations.
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The best way to learn is to hear from other industry leaders discuss their own challenges and strengths when it comes to combating technology in finance.
C-level IT leaders in the financial services and insurance sectors are dealing with many challenges as digital transformation becomes an imperative. Understanding not only the convergence of Mobile, Social, and Cloud but also the possible implications of Artificial Intelligence, Machine Learning and Blockchain is vital to stay ahead of the competition.
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