It's more important than ever for the CFO to not just worry about their role, but also the team that they surround themselves with.
In this environment, perceptions of what makes a great CFO are harder to pin down, and the expectations of colleagues, including CEOs and supervisory boards, are shifting.
To help finance leaders respond to the forces disrupting their role and take control of their professional development, we’ve explored three themes around the DNA of the CFO: the forces disrupting finance leadership, the profiles of today’s CFO and a CFO leadership development plan.
The four forces disrupting finance leadership
Force 1: Digital
For CFOs, digital disruption can feel like being caught between the promise of rain and the threat of drought. On the one hand, digitization offers the opportunity for new business models and revenue streams. But on the other hand, digitization makes the organization vulnerable to competition from new players and agile incumbents and creates exposure to new risk.
of finance leaders say they need to build their understanding of digital, smart technologies and sophisticated data analytics.
To fulfill their agenda of growing and protecting the organization, finance leaders need to transpose and embrace a digital business model. They must also play a key role in building the organization’s readiness and confidence to act and react with urgency.
Force 2: Data
Data and analytics are changing the way CFOs think about business problems, opening their eyes to new opportunities, and challenging accepted and entrenched organizational beliefs. And finance leaders are ideally positioned to define a role for themselves and the finance function that goes beyond pure finance-related data analytics.
of group CFOs believe that the delivery of data and advanced analytics will be a critical capability for tomorrow’s finance function.
To make these efforts into a long-term competitive advantage, CFOs will need to assess the potential disruption for the organization as a whole, and define the role that they and their finance function should play. In some cases, this will mean leading an enterprise-wide analytics capability; in others, it might mean providing crucial inputs.
Either way, the CFO has an important role to play in moving the organization toward more business value from analytics.
Force 3: Risk and uncertainty
Today, organizations and their finance leaders are challenged by a rapidly changing risk landscape shaped by disruptions that include market volatility, hyper connectivity, geopolitical crises, regulatory reforms and cyber threats, to name just a few.
Finding enough certainty to be able to make decisions in this volatile risk landscape is a major challenge for CFOs, and they are taking an increasing role in risk management. In the future, CFOs anticipate that the role will be even bigger, particularly in large organizations.
Risk and uncertainty57%
of finance leaders believe that risk management will be a critical capability in the future.
Robust strategic risk management requires effort and leadership from a range of leaders in the business. To play their part effectively, CFOs must think beyond preventable risks, address risk directly and make investments in key risk talent.
Force 4: Stakeholder scrutiny and regulation
CFOs are caught between a rock and a hard place when it comes to managing stakeholder relationships. Demands of stakeholders are often in conflict, and CFOs increasingly have to juggle the requirements of regulators with the demands of investors and other stakeholders.
Stakeholder scrutiny and regulation71%
of finance leaders say they will increasingly be responsible for the ethics of decision-making in support of their organization’s purpose.
CFOs will need to practice ways to respond to conflicting demands more effectively by prioritizing the most important stakeholder relationships, communicating proactively and telling a consistent value story.
The many profiles of today’s CFO
Each CFO role today is unique, shaped to the particular demands of the company, sector, country and the individual’s own passions and preferences. While this less-formal structure creates opportunities for motivated CFOs keen to define their contribution, it also adds pressure. CFOs need to prove their worth in every single role they play, as opposed to fitting into a fairly uniform description from company to company.
CFOs today find their priorities have changed. They say that they are more focused on enhancing their leadership and team-building skills and expect to increasingly find themselves managing multidiscipline shared services centers. Their likelihood of holding an accountancy qualification and their aspirations for CEO differ based on markets, seniorities and whether their companies are high or low growth.
Embracing disruption: A CFO leadership development plan
As the CFO role as a whole is disrupted, defining a contribution that will cement your place in an organization’s inner circle of decision-making is highly complex. To help seize control of the role’s direction, CFOs should re-evaluate their own competencies, the organization’s strategic direction and the external forces shaping the business environment. A candid evaluation of these three elements will help you determine how to rebalance your contribution, surround yourself with the right team and prioritize the areas that are critical to the future success of the company.
CFOs can prepare for the future by focusing on three areas:
1. Personal competencies
As the CFO role has extended in influence, finance leaders have crossed into new areas from their traditional finance heartland. There are three main domains in the CFO role: finance, operations and strategy. People leadership underpins all three, and is an essential aspect of the role.
2. Strategic considerations
CFOs can shape their roles to support their organizations’ strategy. In today’s economy, the rules of strategy and competition are changing. Ambitious competitors from emerging markets are taking on established developed market companies.
CFOs need to help identify and assess fresh strategic alternatives and help their organization go on the strategic offensive by supporting innovation and new business models, developing and delivering agile strategy, driving sustained long-term growth, inspiring and leading the way with strong purpose and ethics, and supporting digital.
3. External forces
A focus on meeting the next immediate demand can blindside finance leaders from emerging socioeconomic shifts, meaning that CFOs react too late to a disruption, compromising the strength of the response.
By taking the time to identify and understand emerging disruptions and risks, CFOs can lead the debate on key questions and opportunities and begin meaningful, action-oriented dialogue and collaborations.
CFOs can take control of their ever-evolving role by facing the four forces disrupting finance today and instating a CFO development plan. To learn more, download part 1 (pdf) of our three-part DNA of the CFO report.