11 April 2014

Training Manager's Guide To... The Role of a CFO

Our experienced CFO explains what you need to know about the CFO role, the terminology they need to understand, who a CFO works with and what their skill gaps might be.

Chief financial officers (CFOs), hold the overall responsibility for a company’s financial activities. This typically includes overseeing the accounting and finance departments, planning and monitoring cashflow, assessing the business’s financial strengths and weaknesses and financial planning. This may already seem like quite a workload, but in the wake of the financial crisis CFOs are finding that ever increasing demands are being made on their time and that they are having to operate in extremely challenging environments, leading to a greater need for chief financial officer training.

Important to know right now...

The biggest change to a CFO’s role post financial crisis is that it has become much more forward looking. CFOs must be aware of emerging changes in accounting standards and regulatory compliance, laws concerning bribery and IT security threats including cyber risks and fraud.

As CFOs are able to make use of increasingly advanced technology, risk modeling and management is also becoming a real focus as businesses look to ensure they are not victims of any economic turbulence.

Need to know key terms...

Financial strategy plays a huge role in a CFO’s job as they are tasked with ensuring a company is financially sustainable. Financial strategies will include for example of dividend policy, balance sheet gearing policy, cash flow criteria and any external requirements.

Talent management is increasingly becoming a priority and a challenge for the CFO as companies are waking up to the fact that they need the right mix of people in finance. CFOs are playing a vital role in finding new talent, equipping them with the necessary skills and developing strategies to ensure they stay at the top of the game and are effective in forming partnerships with business units.

Budget and forecasts are words that every CFO should be used to hearing. As previously mentioned, the availability of new technologies and innovative approaches means that many CFOs are being asked to make projections further ahead than ever before.

Finance business partnering involves the finance team working in close proximity with the rest of the business to help drive performance as a whole. This way of working has become increasingly popular in recent years as volatile markets and increased competition have allowed finance teams to extend their influence.

Governance is about the rules, processes and practices to direct and supervise a company. CFOs need to establish and work within a governance system which is based on trust, transparency and fairness, with commitment to values, integrity, compliance and accountability. Governance policies have come under considerable scrutiny since the financial crisis; it’s not enough for a company to be profitable, they need to show they are maintaining high standards and meeting the needs of all their stakeholders.

Executive presence is something all CFOs need if they are to be successful in the role, however, it can be quite difficult to describe. Basically it’s the ‘x factor’. A CFO needs to be persuasive, entrepreneurial and demonstrate strong leadership, while making tough but necessary decisions about a company’s financial future requires them to be a bit hard nosed.

Who works with the CFO?

Financial controller – The CFO will often distribute some of their financial management responsibilities to the financial controller including tasks such as preparing financial statements, cost accounting, preparing tax reports and data processing.

Financial analyst – Financial analysts are tasked with keep abreast of what is going on within their particular industry; assessing current trends in business practice, updating the rest of the finance team on new regulations and policies and monitoring the economy and its potential impact on business.

Accountants – An accountant working within a company’s finance team will be in charge of various accounting functions including nominal and general ledgers and analysing financial statements.

Key challenges and common skills gaps

As previously mentioned, a CFO’s role today is more complex and involved than ever. Not only do CFOs have to go about their jobs in an atmosphere of intense regulatory scrutiny, they have to come up with ever-evolving strategies to help drive businesses forward in challenging economic environments. This is on top of ensuring that the finance department is up to date with its core accounting and reporting duties.

Post-crisis, companies are keen to involve the finance team in their wider business strategies, which often means fostering strong links with other departments and communicating complex financial information to non-financial managers to help promote greater understanding across the company and spread awareness of the challenges the business is facing. This requires a particular set of communication skills. CFOs in this position also need to develop strong influential skills so they can interact with the board and other executives in a meaningful way.

There has also been a shift in financial teams’ focus. Profit is no longer the only priority, and CFOs play a significant role in maintaining cashflow within the company and ensuring financial sustainability to support the overall business strategy, including sourcing appropriate funding.

Finally, the onus is increasingly on CFOs to ensure that the finance team has a steady flow of talented recruits with relevant skills, so that succession planning is possible; something which is proving challenging internationally, where skills gaps are rife.

Do you know a CFO or aspiring CFO who would benefit from training? Euromoney Training run the CFO Academy and CFO Strategy & Leadership Programme.


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