Basic Functions of Today’s Chief Financial Officer (CFO)
A chief financial officer operates within a company’s financial, administrative, and risk management functions. The job involves long-term strategic planning as well as short-term operations that support the CEO and the company’s long-term strategies. The CFO develops a financial strategy, develops and monitors controls to preserve the company’s assets, and reports the company’s financial results.
Possibly a CFO’s most vital function is to provide employees with sound financial data. Staff need quick, comprehensive data to shape various decisions ranging from pricing to determining a customer’s lifetime value. A CFO who does not provide these vital services, and does not actively assist with financial management and analysis, is essentially performing the functions of a controller. Accounting services and financial data analysis provided by the CFO are the basis for making strategic financial decisions, not ends in themselves.
The Roles and Duties of CFOs
In the past few decades, the business world has grown increasingly complex, and the roles of CFOs have changed accordingly. Before the 1990s, CFOs were primarily considered the guardians of an organization’s financial health, implementing and overseeing controls regarding the company’s financial infrastructure. In response to the increasing globalization of capital and markets, however, CFOs’ responsibilities have expanded.
Now, CFOs are increasingly charged with more responsibilities in driving organizations to achieve their strategic objectives. According to James Riley, the group finance director and executive director of Jardine Matheson Holdings Ltd., “A good CFO should be at the elbow of the CEO, ready to support and challenge him/her in leading the business.” Above all, he explains, the CFO must be good at communicating. He/she must effectively deliver key information and concepts to “facilitate discussion and decision-making,” including to subordinates so they “are both efficient and motivated.”
CFOs must balance short-term pressures — managing a company’s cash and profitability — with the long-term vision of the company’s strategy. They must ensure compliance with regulatory developments like financial reporting, corporate responsibility, and capital requirements; must communicate effectively with colleagues, investors, suppliers, customers, regulators, and stakeholders; and must assist in driving organizational innovation.
Other expectations of CFOs vary depending on the company’s size, as well as on other external and internal factors like economic and business challenges, specific characteristics of the industry, and the demands of investors and stakeholders.
Career Paths and Skills
Many CFOs start on a financial track, but that’s not the only way to begin. Aspiring CFOs can first undertake business development, account management, or nonprofit work. CFOs need experience in, and a strong understanding of, the fundamentals of financial accounting (i.e., budgeting, analysis, risk management, compliance, and aligned areas).
Candidates should also have strong leadership experience. In a Robert Half survey, 85 percent of interviewed CFOs said their roles had expanded outside the traditional areas of accounting and finance, commonly citing human resources as an area in which they had become more involved.
CFOs must also talk to potential investors and serve as a liaison between the company and the board, which means customer service experience is particularly useful. Positions that emphasize direct communication with investors and customers can help candidates achieve a CFO position.
An understanding of the many digital technologies involved in finance is also essential for today’s CFOs. Knowledge of both the benefits and risks of these new technologies is key.
There are certifications and degrees that can help with the transition to CFO, and the pinnacle achievement for many financial professionals is to reach the CFO status. A master’s in financial economics, followed by certification as a Chartered Financial Analyst, can set financial professionals up for a highly successful career and put them on the path to becoming a CFO.
CFOs must manage increasing amounts of risk in the modern business climate. For example, in the 1950s, most companies on the S&P 500 remained there for 61 years; today’s average S&P 500 company remains on the listing for 18 years. Today, business models readily embrace new technological innovations that can disrupt the industry. The modern CFO must be a close partner to the CEO, actively helping manage a variety of risks through long-term strategic planning that is decidedly forward-thinking.
Today’s employers seek finance professionals who understand the links between the economy and financial markets; professionals who are adept at forecasting potential impacts and timing investments for maximum return. This is the level of expertise you can acquire with the Ohio University online Master of Financial Economics.