Redefining the role of chief financial officers

CFOs have the opportunity to lead business transformation by embracing the new responsibilities that accompany the role.

Chief financial officers (CFOs) today exert more influence than ever in steering the enterprise and providing strategic business counsel.

While traditional duties such as accounting, reporting and budgeting are still important, they now represent a smaller percentage of their diverse responsibilities. Stakeholder management and relations are a growing part of the CFOs’ duties. This entails being a proficient communicator and storyteller not only in the context of investor relations but also with regulatory bodies, policymakers, and the broader public. In an era when transformation is constant, people leadership becomes more important and the art of convincing people to adopt new ways of working and changing traditional mindsets on digitalisation will be increasingly valued.

As the evolution of the CFO role into a central leadership position is a relatively recent development for many companies in Asia Pacific, CFOs in this region have the opportunity to lead the way in driving business transformation by embracing the new responsibilities that accompany the role.

Here are the crucial skill sets and traits needed for CFOs to thrive.

Digital acuity is becoming non-negotiable for CFOs

CFOs must have a strong vision of the role of data and technology in the company and construct a foundational system around them. An increasing emphasis of a CFO’s job is strategic capital allocation to push for innovation, such as harnessing AI tools such as ChatGPT to bolster automation.

An essential component of the digital skill set CFOs now require involves the adept use of data. Democratising data empowers the entire organisation to derive actionable insights within a structured framework. Ensuring that data is clean establishes a single source of truth that can unlock the best insights to effectively influence key internal and external stakeholders.

CFOs should also prioritise investments in analytics and data science. This includes ensuring the presence of data scientists in their teams, committing to dashboards and advanced analytics, establishing a robust data warehouse infrastructure, and extracting data to harvest transformative insights.

Be a credible sounding board to the CEO and Board

Establishing a foundation of trust with the CEO is paramount, given that CFOs now shoulder additional duties in driving the organisational strategy. As a reliable sounding board, CFOs should complement the CEO's skill set, fostering an environment where the CEO can readily seek the CFO for counsel on critical matters.

As CFOs come to play a more multifaceted role in the boardroom, they must also establish deeper relationships with board members, especially the heads of the risk committee and audit chairs. Often, CFOs find themselves plugged into broader strategic conversations and tasked with persuading the board to endorse challenging decisions, where the ultimate verdict hinges not solely on the strength of presented data, but also on the trust vested in the CFO's competence and integrity.

Have a global mindset and agility

Enterprises find themselves significantly impacted by global trends and macroeconomic factors. CFOs must possess an understanding of macro-economic and geopolitical issues to serve as reliable partners to stakeholders to propel the business forward. This includes having a sense of the entire business value chain outside of the organisation and the emerging trends impacting its environment. Having foresight and anticipating with scenario planning in order to problem-solve effectively becomes increasingly important in order to critically advise other business leaders. A crucial asset in this context involves hands-on experience in conducting business with international counterparts and the capacity to tackle challenges that deviate from familiar local scenarios.

An action-oriented ESG mindset

At times, CFOs are responsible for setting aggressive but realistic ESG targets which can help the company gain a competitive advantage and ensure a forward-looking stance on ESG matters.

Having unique access to the financial situation across the business, the finance team is in a unique position to influence outcomes in ESG. In order to leverage this, CFOs should work closely with the team to seamlessly integrate ESG initiatives into key business metrics, thereby shifting the focus from the traditional cost of ownership to the holistic cost.

An integral facet of the CFO's ESG contributions pertains to overseeing reporting and compliance obligations. This has a profound impact on financial statements and serves as a catalyst for action. Furthermore, CFOs should dive into technical and engineering discussions, bridging the gap between internal ESG reporting and external communication with entities like financial institutions and regulatory bodies.

In an age of unprecedented complexity, CFOs have a comprehensive leadership role to play. Apart from the newer skills described above, the discipline is also more demanding in terms of its direct remit. Newly appointed CFOs must wholeheartedly embrace these challenges to make a meaningful impact on their organisations and provide value that extends beyond traditional expectations.

Fabian Tan, principal in Heidrick & Struggles, Singapore, and a member of the global Industrial and Financial Officers practices

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