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The Changing Role of the CFO

John O'Rouke and Karen Dale Torre

The CFO’s role has always been a demanding one, but rapid developments in regulation, information technology and the economy are defining a new era for the CFO, characterized by a significant expansion in his role and responsibilities. In these circumstances the success of the CFO and his ability to deliver on a broad agenda is contingent on the finance function’s ability to establish strong relationships across the enterprise as well as with external stakeholders.

Growing regulation and compliance have been a considerable burden on business in the last few years and the finance function has been stretched to the limit to absorb the changes without adding to headcount. Statutory and regulatory reporting have become more complex and, to add insult to injury, regulators have accelerated reporting deadlines and imposed mandatory reporting in eXtensible Business Reporting Lanuage (XBRL)—adding to the pressure on the finance function.

Technology is playing a greater role in the finance function as well as having a profound effect on the business units around it. In the face of growing transaction volumes and business complexity, the finance function is becoming almost totally reliant on technology to deliver business insight and process efficiency as well as compliance and control.

At the same time the nature of IT itself has changed. The imaginative and creative application of IT is now opening up opportunities for new revenue streams and novel ways of engaging with customers. Whether the CFO is seeking to enhance productivity, reduce costs, or to grow the top line, the relationship with IT is becoming crucial to success and is reflected in stronger alliances between the CFO, CIO, and IT function. CIOs now commonly report directly to the CFO.

But satisfying objectives around process efficiency, control, and compliance requires a more broad-based approach than just collaborating with IT. CFOs have to extend their reach deeply into the business and this is defining a new way of working, especially if the CFO is not to be spread too thinly. Multidisciplinary teams and "centers of excellence" built around shared services or even individual processes chaired by the CFO are becoming more commonplace.

Novel areas of reporting such as corporate social reporting, especially sustainability reporting, is taking the CFO into uncharted waters. Few CFOs could have imagined that they would be accounting for carbon credits or measuring performance around greenhouse gases, nonhazardous waste and energy consumption. Environmental reporting is entering the mainstream of integrated reporting and the CFO’s role is changing along with it.

As the breadth of activity expands, so does the need for risk management. In a sprawling multinational enterprise, the need for the CFO to manage financial risk is even more acute. Once again technology is central to a comprehensive risk management framework. Continuous controls assessment, once a luxury, is now viewed as an essential part of the CFO’s armory, and CFOs’ expertise in audit and compliance makes them the natural candidate to oversee risk management across the enterprise.

Finally, unprecedented volatility and uncertainty in the economy is driving the need for close oversight of performance. Recent developments in cloud computing and mobile technology are allowing the CFO to drive a culture of performance management more pervasively across the enterprise. As a result of this increased visibility, the CFO’s role is becoming more strategic, supporting business units to achieve superior performance through better decision-making.

So there is no question that the CFO’s role is changing. Risk management, technological innovation, and sustainability are just some of the areas causing the CFO’s portfolio to expand. As a result, modern CFOs can no longer be so hands-on and will increasingly rely on enabling technology (such as constant controls monitoring, process automation, mobile business intelligence, and many others) to meet their objectives. Above all, the CFO of the future will inspire change through influencing behavior, creating centers of excellence, and encouraging collaboration across the enterprise.

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