A report by CIMA, the largest global professional body of management accountants, considers the role of the CFO in the context of the ever-changing board agenda. The report is based on a discussion which was chaired by Gillian Lees, Head of Governance and Risk at CIMA, and included several CIMA and industry speakers.
What’s on the CFO’s agenda?
As the board’s agenda changes, so too does the CFO’s. According to CIMA, the board’s overriding priorities include the overall performance of the business and its operations, as well as compliance, and this is important for the CFO to consider. Transparency and trust are therefore key focuses, and the CFO, as an agent of governance, must retain trust and provide to the board ‘transparency with conviction’.
The modern CFO’s responsibilities now include the provision of effective oversight of the company’s strategy, performance, and risk to ensure the long-term sustainable success of the organization. To do this, they need a thorough understanding of the business so that they can engage effectively with the management and offer constructive input.
What is the CFO’s role?
According to the ‘Guidance on board effectiveness’ issued by the UK Financial Reporting Council in 2011 “the CFO has a particular responsibility to deliver high-quality information to the board on the financial position of the company”. In 2016, there’s a lot more to the CFO’s role than that.
The CFO must ensure the integrity of all management information, both finance and non-financial periodically throughout different time frames. However, most boards are usually drowning in information, so the CFO needs to influence better decisions by communicating insight that meets the board’s needs and is simple and transparent. No amount of information and analysis is useful unless it can be communicated by relevant and impactful metrics.
The remainder of the report analyzes the role of the CFO in terms of two key perspectives – tasks and relationships.
The four key tasks of the CFO:
- Financial security – the CFO must ensure that the organization is financially secure.
- Compliance and control – the focus of the CFO must extend to include business-wide processes and ensure that these processes are designed and operating effectively.
- Strategic direction – the CFO needs to advise on strategy as the business grows and changes.
- Building capability – the CFO must build capability in finance and in the organization as a whole to drive the organization’s agenda.
The four key relationships of the CFO:
- Head of HR for finance – the CFO must ensure that the right behaviours, training, coaching, development, and the tone from the top is provided, so that the four key tasks can be achieved.
- The CEO/CFO relationship – the CFO must appropriately inform and constructively challenge the CEO in decision-making.
- Management team member – the CFO must decide when to manage issues and challenges among peers, and when it is best to escalate them to the CEO.
- Executive director of the company – the CFO must work alongside the audit committee and provide a second view, along with the CFO, on how the company is performing.
Key tips to take away…
Finally, the report offers five tips for how the CFO can help the board to ensure that it makes good use of its time.
- Plan carefully to allow time to focus on the most important issues.
- Manage expectations by communicating strategic decisions and progress made.
- Use opportunities for free-flowing conversation in order to learn from the expertise experiences of non-executive directors on the board, for example.
- Think carefully about what the board needs to hear and aim for a meaningful discussion, rather than a long slide-based presentation.
- Use technology effectively to keep communications flowing. Try not to depend on getting everybody in the same place at the same time before discussions take place.
Read the report in full here.