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Pressures on chief financial officers becoming more diverse

Disruptive forces include digital and smart technologies and sophisticated data analytics

It’s been accepted for some time that the skills required for the role of chief financial officer (CFO) are far broader than the traditional financial ones, but the range of pressures now facing these individuals means their roles are becoming even more diverse.

That’s according to EY’s second “DNA of the CFO” survey from last year, which found that while the core responsibilities remained the same as those identified in its first study in 2010, the role today is being disrupted by a number of forces. These forces, which include the ever-faster evolution of digital and smart technologies and sophisticated data analytics, are changing the expectations placed on CFOs.

But what we know for sure is that the core responsibilities – and the skills required – of the role have long since evolved from the traditional number-crunching to broader strategic functions, and which requires a greater understanding of how the non-financial aspects of the business affect the bottom line.

Paul McKeown, Enterprise Ireland’s CFO, says it’s no surprise that the role has evolved in this way. “If you think about finance from an organisational perspective, you have a very wide perception across the whole organisation because nearly everything that happens in an organisation has some financial dimension.”

But as the role these days is being shaped more by technology, will the next generation of CFOs be expected to be wizards with digital technologies and solutions, or at least know how to get the best out of them?

Technology

“There is a level of understanding and familiarity that CFOs need with the technology and the solutions that are in place, but purely in terms of the technical expertise, that can be worked through with others in the organisation,” said McKeown. “I think certainly a good solid base of understanding of that space, of what technology solutions can do [is necessary], but also where they need to go to get financial and non-financial information.

“While obviously the degree of technical expertise won’t be the same [as a chief information officer], the ability to speak the same language is hugely important.”

Cormac Kelleher, international tax partner at Mazars, agrees. "You could have the closest relationship going with your chief information officer, but he or she will only be able to produce what you ask them to produce." Even today, CFOs already need to be familiar with artificial intelligence and data analytics, not to mention accounting technology that is doing everything in real-time.

With the greater expectations on CFOs in terms of directing strategy in conjunction with the CEO, this also means being able to manage risk. This includes strategic, reputational, regulatory and cyber risk.

For Paul Keenan, executive chairman at Capnua, the primary strategic responsibility is to ensure that the business is adequately funded. “The CFO should have a full understanding of the strategy of the business, and where the business is going over the next three or five years, and within that, once you understand where you’re going, what type of funding is appropriate and where to get that funding.”

However, sometimes a CFO might not necessarily be completely up to speed with a funding market that is constantly evolving and changing, particularly if they only dip into the market every once in a while, in which case, delegation to someone who does is a sensible strategy, he says.

Experience

“If you only look at the market once every three or four years, you may not be an expert. To see what the norms are, and what’s required, it’s probably good to have someone working with you who has experience of the debt markets, the bond markets or maybe the equity markets.”

As the role of CFO becomes even more diverse, so too might the range of academic and professional backgrounds. According to the EY survey, nearly half of older CFOs – baby-boomers and generation Xers – would have an accountancy qualification, as befitting the traditional pure number-crunching expected of the role, but fewer than a quarter of younger CFOs have such qualifications. Instead they may have more of a general business studies background and exposure to a number of different financial or commercial roles.

It’s clear that an accountancy qualification remains highly relevant, but potential CFOs must show a broad range of experience.

Kelleher believes that a strong numerical background is still a must, but just how much may depend on whether you are working at an SME or a multinational.

“If it’s an SME-type CFO, you are probably getting down and dirty with the figures a lot more often, you’re probably closer to the costings and what’s driving the costings, and you’d be expected to know that,” he said. “If it was a CFO with a multinational, you’d probably have a much, much larger team around you, and you’d have other people do that level of detail. Obviously you wouldn’t ignore the detail, but you wouldn’t be as intimately familiar with it as a CFO in an SME.”

Kelleher says that the biggest single skill is probably people management, which requires as much in the way of emotional intelligence as IQ.

McKeown agrees. “Having individuals who can show that they can handle the communication side, the inclusiveness skills – that kind of emotional intelligence is hugely important.”

“What we’re talking about here is within, say, a senior management team or within a board, or with external stakeholders, it’s going out there and being able to influence the discussion around what the organisation needs from a strategic and commercial perspective and how that feeds into the financial side.”