The Role of the CFO on the Modern Board

The CFO is more than just the top executive in charge of the company’s pursestrings. Learn the four key tasks and relationships a modern CFO needs to master.

By Gillian Lees, Head of Research and Development, CIMA

 

The role of the modern board is challenging. Not only have boards come under greater scrutiny following the global financial crisis, but they are faced with greater complexity and uncertainty than ever before.


Stakeholders are also expecting more from organisations and the boards that oversee them. They want greater transparency and, with the advent of social media, there are no hiding places. Therefore, those who govern companies need to work hard to achieve and retain trust, which is something I call “transparency with conviction.”

 

It is no longer sufficient for boards to tick the boxes in order to comply with corporate governance codes. Instead, they need to provide an effective overview of the company’s strategy, performance and risk by having a thorough understanding of the business.

 

Alongside this, boards need to set the right tone from the top and demonstrate the right ethical behaviours for the business, all while ferociously guarding organisational reputation.

 

The role of the CFO

 

The CFO is the guardian of the integrity and rigour of both financial and non-financial management information. On top of that, he or she has to help others understand how different parts of the organisation can come together to create value. And since most boards are usually drowning in information, the job of a CFO is to clear the air and influence better decisions. I see the role of the CFO in terms of tasks and relationships. Allow me to explain:

 

The four key tasks of the CFO

 

1. Financial Security

Ultimately, the CFO must ensure that the organisation is financially secure by guaranteeing financial stability in the short-term while working through longer-term issues.

 

2. Compliance & Control

The second key responsibility is to ensure that wider business controls remain fit for purpose as the organisation evolves.

 

3. Strategic Direction

The CFO needs to provide the organisation with a strategic direction by understanding the business model within the context of the external environment. In short, CFOs need to reflect on the wider context in which their organisation operates.

 

4. Building Capability

The CFO must lead the finance community within the organisation and build capability for the future.

 

The four key relationships of the CFO

 

1. Head of HR for finance

Leadership from the top and people selection are fundamentals of an organisation. This underpins all four of the key tasks. They must be reinforced by the right behaviours, training, development and tone from the top.

 

2. The CEO/CFO relationship

The CFO plays an important role in providing checks and balances to the CEO. A key competency is to choose the right battles and where to make the most impact in a challenging yet constructive way.

 

3. Management team member

The CFO works with peers and helps the CEO drive the agenda of the organisation.

 

4. Executive director of the company

Key aspects of this role involve informing the agendas for the audit committee and providing an alternative view from the CEO’s on how the organisation is doing.

 

For a CFO to make good use of board time, he or she must focus on the key issues and manage board expectations. The CFO should also capitalise on opportunities for informal conversation. For example, dinners the night before the board meeting can be valuable for leveraging the diverse talents of the nonexecutive directors by getting them to talk about their skills and experience. The CFO should also think carefully about presenting what the board needs to hear, which doesn’t necessarily mean using a 40-slide deck. Utilising technology effectively, such as video conferencing, can also ensure that all board members can remotely attend meetings.

 

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