The Future of the CFO
The title of chief financial officer may be a bit of a misnomer in the modern enterprise. For one thing, finance only begins to describe what the C-suite, shareholders and the rest of the business expects of a finance chief. CFOs are expected to play a more strategic role in the C-suite at the same time that technology and globalization are adding layers of complexity—and overwhelming opportunity—to the corporate finance function in the Asia-Pacific region in particular. Perhaps chief technology evangelizer, chief strategic engineer or chief operations partner should share the billing with the finance title. CFOs today are expected to fill all of these roles.
To gauge these expectations, Forbes Insights and KPMG surveyed 178 chief executives, business owners and chairmen of large companies to understand their changing views. The survey spanned 13 countries and territories in the Asia-Pacific region. CEOs from ANZ Australia, Pactera, Minor Hotel Group and other companies in the region also shared their views during in-depth one-on-one interviews.
What we found is that CEOs want to see more big-picture, strategic thinking from their CFOs. The greatest opportunity for a CFO to impact the value of an organization: contributing to performance and growth, say six out of ten CEOs. Yet many CFOs remain lost in the numbers, mired in regulatory minutiae, distracted by the daily demands of different compliance, tax and financial reporting regimes.
One thing is clear: something has to change if CFOs are going to close the gap between the expectations of their CEOs and the reality on the ground. Are CFOs up to the challenge? Are CEOs expectations even realistic? What is the best course for CFOs who see the potential of becoming a more strategic business partner—or for the many CFOs who have set their sights on becoming a CEO?
“Most CFOs would love to do more on the strategic side,” says Egidio Zarrella, Clients and Innovation Partner and Data & Analytics Head at KPMG in China. “But they’re buried under regulation. They can’t get past theoperational and tactical aspects of their jobs,” he says. “But if you’re a C-class executive, you’ve got to put some time aside for strategic thinking or how are you ever going to be a business partner?”
Key findings include:
CEOs have set a high bar for CFOs. Almost three quarters of CEOs from high-performing companies—those with Ebitda growth of more than 10% in recent years—believe that the CFO’s role will increase in importance more than any other C-suite roles.
But, a third of CEOs feel their CFOs are not up to the challenge. Thirty-two percent of CEOs say their CFOs don’t understand and assist them with the challenges that they face with running their organizations.
CEOs value growth-oriented initiatives the most, and traditional areas of the finance function the least. Big-picture thinking and strategic approach are the most important attributes for a CFO, say 49% of CEOs.
CFOs need to transform the regulatory burden into an opportunity—or at least avoid getting mired in it to the detriment of big-picture thinking. Forty-three percent believe that the stringent regulatory environment is impeding the CFO’s ability to focus on other areas while 42% see the regulatory environment as an opportunity to derive competitive advantage.
Technology will be a make-or-break test for CFOs. Sixty-three percent of CEOs from high-performing organizations believe that technology will have the greatest effect on the future role of the CFO. CEOs expect their CFOs to do a much better job of leveraging the increasing wealth of financial information so as to play a more strategic role in assessing new markets, improving performance and meeting the regulatory burden.
CEOs put a huge value on people skills and see their CFOs as lacking in them. Eighty percent of CEOs from high-performing organizations say that nothing is more important than talent management but many also believe their CFOs can and should do a better job of managing their teams.
