Traverse Insights

Over the past 10 years, we've had the privilege of serving our clients with fractional, project and interim CFO consultants. During this time, it has been fascinating to observe the evolving role of the CFO, especially given the perspective we've gained from evaluating hundreds of CFO-level candidates for consulting roles and developing numerous client strategies for our consultants to execute. CFOs have seen a significant increase in their responsibilities over the last 10 years, with the number of functions reporting to them almost doubling in that time. Yet, despite all the changes, most still perceive CFOs to be primarily focused on traditional finance tasks and believe that is where their value to the organization lies.

 

Despite these beliefs, CFOs are balancing these new responsibilities such as their internal digital activities, board engagement, and investor management. Therein lies a perception gap where they continue to spend significant time on the more traditional aspects of the role while new stakeholders and initiatives compete for their time. Striking a balance between the two has the potential for great opportunity for CFOs to position the finance function as a key driver of change as well as a catalyst for a competitive advantage.

 

Not your grandfather's CFO.

 

Historically, the CFO's primary role was that of the custodian of financial records, focusing on reporting in a timely, accurate, and compliant manner. They were also the financial stewards, concentrating on financial management, cost savings, internal controls, and financial compliance. The cost-saving element earned them the moniker "CF-no" and further reinforced the CFO's reputation as the glass-half-empty member of the leadership team. Additional financial elements of their role included conducting financial analyses to inform budget decisions, often being at the forefront of the process.

 

The common stereotype depicted these individuals working in financial roles, often seen as traditional "bean counters." They were frequently portrayed in movies wearing green eyeshades, meticulously tallying numbers in isolation. Confined to their own silos within their respective departments, they rarely ventured beyond the realms of their own spreadsheets. In this isolated environment, collaboration with other departments was limited, hindering the flow of information and ideas across the organization.

 

Similarly, apart from a quarterly meeting with bankers and the annual audit, CFOs were not typically external-facing. Relationships with the board, investors, or other external stakeholders were generally managed by the chief executive officer. The same applied to merger and acquisition activities and identifying potential strategic partnerships. While the CFO could be called upon to model various scenarios in these areas, it was usually the CEO and their team of business development professionals responsible for sourcing and completing these types of strategic arrangements.

 

So what’s different today?

 

From a 30,000-foot view, the contemporary CFO has become an important strategic partner, value creator, and trusted adviser to the CEO and the board. They're responsible for making data-driven decisions using real-time data analytics, forecasting, as well as performance metrics and KPIs to track the progress of the organization and pivot where necessary. Proactively, they provide financial insight and architect mergers and acquisitions, drive revenue, and engage in other activities that increase stakeholder value, all while mitigating risks and keeping the organization out of hot water.

 

It would also seem that the day of the “generalist CFO” is gone. Across diverse sectors, adaptability and versatility are a must. For example, in technology-driven sectors, CFOs have become the champions of financing innovation, finding a balance between the need for research and development and financial stewardship. Manufacturing CFOs had their skills put to the test during the pandemic as they played a crucial role in supply chain optimization and mitigating risks with global production networks. Even in the service industry, CFOs have focused on customer–centric financial strategies, ensuring sustainable revenue streams while enhancing customer satisfaction.

 

Technology remains one of my favorite topics in finance - both daunting and exciting at the same time. The discussion on technology certainly warrants more than just a paragraph, but for the purposes of this piece, I’ll try to keep it high level. CFOs today are embracing technology and automation, integrating artificial intelligence and machine learning to streamline financial operations. These tools enable them to enhance data analysis, optimize workflows, and refine decision-making processes. Moreover, in the digital era, CFOs play a pivotal role in ensuring robust data security and cybersecurity measures within organizations, safeguarding sensitive financial information and protecting against cyber threats.

 

Additionally, CFOs are leveraging predictive analytics to anticipate future market trends, customer behaviors, and financial outcomes. Harnessing the power of predictive models allows them to make proactive decisions, identify growth opportunities, and effectively mitigate potential risks, further enhancing their strategic impact on the organization.

 

Regulation, globalization, killer bees…you name it. Spoiler alert; there's a lot going on in the world right now, some of which impacts current CFOs whether directly or indirectly. In addition to the so-called traditional aspects of the CFO role, the landscape is becoming more complex. Intricate tax codes, stringent reporting standards, and ever-growing regulatory compliance must all be contemplated and addressed by the CFO.

 

Globalization has generally been beneficial to organizations, particularly as it relates to the expansion of market horizons, but it isn't without its challenges as well. With it comes the management of international finance operations, currency fluctuation, and every day it seems like geopolitical risks grow. Today's CFO must devise agile financial strategies that capitalize on the opportunities that come from globalization but mitigate risks associated with diverse markets, economic uncertainty, and geopolitical strife.

 

What’s the crystal ball say?

 

In the face of these evolving challenges and opportunities, today's CFO stands as a multifaceted leader, navigating the complexities of finance, technology, and global dynamics with finesse. The modern CFO is not merely a custodian of financial records or a traditional bean counter; they are strategic visionaries, proactively shaping the future of organizations. As we move forward, the CFO's role continues to transform, requiring adaptability, versatility, and a keen understanding of the intricate web of regulations, global markets, and technological advancements. Embracing this complexity, the contemporary CFO emerges as a vital force, driving innovation, ensuring financial stability, and charting a course toward sustainable growth. With an eye on the horizon and a finger on the pulse of change, today's CFOs are architects of resilience, guiding their organizations through the intricacies of the modern business landscape.

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