The Most Important Value That a Truly ‘Strategic’ CFO Can Deliver

By Daniel Shaffer November 14, 2017

CFOs play a vital role in supporting the CEO and their board of directors at a strategic level. This was illustrated by a study carried out by CFO Research, in collaboration with Kyriba, which gauged the views of 167 senior finance executives. According to the report, The Six Key Areas Where CFOs Fail to Deliver for the Board of Directors, 94 percent of financial leaders think CFOs are perceived as critical, strategic business partners by their boards.

But what exactly is the most important value that a ‘strategic’ CFO can deliver to his or her bosses? The research identified several key areas, from business continuity planning to ensuring regulatory compliance. Here are the top three from the survey (multiple responses allowed). For additional details, download the complete report.

1. Business continuity planning

Unexpected events can and do happen. In the event of a natural disaster, such as recent hurricanes Irma and Harvey, it’s essential to have a rigorous business continuity plan in place to keep the business running smoothly. Indeed, 52 percent of the survey’s respondents cited business continuity planning as a key area where CFOs can deliver value.

However, not all companies are prepared for any eventuality. For example, another recent report by CFO Research found that only a third of senior financial executives felt their organisations were very well prepared to recover from a natural disaster. While it’s unfeasible to plan for every possible scenario, CFOs should plan for specific loss conditions, such as being unable to access the office for days or weeks, or the need to use substitute staff for a certain period. For treasury and other key financial functions, cloud technology can help ensure continuity by keeping mission-critical data away from any physical location.

Download Now: The Six Key Areas Where CFOs Fail to Deliver for the Board of Directors

2. Managing financial risk to prevent loss

For 51 percent of respondents, managing financial risk to prevent loss is key when it comes to adding value. This is an area which incorporates a number of different risks, including FX risk, liquidity risk, credit risk and foreign investment risk. In the current market, it’s more important than ever to manage these risks effectively, including hedging FX and interest rate exposures, and mitigating the impact of geopolitical developments such as Brexit.

CFOs also need to keep a close eye on operational risks. Fraud and cybercrime attacks can result in the loss of millions of dollars, as well as causing untold damage to a company’s reputation. While this area provides an opportunity to add value, in practice not all CFOs are doing so: 36 percent of the survey’s respondents stated that CFOs are not giving boards the information they need to monitor fraud effectively.

Additional Reading: Brexit Brings FX Challenges for Treasurers

3. Reducing cost/improving margins

Keeping costs under control is always a key concern for any CFO. Forty-three percent of executives said that CFOs can add value by reducing cost and improving margins – but a quarter stated that boards are not getting the support they need from CFOs in this area. CFOs should therefore consider how they can bridge this gap by gaining a clearer view over the company’s cost base and a clear understanding of what drives profitability in the organization.

Strategic contributions

The results of the survey reveal a clear focus on how CFOs can add strategic rather than tactical value – particularly as less weight was given to areas such as helping unlock working capital (37 percent) and ensuring regulatory compliance (30 percent). This represents an evolution from the CFO’s traditional focus on financial reporting and accounting.

“It is interesting to me that tactical areas of value-add that the board traditionally expects from a CFO—like cost-reduction and working capital efficiency—are now taking a back seat to more strategic contributions like continuity planning and performance risk management,” said Christopher Schmidt, Director of Research at CFO Research. “The board is clearly expecting the CFO to contribute strategically, first and foremost.”

To learn more, download the full report.

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