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In the most basic terms, CFOs are the numbers folks.
It’s their job to track cash flow, review their company’s financial strengths and weaknesses, build financial models, protect the company’s vital assets, prepare financial statements, communicate value and risk to key stakeholders, and complete financial planning activities.
What key skills are required to perform this role to a high standard?
Like the CEO, CFOs need excellent communication skills. They’ll be closely interacting with the board of directors, fellow C-suite members, clients, investors, employees, and — for large multi-national companies — the general public.
Perhaps most importantly, as the CEO’s right-hand person, the CFO is expected to relay important information from the CEO to the workforce and vice versa.
The CEO will share details about long-term strategy, company objectives, and ongoing business challenges with their C-suite. It’s the responsibility of these senior leaders to translate this information into meaningful action items; for both themselves and their team members.
The CEO also depends on their C-suite to provide insights regarding the “mood” of the workforce. A CFO must be adept at assessing the well-being, motivations, and culture of their team, and have a good grasp on how these might impact the business — for the good or bad. This information must be succinctly communicated to the CEO, who will use it to inform important business decisions, be it succession planning, risk management, or investments.
Gone are the days when the business’ finance department could lock themselves away in a corner office, spend their days crunching numbers, and avoid all cross-functional collaboration.
A CFO with their finger on the pulse will prioritize the development of a finance team that works closely with all business departments. When everyone knows what everyone else is doing, it’s easier to drive innovation, work efficiently, overcome challenges, and achieve business goals. With this in mind, the CFO should position their department as approachable, open, and helpful; encouraging other functions to engage them for guidance and support as required.
In addition, the CFO should have an open door policy, and not conform to the hierarchical business structures of yesteryear. Employees must be encouraged to share their ideas and air their grievances since businesses operate more effectively and efficiently when employees feel heard, respected, and valued.
We look to HR departments to foster a happy and healthy workplace culture. But it’s increasingly important that executives from every department support the advancement of an inclusive and supportive working environment.
As the second-in-command, a CFO has the power to influence business ethics, company culture, and important initiatives like diversity, equity, and inclusion (DE&I). It’s important that they abide by good business ethics and actively and vocally support key initiatives. This sets a good example to the workforce at large, drives employee retention, and improves brand reputations.
Further, as a close and trusted advisor, the CFO should feel confident to challenge the principles and practices of the CEO. They might be operating at the top of their game, but CEOs make mistakes and misjudgments just like the rest of us.
4. Analytics Skills
A CFO needs financial planning and analysis skills, but they are also expected to leverage the vast amounts of data at their disposal to maximize company profitability.
Advanced analytics and big data increasingly inform core decisions across all business departments. CFOs don’t need to be data scientists, but they must serve as the connector between business and big data.
To give just one example, most organizations now have access to advanced supply chain analytics. This refers to the analysis of information linked to supply chain execution systems, inventory management, order management, warehouse management, and shipping and transportation management.
With insights from this knowledge to hand, CFOs can make accurate, informed decisions with greater efficiency, whether it’s pivoting to new markets or reviewing risk strategy. Business forecasting becomes easier, as does responding to customer and client needs.
5. Risk Assessment
Risk mitigation is a top priority for CFOs. In the event of external disruption or a business crisis, the finance department acts as the first line of defense, tasked with shielding the business from irreversible damage.
A good CFO is adept at identifying potential business risks and implementing plans to minimize the likelihood of disruption occurring and mitigate the damage should a disruption occur. As well as considering financial risk, a CFO must consider IT, personnel, security, and compliance risk, since disruptions in any of these areas have the potential to significantly harm the company’s bottom line.
6. Resilience and Adaptability
In 2022, some of the biggest challenges faced by CFOs include:
- Geopolitical unrest
- Technological advancements
- Shifting customer and client expectations
- Evolving business priorities
- Talent acquisition and retention
- Skyrocketing inflation rates
- Disparate data sources
- Remote working
- Post-pandemic growth
With all of this to contend with, CFOs must work adaptably and flexibly, ready to pivot strategy at a moment’s notice and withstand the impact of various disruptions. For a CFO, resiliency means staying cool, calm, and collected in the face of adversity. They must tackle a crisis head-on and have the courage of their convictions when it comes to making the toughest decisions.
7. Digital Leadership
Investment in digital technologies is proven to increase revenue, reduce operational costs, and help businesses realize key objectives.
It’s vital that CFOs take a pivotal role in championing innovation and digital transformation efforts. They should be up-to-date on the latest trends, implement and adopt new digital tools, and (crucially) invest resources into upskilling and training their employees to ensure compliance.
CFOs may struggle to attract and retain top talent if they don’t prioritize the building of a digitally-forward function.
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