How the CFO landscape has evolved over the past decade
A Chief Financial Officer is expected to wear multiple hats – from being an architect of business value to being a financial gatekeeper. With the changing technology, they need to keep themselves up-to-date to thrive in the ever competitive market.
It is no surprise that the CFO landscape has evolved over the last decade. Market innovations and huge paces in technology have made such changes inevitable. From big data and network effects to the subscription economy and cloud computing, modern finance is undergoing its most fundamental transformation ever.
The Evolving Role of CFO within the Digital Landscape
Traditionally a Chief Financial Officer (CFO) was expected to keep a tight rein over how much can be spent and checks on balance sheets, monthly revenue, finance sources and regulatory compliances. In the last decade CFO responsibilities have changed drastically from the book keeper to an analyzer and assessor of emerging trends and markets.
CFOs today are integral to the back-office functions at most companies and have a major role to play in the digital transformation of those functions and solutions. The CFO role has expansively changed as a result of two main factors:
- Increased competition
- Increasing changes in respective sectors and in the finance industry
These changes include new international and national financial regulation procedures, updates to industry practices, the effects of the global economic crisis and keeping up with relevant finance industry updates. CFOs are now charged with a multitude of new responsibilities, adding a whole new dimension to their role.
In the contemporary globalized world, adapting business strategy to new competition and risk has often required a different viewpoint to formulate a strategy plan. And that viewpoint has been sought from the CFO on a more frequent basis. The economic recession had a deep effect on the role of CFO. The CFO became an integral reference point in key operational decisions and planning. As the recession was so detrimental, companies are wary of risk-management and so, they continue to involve their finance heads in key operational processes.
Response to increasing changes
The finance industry is currently undergoing a period of extensive restructuring and change. CFOs or those who aspire to be CFOs are well advised to keep up to date with industry news and developments, requiring a further investment in time and resources. Finance chiefs were given new responsibilities, in order to enact sweeping changes that have been fundamental to the survival and success of businesses. This is largely because finance has a unique viewpoint to ask hard questions.
The future of the CFO role
As businesses face greater uncertainty, the CFO is now expected to focus on driving profitability by minimizing costs, managing pricing structures and maximizing the effectiveness of capital allocation. A CFO will be changed with strict scrutiny of capital expenditure, optimizing capital structure. Capital allocation will require CFO involvement in all major areas of a business, considering risk, cost and possible return.
CFOs will have increasing importance in strategy decisions regarding how to maximize customer engagement, which customer groups to target, which markets to enter and which to avoid and how capital is to be allocated. They will have to assess the cost of each directive and how they impact the business as a whole.
A knowledgeable CFO is a valuable CFO. They must stay up to date with changes pertinent to their role and to their company as a whole, which requires constant industry awareness. If done correctly, this ensures the streamlining of new initiative implementation, regulatory procedures and finance procedural changes.
While CFOs have come a long way in the technology landscape, they need to further evolve their roles to integrate finance departments and functions into the broader digital transformation.