The role of finance is going through a major evolution. In today’s business environment, finance organisations are becoming even more elevated as corporations increasingly rely on the financial and strategic prowess of their financial leaders. Today, finance professionals are facing an array of newrisks, responsibilities, and challenges, from managing a globally diversified business to mitigating new technology risks. They are responsible for reporting on the past, managing the present, and creating the future. Their role of finance has become ubiquitous throughout the organisation, and its influence only appears to be growing.
As finance professionals look to manage the new risks and challenges that have evolved with their role, many are leveraging new technology to help them thrive in this modern environment. With the tools available in the new Microsoft Dynamics AX finance leaders are able to drive corporate performance with real-time access to organisational and market data, better assess and manage risk with increased visibility with a single, integrated view into their organization, and growth their business with greater agility and efficiency. In this new era of finance, Microsoft is empowering finance leaders to transforming their organisations by increasing the speed of doing business, driving success today and into the future.
The world is changing. Business is changing. A new generation of employees is forcing organisations to rethink how work is done, the rise of big data is providing business leaders with access to more information than ever before, and globalization has opened up new opportunities as well as new risks for businesses. As business has changed, so has the role of finance. Over the last half century, finance leaders have gone from bean counters to the boardroom; the responsibilities of finance leaders have evolved to encompass everything from business strategy to operations to IT risk management. The role of finance now permeates all areas of business as its influence continues to grow. Over the next few weeks we will explore seven emerging trends in finance that will help empower finance professionals to drive performance, better assess and manage risk, and drive corporate strategy and growth for their business.
1. Evolving CFO role
The expanding reach of the CFO
From bean-counter to the boardroom, the role of Chief Financial Officer has gone through some major changes since its inception. Today, the role of the CFO has become even more elevated, as corporations increasingly rely on the financial and strategic prowess of their most senior financial leader.
A decade after a series of high-profile corporate scandals, CFOs have been thrown into the spotlight and placed under the microscope like never before. They face an array of new challenges, from managing a globally diversified business to mitigating new technology risks. They are responsible for reporting on the past, managing the present, and creating the future. Their influence can be felt throughout the organization; there is no longer a singular definition of the CFO role.
CFO as the IT leader
One of the most discussed changes in the CFO role over the past decade has been taking on the management of technology. This change has been the result of two major factors. The first is simply the growth of technology in all aspects of the corporate world. In a 2015 study by IBM1, technology was identified by business executives as the most important external force shaping businesses. Technology is ubiquitous throughout modern businesses, and while CFOs may not be able to code a website or set up a database, like technology, CFOs have also have become ubiquitous throughout the organisation. Because CFOs have such a deep understanding of all the organisation’s operational units, they are a natural fit to oversee the technology that integrates these units. Also, as a result of growing technology demands in the workplace, technology has become both a major expense and capital asset. Because of the financial demands technology has created, it is important that CFOs have a comprehensive view of these large financial line items.
The decline of the COO
The second reason CFOs have taken on a larger role in IT is the decline of the COO. In many organisations, as the COO role has been removed, their duties have been divided between the CEO and the CFO. According to Crist|Kolder Associates2, Only 33% of Fortune 500 and S&P 500 companies still have Chief Operating Officers, a decrease of 45% from 2000.
This is, in part, due to the fact that so many CEOs of major corporations came from the COO role, as is the case at 40% of Fortune 500 and S&P 500 companies. While this distribution of tasks between CEO and CFO certainly varies by company, often the CEO, with their operational background, takes over manufacturing and supply responsibilities, while CFOs take over procurement and IT.
The CFO’s rise to being a strategic advisor should not be a surprising one. A background in finance gives CFOs a unique ability to apply a systemic and objective lens to business operations. And while CFOs remain burdened by stigmas of being penny-pinchers and number-junkies, the shift to a more quantified approach to business has provided an important balance to the “gut-instinct” style of management from previous times.
Additionally, technology and low cost labour abroad have made the CFOs clerical tasks, such as monitoring and reporting on finances, faster and less expensive. As a result, the CFO has taken on more strategic planning responsibilities, especially over the last decade. In a recent study by EY3, 75% of CFOs reported spending 50% or more of their time on strategic aspects of their business, with 2 out of 3 saying they are the face of the company on all strategic issues related to financial performance. These statistics were reiterated in IBM’s 2013 Global CFO study4, where 70% of CFOs reported playing a critical role in decision making. Furthermore, 78% said that business model innovation was a major part of their role as CFO, and 88% said they were responsible for helping select the key metrics linking performance to strategy execution.