COVER STORY: What makes a good CFO?

In just five short years between 2016 and 2021, the number of finance leaders who claimed responsibility for a company’s digital activities has tripled, and investor relations, post-merger integration, board engagement and procurement have largely fallen under the CFO remit, according to a McKinsey Global Survey.

Once dismissed as bean-counters and naysayers, chief financial officers (CFO) have become the right-hand men and women to the CEO, straddling the realms of financial and strategic decision-making.

CFOs sit at the intersection of digital and finance, and particularly during the pandemic, have become responsible for a business's ability to respond and adapt.

“CFO and CEO interactions on organisational transformation have increased significantly during the COVID-19 crisis, and the data show that CFOs’ leadership in this area adds significant value. Respondents say that they are pursuing transformations for a range of reasons, particularly in support of performance improvement and digital initiatives,” the McKinsey report said.

Digital Nation Australia spoke to four CFOs about how their roles have evolved and how external pressures have affected their key responsibilities.

The bean counters

According to Andrew Muller, CFO at engineering consultancy Aurecon, the CFO's role is becoming less about pure financials.

“The days of just being the person who made sure the numbers made sense and all that sort of thing, you’ve got to have that done, but that's almost a given,” said Muller.

“We talk about being able to provide the business with that sort of insight and that challenge to be able to drive things and get things done. So that's a very different skill to probably the traditional accounting skills and things that you might have grown up with.”

According to Neal Hawkins, CFO at fintech MoneyMe, while the core function for financial chiefs a decade ago was to manage cashflows and keep records, this is not the case for CFOs today.

“In part, it's not just happened over the last 10 years, but in the last 10 years or so, it's certainly accelerated, and a lot of that is we're just very fortunate to be in a world of technology that we just never had. Now, these technologies really are quite mature,” said Hawkins.

“What that means is a lot of the control functions that a finance manager or a CFO would be involved in, can and are getting automated.”

Digitising finance

McKinsey’s research reveals that digital adoption is on the rise across the entire finance function.

“The share of finance-function respondents reporting the use of robotics and artificial-intelligence (AI) tools has more than tripled since our 2018 survey, while the share saying that they use advanced analytics for finance tasks has almost doubled,” the report says.

“What’s more, respondents say that their companies’ IT and digital investments have paid off. Nearly six in ten report either a positive or very positive ROI from investments made in the past year.”

With exponential access to information, and tools including data and analytics, visualisation and dashboarding, today’s CFOs have a wider visibility of the business than ever before.

According to Aurecon’s Muller, “The availability of information today is miles ahead of where anyone's been previously.

“I've certainly got the ability to see much more around what-what's happening, but I think it's also the ability then to be able to point at the things that actually make a difference and actually matter,” he said.

According to Hawkins, while MoneyMe was built to have its own technology stack, which gives him broad access to information as CFO.

“We've been out to tailor things, so we get the right analytics at the right time, real-time, and the information exactly what we need. It means that you can get to the substance of what you need to get to, get the basic information, understanding just a lot quicker, a lot more efficiently,” said Hawkins.

“That means you can make better decisions. You can make quicker decisions. And that means also that you can have people in your team that are focused on more of those value add tasks rather than the past we know that know the finance departments, in particular, can be full of people managing quite complicated and difficult Excel spreadsheets, that kind of thing.”

People and culture

Gina McNamara, regional CFO Asia Pacific and Japan at SAP told Digital Nation Australia that modern CFOs are leaning into the people side of the organisation.

“Numbers don’t occur without people,” said McNamara.

She described the relationship between the CFO and the chief HR officer (CHRO) as “extremely close” as CFOs consider health and wellbeing in their strategic decision-making.

Digital Nation Australia explored the changing role of the CHRO in a recent documentary, which revealed the role of people and culture chiefs in enabling business growth.

“A lot of companies are tying directors’ remuneration and boards’, remuneration to non-financial metrics, and that includes CFOs,” said McNamara.

“We sort of have a DNA where we are into the detail and we do like to dive into areas beyond our finance remit, but now it's becoming more official. CFOs will be in charge of things like the business continuity team, which became, quite a focus during the pandemic. And it won't go away anytime soon when you have things like wars in Ukraine.”

Environmental, Social and Governance

McNamara insists that ESG is a key focus area when it comes to reporting on non-financial risks.

“Sustainability has been top of the list for quite some time, it’s not a new topic. And, I do believe that the CFOs are being tasked with that reporting and owning it, but then partnering with the business to really drive change and decide what are those metrics that we're going to hold our business accountable to and how can we do this together?” she said.

According to Peter Canterbury, CFO at Western Australian gold explorer De Grey Mining, investors in varying degrees are becoming more interested in a business’s approach to sustainability.

“The pure governance side has always been a remit of the CFO in terms of its reporting to the board in terms of managing audit processes and ensure that we have good governance over our internal processes, but it becomes much more of a broader issue when you start to talk to investors,” said Canterbury.

“It does fall on the whole board, but also from an executive perspective, the MD and the CFO have an increased responsibility to ensure the organisation's structured right in that environment.”

According to McKinsey research, finance leaders and CEOs saw increased investor interest in ESG during the pandemic.

“For all three areas related to environmental, social, and governance programs, CFO involvement also seems to support greater alignment between these programs and the company’s strategic and financial objectives,” the report said.

When reporting on ESG risks, CFOs largely rely on non-financial data said SAP’s McNamara.

“Things like modern slavery, things like carbon emissions. There’s a whole bunch of powerful data that we didn't necessarily have access to before,” she said.

What makes a good CFO?

While the skillset of the CFOs has always and probably will always need to have a financial basis, it is the leadership skills that set the good CFOs a part from the rest.

According to De Grey Mining’s Canterbury, “I've done CEO roles as well as some CFO roles and the difference between the two I think is blurring on some of it because you're actually trying to drive the strategic goals of the company with the managing director or CEO, under the guidance of the board.”

Aurecon’s Muller said that CFO’s who are not open to experimentation are at risk of being left behind.

“From a business point of view, I think it's someone who is willing to immerse themselves in an organisation and really own what the business does,” he said.

And finally, you actually have to like what you do.

“I've heard a few colleagues over time who you’re trying to understand why they might not be happy and eventually they'll come around and say, ‘You know what? I actually don't like finance.’ And I look at them and say, ‘Well, don't do it! Life’s too short!’,” said Hawkins.