Corporate Finance

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Modernising the Finance Department’s Role The new CFO has arrived in his most recently updated version. His job has evolved considerably over the last few years because of fundamental changes in the environment in which he operates, just as happened with the treasury manager’s job. After spending a huge amount of time on compliance, he is now being asked to improve the organisation’s performance. He is being asked to be transparent, multi-skilled, efficient, proactive and a visionary. This is a very wide-ranging job description which this article sets out to illustrate.

Modernising the Finance Department's Role

by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman, EACT

The new CFO has arrived in his most recently updated version. His job has evolved considerably over the last few years because of fundamental changes in the environment in which he operates, just as happened with the treasury manager’s job. After spending a huge amount of time on compliance, he is now being asked to improve the organisation’s performance. He is being asked to be transparent, multi-skilled, efficient, proactive and a visionary. This is a very wide-ranging job description which this article sets out to illustrate.

Parallel evolution

It is not only just technical jobs, such as the treasurers’, that have evolved greatly over the last few years. The CFO’s job has also obviously mutated for a number of reasons. It now requires qualities other than those needed in the past as well as new aptitudes to fulfil the growing expectations of the shareholders and the audit committee.

The CFO now sees his performance measured and evaluated. He can no longer just do his job and produce the financial results; in addition, he has to demonstrate that he has performed. We have moved into a yet more competitive era. We have to demonstrate that we are achieving fixed, pre-set targets effectively. This need to demonstrate that expectations have been fulfilled and that the job has been done, from a perspective that is not just backward-looking, creates the feeling of increased pressure on CFOs. Onto profit reporting has to be added the method, how we got there and how we will keep on getting there – a new predictive aspect of the job which goes well beyond producing cash flow forecasts and budgets. The management aspect is new because the methods and the control system are going to be of the essence and must be demonstrable. The days of taking people’s word for it or judging by past results are well and truly over. The neo-CFO in his 2011.0 version has become the multinational market standard.

Onto profit reporting has to be added; the method, how we got there and how we will keep on getting there.

The guardian of the temple

The CFO is often vital to strategic decision-making. He must protect the company against the  frequent biases arising from taking decisions on emotional or barely rational grounds.  Only a few CFOs use the lever that their job gives them to influence decision-making. They were frequently excluded from or little involved in the strategic decision-making process. CFOs often seemed to be distanced from strategic operations and were seen as ‘spoilsports’. The new CFOs must take a full part in the strategic decision-making progress and not only from a financial point of view (for example foreign exchange, finance and interest-rate risks, etc.). They are often also criticised for excessive and systematic evasiveness. All too often, this role of guardian of the temple and financial orthodoxy has been perceived as being incompatible with the strategic decision-making and acquisitions processes. He was a supplier of (financial) services rather than a major player in decision-making. Things have changed and the CFO is now vested with the role of adviser and joint decision-maker, for example in merger & acquisition activities.

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