How does the need for broader reporting impact CFOs?
How does the need for broader reporting impact CFOs?
Increasingly, we’re seeing that in addition to a thorough grounding in all aspects of finance control — from financial and management accounting to taxation and business law — CFOs are being asked to manage and contribute to business areas outside of the traditional foundations of accounting.
Data and analytical insights, supply chain resilience, environmental, social and corporate governance, and so much more — finance leaders are progressively expected to shape decision making and report on performance across a complex range of value drivers.
| “We [must] have the change in mindset to say it is not just about financial reporting, it is not just about finance-related roles — you are able to influence so many strategic decisions that are of value to the organisation.”
CFO participant based in Africa
Chief Value Officer: The Important Evolution of the CFO ACCA |
In June, BDO and the ACCA published Chief Value Officer — The Important Evolution of the CFO. The report explores the expanding role of the CFO — and the growing trend towards the emerging role of the Chief Value Officer. The research demonstrates that finance leaders “have a responsibility for value creation in the organisation: not just for its financial performance but also for other aspects of value”. Meanwhile, the introduction of the CVO role reflects a growing view that business success doesn’t just depend on financial performance, but also on this broader range of value-driving levers.
Initiatives like the International Integrated Reporting Framework, developed by the International Integrated Reporting Council (IIRC) of the International Financial Reporting Standards Foundation (IFRS), are already recognising the need for finance leaders to cater for broader reporting requirements. IFRS S1 and IFRS S2 highlight the importance of sustainability-related disclosures in capital markets worldwide.
The IIRC framework establishes that organisations rely on six enablers of value: Financial, Manufactured, Intellectual, Human, Social and Relationship capital, and Natural.
Given the depth and complexity of these value drivers, it’s fair to say that finance leaders could spend a lifetime acquiring expert knowledge and still not cover all the bases. The good news is that this shouldn’t be necessary — in fact, the key to success will be to apply the same high-level analytical and problem-solving skills already used for financial reporting, without getting caught up in the fine detail.
A key area where we’re seeing complex change — and a prime example of the evolution of the CFO’s role — is in the organisation’s sustainability agenda. To varying degrees, finance leaders and their teams are assuming a level of responsibility for shaping decision making and reporting on performance across the ESG space.
Our Chief Value Officer research with the ACCA suggests that “In a large entity where there are many complex issues associated with achieving a sustainable future, the finance team will do best to focus their skills on the quality of the reporting of sustainability activities, both internally and externally.”
| “The implication here is that CVOs will likely require a lot more support to do their jobs. Some of this will come from automation, which is expected to streamline data processing and improve the accuracy of trend forecasting. Trends such as open accounting may simplify data flows for many, creating transparency across organisations”.
Chief Value Officer: The Important Evolution of the CFO
ACCA |
But while automation may be able to deal with more routine tasks, we are certainly going to see an increased need for specialist resources and skillsets, which may not always be able to be sourced in-house. A need for reporting and insight across a range of dimensions will drive demand for data analytics systems and dashboards. Meanwhile, as CFOs are increasingly called upon for forward-looking thought leadership, the function will place greater emphasis on forecasts and modelling.
Transitioning to accommodate this change may require strategic resourcing solutions to ensure the right skill sets can be accessed efficiently, without having to recruit an army of in-house experts. Similarly, CFOs (and CVOs) may find it useful to outsource elements of their finance function, so that their teams can focus more rigorously on delivering the value that the organisation expects.
Ultimately, the research we’ve conducted with the ACCA confirms what we’ve been seeing for some time — the role of the finance leader is certainly changing, and we need to take stock of the entire finance function.
How we can help
Increasingly, successful finance leaders are rethinking their approach to the component parts of their function. Viewed through the lens of transformational change — and the need to support stakeholders, investors and leadership teams and deliver growth in new ways — how might the transformation of your finance function support the continued success of your business?BDO’s Finance Function of the Future explores the opportunities and challenges faced by today's finance leaders, connecting these with approaches and solutions that will enable you to achieve your strategic direction.
CONTACT US FOR MORE INFORMATION
Chief Value Officer: The Important Evolution of the CFO Copyright © 2023 by the Association of Chartered Certified Accountants (ACCA). All rights reserved. Used with permission of ACCA. Contact insights@accaglobal.com for permission to reproduce, store or transmit, or to make other similar uses of this document.