What value does a chief financial officer (CFO) provide? Traditionally, the role has been important in helping companies improve cash flow and profitability, which in turn helps deliver growth and attract investment.
These are vital business benefits, but our research with the ACCA — with involvement from almost 100 finance leaders from a range of organisations around the world — suggests that today’s CFOs are increasingly being challenged to respond to a much broader definition of value.
| “Value is a long-term concept and one that is aligned to the creation of sustainable organisations. […] The reality is that, for most CFOs, the achievement of the strategic goals of an organisation that embraces economic, environmental and social equity is a fundamental part of their evolving role. This is at the core of generating value.” Chief Value Officer — The Important Evolution of the CFO |
The research explores the broadening spectrum of business datapoints and insight being brought under finance leaders’ purview, prompting the emergence of a new role, that of the Chief Value Officer or CVO.
| “While there is a debate as to whether there is a separate CVO role or if it is an extension of the CFO role, many of the CFOs who contributed to this research argued that they were already fulfilling that role. […] On this basis, while there is always more to learn, there is no need to rebrand the role, but CFOs need to ensure that they step up to satisfy the required value agenda. A failure to do so will lead to a marginalised finance team and CFO role, as the CVO requirement will be fulfilled by others.” Chief Value Officer — The Important Evolution of the CFO |
Regardless of individual job title, we know that finance leaders are increasingly being called up to report on a much wider range of business success metrics, with a broader perspective of business value, and in a forward-looking manner.
Increasingly, this is not just about the traditional remit of profitability - although this of course remains key. Instead, finance leaders are being challenged to share insight and shape business thinking around a broader range of questions, such as:
- What are we doing with the resources we have?
- How are we improving the lives of others and benefiting the communities we operate in?
- How are we fulfilling the deliverables of our mission?
The shift reflects changes in the way institutional investors and others perceive value, for example with an eye to sustainability. In 2022, investors put $157bn into mutual funds and exchange-traded products with a focus on environmental, social and corporate governance, according to data provider Morningstar.
| “There is a desire by many stakeholders to receive information in as near real time as possible. […] Periodicity is no longer a valid concept. Waiting to get the ‘numbers right’ at a certain point in time does not add value.” Chief Value Officer — The Important Evolution of the CFO |
Applying CFO skills to wider measures of value can benefit a broad spectrum of stakeholders. Traditionally, finance leaders interfaced mostly with investors and other financial audiences, reporting on measures such as earnings before interest, taxes, depreciation and amortisation.
| “A robust and flexible financial model remains a critical tool for CFO’s in assessing the impact of strategic choices upon their business, as well as for raising finance or investment. Alongside this, increasingly the ability to extract and visualise data quickly is a strategic advantage in today's environment. Effective analytics tools allow CFOs to focus on decision making using real time information leading to actionable insights.” |
A Chief Value Officer might seek to address customers experience through product quality metrics; employees through employment security; local communities through infrastructure investment; or regulators through compliance and risk management practices.
A key feature of this shift is that it requires CFOs to work in new ways, leveraging internal resources and outsourcing solutions; automating work where possible; and creating networks of internal and external advisers to have a more holistic view of the business and its operating environment.
How can we help?
By addressing value across the business, the CFO role itself is becoming more valuable. It used to be about reporting, whereas now it’s really about helping the business move forward: pointing to opportunities and steering the company away from risks. With the right support, finance leaders are becoming increasingly pivotal figures in the corporate hierarchy. This can only be a good thing for business, but for the individuals concerned, it will be important to know when and where to look for help.
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.
