Economic uncertainty, increasing regulatory demands and stakeholder expectations are bringing rapid change to businesses. Like a high jump competition, the bar keeps getting raised. Undeniably, this makes it an especially challenging time for businesses around the world.
Against this backdrop, how do CFOs who have to fill the big shoes of “strategic business partner to their CEOs” continue to stay relevant and create value for their organizations? How do CFOs balance long term sustainability with short term payouts?
While there is no one-size-fits all formula, here are some key traits of award-winning CFOs we have observed in our years of research work at the Institute of Singapore Chartered Accountants (ISCA).
Acting as 'Moral Compass'
“The economic crisis has highlighted the fact that building trust is challenging and, at the same time, how easily it can be broken. CFOs are often seen as the moral compass for an organisation. Apart from the Board and the Chief Executive Officer (CEO), an organisation’s CFO plays a critical role in building trust in the organisation,” said Dr Ernest Kan, President, Institute of Singapore Chartered Accountants (ISCA).
Despite CFOs having to adopt a more strategic focus, their traditional role of financial stewardship with continued focus on ethics and integrity remains key, as highlighted by a CFO study conducted by ISCA. Certainly, inspiring trust and confidence is fundamental in this role.
For example, this is attested by the requirement of certain capital markets, such as Singapore Exchange (SGX), for the Board Audit Committee to make all reasonable enquiries and provide confirmation on the competency, character and integrity of the CFO at the time of listing.
Good varied career experience is another valuable attribute which aspiring CFOs should seek to transform themselves into successful CFOs. A recent research by the National University of Singapore showed the market reacting positively to the appointment of an experienced CFO, and the share price reacting more negatively to the cessation of a longer-tenured CFO.
Being Able to Connect the Dots
“CFOs must be trusted business advisors. Successful CFOs are expected to link financial metrics to corporate strategy and be able to succinctly communicate the meaning and value behind those financial numbers," says Jeann Low, Group Chief Financial Officer, SingTel Group.
Successful CFOs today possess cross-functional skills and should leverage on their position, which allows them to have insights across all business areas of their firm, to contribute leading-edge strategic perspectives. The astute CFO is in a good position to identify opportunities to create more synergy for the organisation, both internally and externally.
Successful CFOs or finance leaders are also innovative and think beyond the traditional scope or areas of focus under the CFO’s purview. For example, in order to help BBC, the British broadcasting giant, meet 21st- century challenges in the global media sector, their finance leaders re-engineered BBC’s finance function and processes.
BBC not only determined what had to be retained in-house or outsourced to achieve efficiency and cost savings, but also decided to embed finance staff in the business divisions, to perform primarily advisory role to the business staff.
To respond to changing and expanding business demands, CFOs have to show leadership in any needed transformation of the finance function. Indeed, reflecting the critical role which the finance function plays in supporting the organisation’s strategies and initiatives, there are successful CFOs who hold concurrent roles such as Deputy Chief Executive Officer (CEO) or even move up to become CEOs.
Going Beyond the Numbers
“Successful CFOs are also characterised as having adaptable mindsets and excellent soft skills. These are necessary to effectively carry out their expanded role,” says Ho Tuck Chuen, Group Chief Financial Officer, JTC Corporation.
Successful CFOs have shown themselves to be good and effective communicators. CFOs have to find new ways, going beyond the traditional financial reporting, to effectively report the activities and value created by their firms. With most business decisions having financial impact and vice versa, CFOs need to communicate such impact concisely yet comprehensively.
Beyond communicating well, CFOs need to possess good relationship management skills. These help successful CFOs to complement their CEOs to effectively engage their key stakeholders, such as shareholders, investment analysts and bankers, in particular for CFOs in listed companies.
Strong business acumen and keen cultural understanding are also attributes of successful CFOs. “As the demands on senior executives grow with internationalization, it is important for CFO’s to possess not just good business acumen, but sound human resource skills to spot and develop local talent in order to compete successfully abroad.
This approach will allow organisations to better adapt to the different cultural requirements and understand the keen local competition and challenges,” says Chia Nam Toon, Assistant Chief Executive Officer, Corporate Services and Group Chief Financial Officer, at property firm Ascendas Pte Ltd. This is important in managing the companies' finances across cultures and jurisdictions, and to ensure proper and appropriate controls and procedures are in place, even away from corporate headquarters. This is all part of good corporate governance, risk management and controls.
The pace of change is ever increasing. Successful CFOs have demonstrated themselves capable of taking the changes by the horns and visionary in leading their finance teams.
About the Authors
Chan Sze Yee is Head of Research and Perrine Oh is Manager of Research at the Institute of Singapore Chartered Accountants. ©2013 Institute of Singapore Chartered Accountants. All rights reserved.