A Toast To The Best CFOs

The old and traditional role of a CFO had much to do with crunching data, checking figures and monitoring margins, besides explaining to stakeholders the reasons for the results, good or bad.

But a new and more strategic role of this critical profession parallels that of a CEO. It complements and supplements the latter at every step. CFOs now don’t just report on figures anymore; instead, they spend much time and planning in strategic business thinking.

It is hardly any great surprise, then, that nowadays more CFOs are being carefully screened for the top job — and sliding smoothly into the role of the CEO. That is because the role of the CFO has shifted fundamentally, from finance operations and merely reporting figures to becoming ever more keenly involved in the more demanding and critical thinking functions related to business strategy.

Take Rajesh Gopinathan, for instance. This former CFO of TCS was catapulted into the top job at TCS when N. Chandrasekaran moved up to become Chairman of the Tata Group.

Other such illustrious personalities in the world of business include Indra Nooyi. She joined PepsiCo as CFO in 2001, went on to become CEO in 2006, and has been in that premier role for over a decade now.

An example such as this illustrates how the role of the CFO has now changed to become far more all-encompassing, and that finance is increasingly going hand in hand with business strategy.

As masters of capital allocation, CFOs have to have their eye on the ball when it comes to knowing the amount of capital that needs to be invested in businesses, and what are the type of returns that businesses generate. Knowing what will work, in terms of revenue and profit, often enables a CFO to think strategically and stay ahead of the curve.

So, the CFO is not a mere finance man for reasons more than one. The role is becoming far more dynamic than ever before. This also implies that a CFO has to be prepared for anything, and be able to change swiftly as circumstances demand.

Consider the many shifts in the global finance dynamics occurring every day. If on the one hand, foreign exchange rates are jumpy, on the other, commodity prices are never stable. Returns from Treasury and other operations are also turning ever so erratic as interest-rate movements are becoming more rapid.

Asian Paints CFO Jayesh Merchant says, “CFOs, instead of being reactive, now, have to be proactive. We need to be prepared for anything. If you see the present scenario, particularly with volatility in foreign exchange and commodities, the socio-political environment globally, the China situation and what is happening in the US, you need to be on the ball, daily. That is the kind of challenge.”

And then, the role is turning increasingly complex because of the changes in the rules and regulations. CFOs now not only have to keep abreast of the enormous risk ever present in the system, but also with the new standards and regulations that have been put into place just this year.

For instance, the implementation of GST means that CFOs have to make heavy investments in new systems, and focus on getting their execution strategy right off the bat once the new regulations come into force.

Again this year, the new IFRS rules or the International Financial Reporting Standards is being implemented. This means that the earlier classification of items in finance is set to change, which would mean plenty of work for the CFO, explaining to stakeholders and financial analysts how such changes are likely to impact the presentation and the implication of the figures.

What’s more, some of the bigger companies have to change their auditors, starting this year. This means that the CFO will now have to spend longer hours with the new auditors to ensure that they are up to speed with the various facets of the company’s business. All these changes have happened in the span of a year.

Then again, there is a talk of changing the accounting year from the traditional April to March to a calendar-year period, which means further investments of time and catching up that a CFO needs to make.

So, even as the day-to-day affairs of the finance office become demanding in themselves, the CFO has to look at the business environment outside, and calculate its implications on the business as a whole. Says Merchant, “The world has become dynamic. The CFO also has to provide a review mechanism of the strategy, of where we are, steps to move forward, how to leverage one’s strength continuously, and that is a challenge.”

In other words, the already high bar of the working environment of the CFO is constantly being raised. Nevertheless, these are moments of triumph for a CFO. The structural changes both within the profession and outside in the volatile global arena are being well-managed by CFOs without too much of a hitch.

It is due to the amazing dynamism of CFOs that BW Businessworld and Yes Bank decided to bring out an issue celebrating the versatility of CFOs; appreciating their behind-the-scenes work and their frontline strategic thinking; recognising their move beyond practical left-brain numeric skills to dynamic right-brained business ones.