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The rapid modernization of the CFO and finance function provides significant opportunities to accelerate the value contribution of professional accountants to business success.

In 2019, IFAC set out a vision for future-fit CFOs and finance functions in the context of significant societal and business transformations driven by digital and sustainable development. Since then, the COVID-19 pandemic has greatly accelerated digital and workplace transformation and elevated sustainability and climate action into the spotlight. Concurrently, CFOs and finance functions have had a central role in helping organizations navigate through the crisis and its operational and financial implications.

The recent period of crisis management is turning into recovery involving fundamental shifts in how work gets done and how value is created for key stakeholders (customers, employees, investors, society), the planet as well as the organization itself.

Consequently, professional accountants in business are more deeply involved than ever before in navigating organizations through opportunities and threats to value creation arising from various areas including climate action and environmental, social and governance factors, supply chain, changing consumer preferences, and digitalization and decentralized finance.

The key message from IFAC’s recent Professional Accountants in Business (PAIB) Advisory Group meeting, including two excellent sessions with Reliance Industries and Standard Chartered Bank, is that CFOs and finance functions are more strategic and focused on critical decisions around business and operating model transitions and disruption that require the involvement of multiple stakeholders, collecting data from various sources, applying advanced analytics and analysis, and dealing with complex issues and solutions. This requires a significant shift from “business partnering” to “value partnering”. 

Value partnering involves a much more strategic contribution with a relentless focus on activities and actions that enable value creation for the organization, customers and other stakeholders. This means finance teams must understand how the organization creates value and provide information and analysis to help maximize value. This is at the heart of the chief value officer mindset that CFOs and finance and accounting professionals need to adopt to elevate their role.

The CFO and finance function’s strategic focus on higher value activities covers various areas from leading or enabling transformation initiatives within the function and across organizations, ensuring sustainability objectives are integrated and aligned to business priorities and decisions, and leading other functions and business units towards achieving value creation priorities.

Mastering Change: The New CFO Mandate

McKinsey’s latest research of 351 finance leaders in March to April 2021 highlights that CFO responsibilities have grown in a few important areas. Between 2016 and 2021, the share of finance leaders who say they are responsible for their companies’ digital activities has more than tripled. Investor relations has also grown dramatically as an area of focus, as well as their role in aligning ESG programs to strategic and financial objectives.

Capturing the Value Partnering Role of CFOs and the Finance Functions

The PAIB Advisory Group highlighted the following key features of the modernization of the role of the CFO and finance function in a value partnering role:

  • Providing insights on creating, enabling and sustaining competitive advantage and long-term value creation. This involves:
    • Cost leadership through cost visibility, reduction and productivity insights for both finance and business operations
    • Strategic insights on revenue growth and gross margin optimization
    • Leadership on broader trends and performance areas particularly in relation to sustainability and ESG, and intellectual assets, that contribute to future value and reputation and social license to operate.

  • Effective governance and risk management activities that enable a clear focus on value creation and protection incorporating short versus long-term, and higher and lower risk business cases appropriate to different levels of the organization (enterprise, business unit, function etc.)
  • Fulfilling core roles of finance and accounting including financial planning and analysis, treasury, tax, and reporting, which remain crucial, but the focus of these core roles needs to be on actions and ways of working that drive and maximize value creation and minimize value erosion. This requires understanding and communicating the nature of value creation and trade-offs, and positioning the finance function to be involved in relevant priority areas of transformation such as decarbonization and digital initiatives.
  • Building trust and integrity in organizations by ensuring:
  • The information and data used for decision making and reporting to both internal and external stakeholders inform business actions and decisions that contribute to long-term value creation and sustainability. This traditional stewardship role has widened with boards and CEOs increasingly turning to the finance function to provide oversight of both financial and non-financial data and metrics related to value creation given the inherent skills accountants have in ensuring high quality information and reporting
  • The right systems, processes and controls are in place to protect the organization from fraud and corruption as well as ensuring trust and integrity in information and data that is used for decision making and disclosure. 
  • Strategic resource and capital allocation decisions that underpin actions to achieve growth, transformation and ultimately value creation. This requires a capital allocation strategy that clearly supports and is aligned to business priorities for value creation, including highlighting conflicts between short- and long-term value creation objectives. 
  • Consolidating information across the organization into meaningful insights, which requires understanding and communicating insights based on information from other functions and systems that highlight business performance, and bring this information together with financial information in a meaningful way.

For PAIBs, achieving value partnering involves

  • A finance mindset that enables finance functions to embrace growth, change and experimentation, and higher-order skills and capabilities to support value partnering with other functions.

Example: Prudential Financial’s Finance Forward transformation program involved focusing on talent management, and experience working outside the finance function and making an impact throughout the organization to change customer outcomes and increase market competitiveness.

  • Close collaboration and partnership with other business functions and external partners being the modus operandi for how finance functions approach their work. Cross-functional collaboration is the most effective way to deal with the complexity and multi-disciplinary nature of the opportunities and challenges facing organizations. It will often require finance teams gaining the trust of their peers.

Example: Maersk. As a partner, the finance team must “challenge and own” through being an active member of business teams, influencing decision making by driving performance management discussions and taking ownership and responsibility for decisions.

  • Agile management techniques that are becoming widely used in transformation of finance and business processes. These are the foundation for leveraging digital tools and technology, and enabling standardization, cost savings and continuous improvement. Agile techniques foster greater connectivity between finance, the business and critical enabling functions such as IT.

Example: the digital solutions enabled by agile management approaches that are modernizing source-to-pay processes connect finance more closely to other functions and processes to deliver greater value to customers. The PAIB report Enabling Purpose Driven Organizations, highlighted how procurement and supply chain models are dramatically changing the role of finance functions in this area.

  • An understanding of risk including how to identify and analyze risks, mitigate them or turn them into opportunities. This also requires being plugged into innovation and understanding potential solutions relevant to the opportunities and challenges facing the organization and its industry sector

Example: For Reliance Industries, delivering on its net carbon-zero commitment and strategy is an opportunity to become one of the world’s leading new energy and new materials companies. Achieving this involves a business model transition and significant investments in talent and partnerships, research and development (R&D) and innovation to decarbonize its operating model.

  • Advanced analytical and assessment approaches to deal with uncertainty in decision making such as scenarios, sensitivity analysis, decision trees and monte carlo simulations, and advanced data analytics and modeling to deliver decision making insights.

Example: The finance team in Pakistan International Airlines collaborated with business operations to understand route profitability. Using simulation models, the team examined cost and revenue drivers, and benchmarked competitors to determine actions to improve profitability or where to shut down routes.

For further insights from IFAC’s PAIB Advisory Group, see the meeting report: The Role of Accountants in Mainstreaming Sustainability in Business

Stathis Gould

Director, Member Engagement and PAIB

Stathis Gould is responsible for IFAC member engagement and leads IFAC’s advocacy for professional accountants working in business (PAIB) and the public sector. A key element of his work is developing thought leadership and guidance in support of enhancing the recognition of and confidence in professional accountants as CFOs, business leaders, and value partners in the context of sustainability/ESG, data and digital transformation, and other emerging business trends and issues.

Before joining IFAC, Stathis worked at the Chartered Institute of Management Accountants (CIMA), where he was responsible for planning and overseeing a program of policy and research that promoted and developed management accountancy. Prior to serving the accountancy profession, he worked in various roles in the private and public sectors in the UK. There, Stathis delivered financial and performance management in the National Health Service and worked for a technology company responsible for delivering the localization of software and content across the globe.

Stathis holds a BA in European Business Studies, an MBA (with distinction), and a postgraduate certificate in Environmental Management, Economics, and Policy. He is a member of the Institute of Management Accountants.