The modern CFO: Risk taker or business maker?

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Chief financial officers or CFOs these days look forward, not back.

That’s the difference between the modern  ‘digital’ CFO and the specialists in the role at the turn of the millennium… 20 years ago, they didn’t have the tools needed to look ahead in any sophisticated way.

At the turn of the millennium, you would build a team, business would happen, and then accounting would be done after the fact.

Systems would record transactions, and you’d then report on your business afterwards. The standard measurement points were monthly – if not quarterly, and reporting would often take a week or more after month (or quarter) end.

Compare that against the state of business today, and you’ll see business leaders with a hugely accelerated need to see around corners – to mitigate risk before it turns into crisis, and to seize opportunity before it fizzles out.

The CFO has always filled that risk mitigation role – albeit on a look-back basis. But with digital transformation added into the mix, the modern CFO role has itself transformed into a future-facing navigator – combining risk mitigation with near-live opportunity mapping. According to Deloitte’s Middle East CFO 2022 survey, 53 per cent of CFOs across the Middle East cited establishing a strategy for financial performance and growth as their top priority.

CFOs sit at a fulcrum point in the business. As the financial and strategic lead for the entire business, by definition, the CFO has total access to almost every data point generated by the enterprise.

The modern CFO needs this visibility not only from a risk management perspective but also from a performance management standpoint – enabling high-ROI projects and deprioritising non-productive activities – all enabled by their vital context and expertise.

Because CFOs are able to look at all the data – to see it in the full context of the business environment, and to collaborate with the wider executive team to support decision-making – they sit at a unique point between risk and opportunity. In turn, the analytically enabled CFO not only has access to all the data, but also the ability to analyse and react to changing trends at speed.

The data-enabled CFO: Integrating analytics for decision-intelligence

Digital Transformation and data are at the heart of this strategic shift to a digitally enabled office of the CFO, according to the same Deloitte survey, more than 80 per cent of CFOs acknowledged either having completed or being in the process of implementing their digital strategies in their respective functions.

The survey further indicates that 41 per cent of CFOs in the UAE and 23 per cent of CFOs in Saudi Arabia have successfully completed this transition. However, many other factors helped to turbocharge this evolution.

Look to any Global 100 company and, firstly, you’ll see size and complexity – particularly around data. With manual processes and manual human input in different areas, by the time crucial data insights are reviewed, rolled up, and presented to an executive, that intelligence is out of date. At even 30 days old, those insights are stale.

Traditionally leaders would need to wait until the end of the month – or the end of the quarter – for meaningful insights to roll up. Today, the priority is near real-time information – facilitating more dynamic reactions or changes to help business success factors. Businesses need to understand as much as possible as quickly as possible. Information on what’s happening with lead time, lead flow, and conversions, for example, is needed by decision-makers on a daily basis.

Look at product performance, for example, when businesses release a new product into the market. If you’re trying to understand the momentum of the product, you will need to understand the signals that are happening around immediate customer conversations, business wins, and pitch losses.

Previous generations of executives relied on the data science wizards in the background to give them cubes of data. Today, finance teams can analyse that information themselves – delivering their own insights through analytic toolkits. My generation didn’t come out of school learning SQL, Python or R. I didn’t learn Excel until I was in the workplace. Today, self-service analytic tools have abstracted those code-based skill sets into drag-and-drop technology. It means that finance and business specialists don’t also need to be coding experts to effectively deliver value in their roles.

Because this data rolls up to the office of the CFO, the modern digitally enabled leader now mitigates the risk of decision-making in increasingly disrupted geopolitical markets with near real-time decision intelligence. They allow businesses to be resilient by making incredibly nimble and agile decisions while also – simultaneously – sidestepping unnecessary risk.

Delivering competitive advantage at the speed of hyper-connected business

The volume and velocity of data being created at every given moment are increasing exponentially. Surrounded by data, forward-thinking CFOs and business leaders are accelerating digital transformation. According to PwC’s Global Digital CFO 2022 Survey, 78 per cent of CFOs agree that digitalisation of the finance function is a high priority.

The traditional method of submitting data requests to IT and data science teams, and then waiting for the results, can’t keep up with the demand for insights at the speed needed. The modern financial compliance environment – and I include accounting in that – has become so much more complicated over time. If business leaders can recognize and act on trends sooner – with more information at their fingertips – they can adapt and respond more effectively to change as it happens.

Today, CFOs act as a force modifier for those businesses needing to see around corners – reporting out and collaborating with the wider executive team to drive business success at scale and speed.

Using data, analytics, and the unique CFO skillset, specialists can instrument more frequent ways of understanding the key performance indicators in their business – allowing them to react faster, and to make better decisions. That’s how you draw opportunity out of uncertainty and transform risk into reward.

The writer is the chief finance officer at Alteryx.

Read: The cross-functional role of CFOs in regional businesses