Modern CFOs navigate the complexities of today's business landscape, balancing financial stewardship, risk management, and sustainability. How will this shape the future of organisations?

Table of contents:

  • Introduction 
  • The evolving role of the CFO
  • Core responsibilities of the CFO
  • Key skills for a successful CFO
  • The growing importance of ESG for CFOs
  • Final thought 

Ruth Porat has served as the CFO of Alphabet Inc. (the parent company of Google) since 2015. Known for her disciplined financial management, she has helped Google into its next phase of growth while maintaining profitability. Her ability to balance innovation with financial discipline has made her a key figure in Alphabet’s ongoing success and contributed to Alphabet's market valuation exceeding $1 trillion. 

The role of the Chief Financial Officer (CFO) has evolved significantly over the years. Once seen primarily as the financial gatekeeper, today's CFOs are strategic leaders, driving business growth and shaping the future of organisations. As businesses face increasing complexity, the demand for skilled CFOs has never been higher. 

This article delves into the responsibilities of a CFO, highlighting the skills needed to excel in the role, and examining how CFOs contribute to both short-term financial health and long-term business strategy.

The evolving role of the CFO

Traditionally, the CFO was responsible for managing the company's financial operations, including accounting, budgeting, reporting, and cash flow management. However, with the rise of digitalisation, globalisation, and regulatory changes, the role has expanded to include strategic planning, risk management, corporate governance, and technology implementation. A 2021 McKinsey report showed that 41% of CFOs now spend the majority of their time on strategic leadership rather than on traditional financial activities.

In the United Kingdom alone, CFOs are playing a crucial role in navigating the uncertainties of Brexit and post-pandemic economic recovery. According to a 2023 Deloitte CFO survey, 90% of UK CFOs have been actively involved in reshaping their companies' business models to adapt to these changes. This shift in focus demonstrates the growing importance of the CFO as a business leader, not just a financial steward.

Core responsibilities of the CFO

Financial planning and analysis (FP&A)
One of the primary responsibilities of a CFO is overseeing the organisation's financial planning and analysis. This involves forecasting future revenues and expenses, analysing financial performance, and developing strategies to ensure the organisation meets its financial goals. CFOs work closely with other departments to create budgets and allocate resources efficiently.

For instance, in large corporations like BP plc, the CFO is responsible for managing complex financial models that take into account the volatility of oil prices, changes in consumer demand, and regulatory developments. In this capacity, CFOs help guide the organisation’s financial strategy in an uncertain market.

Financial reporting
Transparency is key to maintaining stakeholder confidence. The CFO is responsible for ensuring that financial reports are accurate, comprehensive, and in line with regulatory requirements. In the UK, companies are required to comply with accounting standards such as the International Financial Reporting Standards (IFRS), overseen by the Financial Reporting Council (FRC).

CFOs must ensure that their organisations adhere to these standards, providing accurate financial statements to investors, regulatory bodies, and other stakeholders. For example, Tesco’s CFO has the critical task of reporting financial performance to maintain investor trust, especially in light of past accounting scandals.

Risk management
In an increasingly complex global market, the CFO plays a key role in identifying and mitigating financial risks. This includes market risks (such as fluctuating currency rates or commodity prices), operational risks, and compliance risks. Effective risk management ensures that the organisation can withstand financial shocks and maintain stability.

During the 2008 financial crisis when many companies experienced significant losses due to inadequate risk management. CFOs who foresaw the looming risks, such as those in Barclays, took early steps to manage their exposure to toxic assets, helping to limit the financial damage.

Treasury and cash flow management
Maintaining a healthy cash flow is crucial for the survival of any business. CFOs are responsible for overseeing treasury operations, which involve managing the company’s cash reserves, investments, and debt. Effective cash flow management ensures that the company can meet its obligations, fund its operations, and invest in growth opportunities.

Capital allocation and investment strategy
One of the most strategic aspects of the CFO’s role is deciding where and how the company’s capital should be invested. This could involve making decisions about mergers and acquisitions (M&A), capital expenditures, and research and development (R&D) investments. These decisions shape the company’s future, and the CFO must balance risk with potential reward.

For example, AstraZeneca’s CFO played a key role in securing financing for the development and distribution of the company’s COVID-19 vaccine. This strategic investment not only contributed to public health efforts but also positioned the company as a leader in the pharmaceutical industry.

Corporate governance and regulatory compliance
The CFO is also responsible for ensuring that the company adheres to legal and regulatory requirements. This includes compliance with tax laws, financial regulations, and corporate governance standards. In the UK, CFOs must ensure that their companies comply with the UK Corporate Governance Code, which outlines principles of transparency, accountability, and sustainability.

Failure to comply with these regulations can lead to significant fines, legal penalties, and damage to the company’s reputation.

Key skills for a successful CFO

Given the breadth of responsibilities, successful CFOs need to possess a diverse skill set. Some of the essential skills include:

  • Analytical and strategic thinking: CFOs must analyse complex financial data and translate it into actionable insights. This requires strong analytical skills and the ability to think strategically about the company's future.
  • Leadership and communication: As part of the executive team, CFOs must work closely with the CEO, board of directors, and other stakeholders. Strong leadership and communication skills are essential for conveying financial information and strategic plans clearly and persuasively.
  • Risk management expertise: In an unpredictable business environment, CFOs need to identify potential risks and develop strategies to mitigate them. This requires not only financial expertise but also a deep understanding of market dynamics and operational risks.
  • Technological proficiency: With the rise of digital finance, CFOs need to be familiar with emerging technologies like data analytics, artificial intelligence, and blockchain. These technologies can enhance financial forecasting, risk management, and decision-making processes.

The growing importance of ESG for CFOs

Environmental, social, and governance (ESG) factors have become increasingly important in corporate finance. A 2022 PwC survey revealed that 83% of global investors consider ESG criteria when making investment decisions. As such, CFOs are now tasked with integrating ESG principles into their financial strategies.

In companies like Unilever and Shell, CFOs are actively involved in sustainability initiatives, ensuring that financial strategies align with long-term environmental goals. This might include investing in renewable energy projects, reducing carbon footprints, and enhancing supply chain transparency.

Final thought 

The role of the CFO has grown from managing financial operations to becoming a critical driver of business strategy. In today’s complex and volatile business environment, CFOs must balance their traditional responsibilities with the need for innovation, risk management, and long-term growth. 

Whether steering financial strategy, managing risk, or ensuring regulatory compliance, the CFO is indispensable to the success of modern organisations. With the increasing emphasis on ESG and technological advancement, the CFO’s role will continue to evolve, making them one of the most influential figures in the corporate world.

Key takeaways

  • CFOs have shifted from traditional financial management to strategic leadership, driving business growth and long-term planning.
  • Their duties include financial planning, reporting, risk management, cash flow oversight, capital allocation, and regulatory compliance.
  • Modern CFOs play a key role in shaping business strategies, such as navigating post-Brexit challenges and economic recovery in the UK.
  • Successful CFOs need analytical thinking, leadership, risk management expertise, and technological proficiency.
  • The growing importance of environmental, social, and governance factors is prompting CFOs to align financial strategies with sustainability goals.
  • The CFO's role continues to expand, incorporating innovation, risk management, and adapting to technological advancements.