The F in CFO stands for future

The F in CFO stands for future

BY SHYAM MAMIDI –

4 HOURS 21 MIN AGO

CFO stands for Chief Financial Officer. But increasingly, this role is becoming of greater significance. At top-performing companies, the “F” has taken on the meaning of “Future”. The CFO is the person, in most organisations, who is in the best position to harness the ever-expanding deluge of data that can inform and drive corporate strategy. CFOs cannot only be scorekeepers. They are heavily focused on integrating the information across the enterprise and need to help their firm score big, which is to say, discover new revenue growth opportunities.And CFOs in outperforming enterprises know what is critically important and where they need to up their game, according to IBM’s latest global C-suite study of nearly 4,200 C-level executives released this month.

The CFO’s role in restructuring and business model innovation is critical. The contrast is stark between outperformers — defined in the study as companies with above-average growth and revenue—and underperformers, particularly when it comes to their areas of priority. Sixty-five percent of CFOs in outperforming companies focus on restructuring (acquisitions and divestures), which is 117 per cent more than CFOs in underperforming companies at 30 per cent. Furthermore, 42 per cent of CFOs in outperforming companies focus on business model innovation versus 20 per cent of those in companies that are underperforming.

A SINGLE SOURCE OF TRUTH

Indeed, data is integral to CFOs who focus on broader strategic change to accelerate their companies’ performance and profits.

They strongly believe in a single source of truth. They are interested to know how unstructured data, from call centre records to warranty reports, can predict the future. They are also keen to know how publicly available data such as credit card records and telephone-traffic logs can uncover new opportunities.

Instead of shining the spotlight on the past to show how far the company has come, it is time to shine headlights on the future to show where to go —and succeed.

CFOs still need to compile and report their company’s sales and profits, of course. But that is no longer their main responsibility. Rather, they need to establish systems to acquire and use data on a wide range of items to guide the company’s strategic plan. The goal is to enable and ensure the company makes decisions based on real data rather than the gut instinct of the HIPPO— highest-paid position —in the room.

One of the most important jobs for the CFO is to make sure that there is one version of the truth that is used across the company. Yet, the C-suite study found that, while 82 per cent of CFOs worldwide consider integrating information across the enterprise as one of the key areas in their role, merely 24 per cent felt they were effective at this function.

It is a lot harder than it sounds. Over the years, many companies would have developed several silos of information built around particular marketing efforts or product lines. Acquisitions that have their own computer systems present additional problems.

Standardising accounting worldwide is something every CFO has worked on. Standardising the treatment of unstructured data is a new challenge, and one that CFOs have to embrace.

NOT JUST ‘NICE TO HAVE’

Having common, integrated data is not just nice. It is the key to making the company agile. If every new initiative requires converting and reconciling existing data for new purposes, it slows the company down dramatically, thereby missing potential new opportunities in the marketplace.

CFOs need to work with their CIO (Chief Information Officer) counterparts to make that happen. According to another recent survey IBM did, 39 per cent of CIOs report to the CFO.

Computer infrastructure has long been required for running supply chains and monitoring finances. The CFO has to make sure the infrastructure is in place to assess future risks and look for future rewards.

A data analytics infrastructure isn’t just a nice-to-have; it has to be a priority. IBM’s recent studies show that companies that apply advanced analytics have 33 per cent more revenue growth and 12 times more profit growth than companies that do not.

CFO cannot just sit back and report what happened to the company. They need to lean forward and use hard data to help predict the future for the company.

They should help define the new business strategies to enhance the value realised and by getting to know their customers better.

ABOUT THE AUTHOR:

Shyam Mamidi is Singapore Country Leader for Global Business Services at IBM.