The evolving role of the CFO

In a post-pandemic world, the role of the CFO will move away from being strictly financial as new challenges arise, says Christian Doherty

A year like no other: that was the much-used description of 2020 – although some might argue 2021 has been more of the same. The COVID-19 pandemic presented businesses with a set of challenges few could have predicted. As demand levels fell through the floor, new investment froze and supply chains seized up. There can’t have been many finance directors and CFOs who could truly say they were 100% ready to respond.

A Deloitte survey conducted towards the end of 2020 revealed that three‐quarters of CFOs expected the pandemic to have significant or severe negative effects on their business in 2021, while 79% rated the level of external financial and economic uncertainty as high or very high.

Lessons learned?

However, as 2021 has progressed and the end comes into view, the disruption and chaos have created a set of opportunities for CFOs to redefine how the role is handled and viewed by others in the business. As Churchill famously put it: “Never let a good crisis go to waste” – a message that shouldn’t be lost on senior finance leaders.

“I worry that a lot of the lessons of COVID-19 are already being forgotten,” says Ludovic Deprez, Financial Accounting Advisory Services Executive Director at EY, and author of the firm’s August 2020 report Beyond COVID-19: What will be the role of the CFO?, on the future of the post-COVID-19 CFO. “Whether that’s the importance of having cash reserves to cover disruptions, or understanding weaknesses in operational matters, too many CFOs are seemingly passing up the opportunity to enact long-lasting change".

I had thought COVID-19 would serve as a wake-up call, but it’s not the case. Many CFOs still see the monthly closing process as a compliance issue and not one of risk management, for instance. They don’t even know why they do it. Perhaps COVID-19 could have focused the mind on what the company’s risks are, certainly from a cash perspective, and whether they should tweak the process to identify provisions to be taken, and so on".

Ludovic Deprez

There are, however, some signs that the enforced suspension of some routine tasks have created a window for more forward-thinking CFOs to drive improvement. “We’ve certainly seen a lot of companies that now want to have a better view of their processes,” Deprez says. “Recently, I’ve been talking a lot about process mining (see What Process Mining Is, and Why Companies Should Do It) – explaining to companies how things work and illustrating how they are encoded in the system.

“We can see a lot of controls aren’t being followed and the past few years have seen things slip in the back office while the focus has been on growth. So they’ve survived in that mode. But when something like COVID-19 or the financial crisis hits, then things become clearer: where does the money go? Are we following up on things?”

In from the cold

For Nick Yeates, the CFO role has already begun to evolve. The pandemic had been in full swing for a few months when he took on his latest role as CFO at fund management technology provider Kneip. His first task – to integrate with a new team entirely via video call – was an illustration of the new normal that many CFOs will be facing in the coming months and years.

“Remote working forces you to compartmentalise what you’re doing because most offices are open plan and now it’s not possible for people to lean over the desk and say: ‘Take a look at this for me,’” he says. “There’s a lot of stuff that suffers with remote working – no whiteboard to write things down and bounce ideas around for new systems and processes – but then there’s an upside: less commuting, more time to work.”

Yeates accepts that establishing and maintaining the CFO’s credibility and authority has definitely been made more difficult by the fractured nature of office life. “Once COVID-19 hit, we moved people on to four-day weeks. That takes trust and management, but it shows you don’t just have to fire people,” he says, reflecting that the CFO will have to sell his or her vision to team members who may be stressed by remote working.

Happily, people are more open to cost-effective solutions they might have turned their noses up at in the past,” he says. “So that does make the CFO’s job a little easier as people recognise it’s an issue. If businesses are struggling, people look after themselves, but I think, in a way, COVID-19 has brought some companies closer to their employees.”

Nick Yeates

Control vs trust

Andy Brown works as a CFO for a range of companies of various sizes. He agrees that CFOs will face a dilemma as centralised office working becomes less popular. “Most CFOs will need to manage what I call the ‘control-trust tug-of-war’ post-COVID-19,” he says.

“The existence of one without the other means everyone and everything falls over. In 2021, we have more members of the finance team working remotely. There needs to be trust. At our worst, some accountants might err to over-controlling. With colleagues working remotely, a balance has to be struck. An absence of trust will slow down action, productivity and efficiency, and not facilitate a strong relationship within the team”.

For Brown, the watchword for the forward-thinking CFO both during and post-COVID-19 is ‘bravery’. “As humans, we can sometimes shy away from a tough decision. For a CFO, that might mean hiring or firing,” he says. “But the real test is that perhaps your sector is having a hard time, but you might see opportunities for growth. It’s a risk for the CFO to be a voice on the board to say ‘We can afford this’ or even ‘We can’t afford not to because this is going to take us to the next level’.”

From his perspective, the post-COVID-19 CFO has to grasp the nettle. For some, that will mean greenlighting investment. “For others, it may be time to talk to the bank, the staff or shareholders, or even the insolvency practitioners,” Brown says.

We will see the question of stakeholder management becoming more important,” says Deprez. “Banks, suppliers, regulators and so on will all want more detailed and regular information. And that will challenge CFOs: they need to make sure they’re providing that, but they don’t want to get caught up in simply churning out reports. They need to be the ones driving change.”

Ludovic Deprez

From CFO to CVO

Delphine Gibassier, Professor of Finance and Sustainable Development accounting at Audencia Business School, France, believes the transformation from CFO to Chief Value Officer (CVO) will be profound. “Smart organisations are shifting their sustainability responsibilities toward the finance function. In this new context, CFOs will play a critical role to bring the necessary shift inside organisations and as investors request their expertise on climate, social and environmental risks more and more.

“I think the Chief Financial Officer will become CVO post-COVID-19. As a business partner and an expert in sustainable accounting, the CVO must integrate all value creation of the company into a ‘multi-capital’ vision.”

This, she believes, will represent a key role in the strategic success of all organisations thinking with a long-term perspective. “CVOs will have a traditional accountant’s background, but with much more of the team focus on sustainability and the interlinkages with finance,” she says. “They no longer just have financial capital in mind; they have a 360-degree view and look through the lens of a multi-capital approach.”