Five Years Increases the Status of CFOs, CFOs and Treasury
Prior to the collapse of Lehman Brothers in September 2008,
the role of the chief financial officer (CFO) or corporate treasurer was
principally that of being a commercial business partner to the chief executive
officer (CEO). They were important figures in setting strategy, looking at
potential acquisitions and growing businesses. At this point, a large
percentage of the CFO’s attention centred on business growth which included the
safeguarding of company assets, meeting the organisation’s financial key
performance indicators (KPIs) and maintaining a good cash flow position over
the next 12 months as at that time the banks had lower barriers on loans.
Following the 2008-09 crash this description has changed to some degree,
depending on the industry. The role of the CFO has now become very focussed on
cost, which includes cost management, cost reduction and account reduction. The
role of these high-level executives has evolved to become more internally
focused, while prior to that they spent the majority of their time on external
affairs.
Similarly, the position of corporate treasurers within
corporations has risen in prominence. It has become more important these days
that clients can manage their cash flows and funds more effectively. This is
due to the increasing challenge of ready credit in the market. In addition,
these tasks have also been transformed into a larger part of the CFO’s scope
because, ultimately, there has been more spotlight on cash flow management and
debtors.
In line with the rise in status of these roles, the
position of the chief risk officer (CRO) has become extremely important;
particularly because the CEO and the executive board are liable for what
happens in the business. So the CRO’s role has become a really influential seat
at the board table. His or her’s key functions include assessing commercial,
financial and regional risk. CROs are also now required to look as far ahead as
possible and ensure there are adequate contingency plans for areas of high risk
within the business.
Governance and Risk
Management
Michele Foo, manager – commerce finance at
Robert Walters Malaysia agrees. “The role of the CRO is of utter importance
today. In the past few years, the global implementation of the enterprise risk
management (ERM) framework necessitates the appointment of an experienced
officer to take on the CRO role.
“This role is entrenched into the
governance and decision-making framework of many conglomerates. Any major
decisions will have to be vetted and weighed in by the CRO, before a final
decision will be considered in a risk management report.”
Meanwhile, the role of the CFO has also expanded to include more transparency
around corporate governance and risk. The general public is also more aware of
the issues that have been called by corporations and banks. Therefore, CFOs
have to implement the frameworks put in placem to ensure that the public and
their investments are protected. The general sentiment now is more awareness
and the acknowledgement that things can go wrong.
The environment
in Malaysia is similar, confirms Foo. “We observe more of a focus towards risk
management. Today’s CFOs have to be more conservative with financial
instruments, forward-looking, possess better understanding of complex financial
products as well as seek professional assistance to get views on the
implications of these financial instruments.”
She adds that good
corporate governance practices have been promoted and mandated, incorporating a
focus on strong finance functions and risk management frameworks.
Hence, we have also seen an increase in the degree of transparency within the
role of CFO, corporate treasurer and across other finance department roles.
When recruiting for CFO or finance positions, hiring managers now require
professionals with a risk or corporate governance background.
This
previous experience has become an increasingly important part of their overall
finance duties. Firms work towards ensuring the optimum quality and
creditability of the financial information circulating within the workplace.
The evolution of the CFO’s role today to business partnering has
risen to a higher level of complexity and the demands placed on them reflect
this. While they have the great responsibility of ensuring meticulous
accounting, risk management as well as corporate governance and transparency;
there is now increased pressure on communication. Being able to implement
strategies effectively and with clarity is the key to ensuring swift acceptance
in the office.
Ultimately, it is uncertain whether a major economic
downfall such as the Lehman’s collapse could recur at some point in the future.
With solid finance strategies however, companies are able to weather the worst
of such times and work towards obtaining sustainable profitability.