In today's dynamic business landscape, the role of the chief financial officer (CFO) has evolved far beyond the confines of number crunching and financial reporting.
There has never been a more opportune time for CFOs to make a lasting impact on their organizations. Chief executive officers (CEOs) are increasingly turning to CFOs not just to manage financials, but to actively shape strategy and the direction of the business.
Justin Mullany, chief financial officer Asia Pacific at ABN AMRO Bank, shared his perspective on the evolution and ongoing transition from a CFO to a Chief Value Officer (CVO).
Justin has been based in Singapore for the last 23 years, working in the financial services industry as a Regional CFO in two major European financial institutions, both of which have gone through significant strategic change. As he nears completion of his latest restructuring project, I took the opportunity to sit down with him to discuss the future of the CFO and how the expectations and demands of the role have changed.
A: While “CVO” is not yet a commonly used title, the traditional perception of a CFO as someone solely responsible for managing finances is undergoing a remarkable transformation. The modern CFO is now tasked with a delicate balancing act – to maintain their core financial responsibilities all while meeting rising demand for data-driven analysis and insights that contribute to growth and inform strategic decisions.
Today's business environment is marked by intense competition and rapid change. Virtually every industry is experiencing disruption due to the emergence of new technologies and innovative business models. These shifts are not only altering the way business is conducted, but also reshaping customer expectations and how they're served. Simultaneously, the regulatory environment has become increasingly complex, demanding a keen understanding of compliance and risk management from CFOs.
Because of these changes, today's CFOs are finding themselves at the nexus of a diverse range of responsibilities. From spearheading digital transformations to driving initiatives in talent development, their roles have expanded far beyond the traditional financial sphere.
One notable addition to this evolving list of responsibilities is the pivotal role in helping companies navigate the landscape of environmental, social, and governance (ESG) requirements. In essence, the contemporary CFO is confronted with a multifaceted set of responsibilities and priorities. Beyond the realm of numbers, they are pivotal in driving strategic decisions that shape the very trajectory of the organization.
Read more about ESG roles in our Asia asset management update for 2023
While it is still critical to deliver financial results and to grow returns, the requirement to take a longer-term strategic view of the value creation and performance of the organization is increasingly demanded from boards, investors, shareholders and regulators.
The CFO is in the ideal position to take advantage of these changing requirements and support the shift from “financial” to “value” in their title.
A: Recent research carried out by the ACCA and BDO encapsulates the necessary change in skills. It presents an alternative view with a shift from a model where financial acumen sits in the middle of the role to one where that central focus is now that of a change agent with guardian of risk, stewardship of assets, reporter of finance and strategic advisor as the four main quadrants surrounding it.
Skills such as data analysis and value acumen are key development areas. With automation, a lot of the traditional finance processes are being replaced; therefore, as a CFO, understanding how to review and interpret the data obtained is critical.
There are non-financial areas, like ESG, that drive value in your organization and it’s imperative a CVO understands the value it brings as they move into value reporting. In an area like ESG, there are also increasingly stringent reporting requirements in certain industries that we must also consider.
A: I don’t see this as a balance between the two, since the long-term value objectives of the organization will drive the financial outcomes. Automation and technology can help us produce the numbers more quickly, but the challenge lies in driving the right strategy that’s aligned with all stakeholders.
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A: Value creation is the responsibility of the whole organization, very much in the same way that financial outcomes are. The measure of success will vary from organization to organization, but the key is to set measurable and achievable targets for all aspects, whether that’s your own carbon footprint, your employees’ welfare and engagement or what type of industries and clients you’re targeting.
A: I see the transition of the CFO as both a natural fit and a necessity. If the finance functions of organizations don’t evolve, they will become obsolete. Many of the required skills of the CFO form foundation from which to develop into a CVO. The ability to understand and present financial performance can be used in the development and measurement of value reporting.
A: ESG responsibilities have numerous meanings depending on your industry, mission and strategy. For the banking industry, we must align on several fronts.
Firstly, we need to have our own ESG goals and objectives, including communicating where we want to be and by when. This internal alignment comes from having a noticeably clear mission, purpose and strategy, which can then be linked to the measurable aims.
Secondly, we need to understand the ESG journey our customers and clients are on and how we support their transition.
Thirdly, with the significant increase in ESG regulatory reporting requirements, we must have the technology to support the capture of new client data points.
A: This is an exciting time in all industries, but (speaking to my own experience) in the finance industry especially, with notable changes to the expectations of the finance team, there is an incredible opportunity. The shift from number-crunching to value-adding and business-partnering started a while ago. This next phase is further progression and provides CFOs with a far greater understanding of their business and the contribution they can make to its success.
The journey from CFO to CVO encompasses a profound shift towards holistic value creation. ESG considerations are not mere add-ons, but integral components of this transition. The CVO's ability to champion ESG integration and transparency reflects their commitment to responsible business practices, the sustainable growth of their organization and the betterment of the world in which they operate. This evolution is more than a professional progression; it’s a testament to the CFO's ability to embrace change, drive innovation and shape an inclusive and prosperous future.
Whether you currently hold the title of CFO or aspire to become a future finance leader, the imperative remains the same: continuous personal and professional development. The pace of change and the breadth of responsibilities require a commitment to growth and staying attuned to emerging trends, technologies and best practices. It's not as much about adapting to change as it is proactively shaping and driving transformation.