The Role and

Expectations
of a CFO
A Global Debate on
Preparing Accountants
for Finance Leadership
Discussion Paper

BUSINESS & INDUSTRY

The Role and
Expectations
of a CFO
A Global Debate on
Preparing Accountants
for Finance Leadership
Discussion Paper
Copyright © October 2013 by the International Federation of Accountants (IFAC).
All rights reserved. Used with permission of IFAC. Contact [email protected]
for permission to reproduce, store, or transmit this document.
 iii

Table of Contents

Preparing Professional Accountants for Finance Leadership 1

How the CFO Role is Changing 5

Principles Guiding the Role and Expectations of a CFO 9

Recommendations for the Accountancy Profession and Employers

of Professional Accountants 25
 1

Preparing Professional
Accountants for
Finance Leadership
Principles Guiding the Role and Expectations of a CFO

A professional chief fnancial ofcer (CFO) should:

1. Be an efective organizational leader and a key member of senior management;
2. Balance the responsibilities of stewardship with business partnership;
3. Act as the integrator and navigator for the organization;
4. Be an efective leader of the fnance and accounting function; and
5. Bring professional qualities to the role and the organization.

Tese fve principles establish a frame- management and reporting, and more
work for understanding the changing broadly the efcient and productive
expectations, scope, and mandate of the use of resources, under the oversight
person who exercises leadership in the of a person with the necessary skills,
most senior fnance management posi- qualities, and professional standards.
tion in an organization or in one of its
separately managed units — that is, the Te training, expertise, and experi-
CFO or equivalent, such as a fnance ence professional accountants bring
director or vice president of fnance. to the CFO role should be seen as an
advantage specifcally in terms of unit-
Tese principles capture the key require- ing an ethical and technical mindset
ments of the CFO role and highlight together with business acumen.
what professional accountants need to
do to prepare for fnance leadership, However, professional accountants in
as well as the benefts of a professional related fnance leadership roles are far
accountant serving as the CFO. from universal. Te most common level
of education for a CFO is a degree in
As part of good governance, organiza- fnance (29%) followed by a chartered
tions should place the responsibil- (professional) accountancy qualifcation
ity of sound and ethical fnancial (27%) and an MBA (27%), according to a
2 The Role and Expectations of a CFO

2010 EY survey of 669 CFOs in Europe, level, and for employers of professional
the Middle East, India, and Africa, con- accountants, who also directly infu-
ducted by the Economist Intelligence ence preparation for leadership.
1
Unit. Recently, the number of profes-
sional accountants in the CFO role has Finally, this discussion is also relevant to
declined in some jurisdictions, particularly the regulatory community that is striv-
in larger organizations. However, this ing for well-governed organizations and
decline is reversing in some locations, market integrity. Te CFO is a critical
such as in the US where CFOs who part of a chain of actors, including the
were also Certifed Public Accountants governing body (i.e., board of directors),
increased to 38%, up from 25% in 2006.
2 chief executive ofcer (CEO), audit com-
mittee, and auditor that all have their
Tis trend has signifcant implications respective responsibilities to ensure that
for professional accountancy organiza- business reporting provides relevant,
tions (PAOs) in their eforts to adequately faithful, and comparable information on
prepare professional accountants for the fnancial position and performance
career progression to fnance leadership. of an organization. Having professional
accountants in key fnance leadership
Building on Competent and Versatile: roles is an important part of ensur-
How Professional Accountants in Busi- ing well-governed organizations.
ness Drive Sustainable Success, this
discussion paper starts a global debate Unlike the role of auditors and assurance
among PAOs and employers of profes- professionals, which is typically subject to
sional accountants on the key implications oversight and registration, qualifcation,
of the changing expectation on CFOs competency, and licensing requirements,
for the education, training, and devel- fnance leadership in organizations is
opment of professional accountants. largely unregulated. In this context, the
onus is on organizations to ensure they
IFAC seeks to encourage a dialogue on employ fnance leaders with the prerequi-
both the principles and proposed recom- site professional qualities and competence.
mendations to prepare aspiring accoun- In 2009, in its submission to the Group
tants to acquire and develop the skills of Twenty (G20), IFAC recommended
needed to be an efective fnance and orga- that the G20 call for the establishment
nizational leader. Te proposed actions are of an international, principles-based
relevant for PAOs, which need to continu- competency threshold for senior fnan-
ally review their qualifcations and train- cial ofcers in public interest entities.
3

ing at both a pre- and post-certifcation

1 EY, Te DNA of the CFO: A Study of What Makes A Chief

Financial Ofcer 2010. 3 Recommendation Four, Recommendations for the G20
Nations — Meeting of September 24-25 (IFAC, 2009), and
2 Maxwell Murphy, “CFOs Serving Longer Terms” Wall Street Recommendations for Working Group 1 — Enhancing Sound
Journal, August 9, 2013. Regulation and Strengthening Transparency (IFAC, 2009).
 Preparing Professional Accountants for Finance Leadership 3

Te increasing expectation of CFOs and public sector organizations are closely

fnance and accounting (F&A) functions linked with quality and professional-
also extends to government and public ism of the CFO and the F&A function.
sector organizations, where there is a clear Consequently, CFOs’ expertise and advice
need for enhanced fnance leadership and are essential elements in an efective
public fnancial management to improve leadership team as well as for ensur-
the quality of public sector transpar- ing that strong management practices
ency, accountability, and outcomes. and information systems, supported by
an appropriate governance infrastruc-
Te transparency, fnancial stability, ture and ethical culture, are in place.
and performance of governments and

Professional Accountants in Business

Professional accountants in business refer to all those members of the profession

who work in commerce, industry, fnancial services, education, and the public and
not-for-proft sectors. Professional accountants in business work as employees,
consultants, and self-employed owner-managers or advisers and support their
organizations in a wide range of job functions at various levels.

Professional accountants working in business can typically be found in four types of

roles: as value creators, enablers, preservers, and reporters. Te CFO principles relate
to these roles and will need to ensure success in each by:
• creating value — developing strategies for sustainable value creation;
• enabling value — supporting the governing body and senior management in
making decisions and facilitating the understanding of performance of
organizational functions or units;
• preserving value — asset and liability management, managing risk in relation
to setting and achieving the organization’s objectives, and implement-
ing and monitoring efective internal control systems; and
• reporting value — ensuring relevant and useful inter-
nal and external business reporting.

Depending on the route they have taken, professional accountants may have trained
and qualifed while working in public accounting and, later in their career, moved to
work for an organization. Others, typically known as management accountants, have
trained and qualifed within a corporate or public sector environment. Professional
accountants are recognized by diferent designations around the world — for example,
Chartered Accountant (CA), Certifed Public Accountant (CPA), Chartered Profes-
sional Accountant (CPA), Certifed Accountant, Chartered or Certifed Management
Accountant (CMA), Expert Comptable, or Contador Publico.
 5

How the CFO

Role is Changing

formance
Per
O rg
an
n al iza
io tio
ss na
fe

ll
o
Pr

PAIB as PAIB as e ad
er
Creator of Enabler of
Value Value
in g le a d e r

Bu si

CFO
n e ss p a r tn
ou n t

PAIB as PAIB as
cc

er
d a

an

Reporter Preserver
d
an

of Value of Value
st
ce

ew
n

ar
a

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Fi

In r
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Co e
nf orm a n c

Te past few decades have witnessed guardian of the fnancial health of an

signifcant growth in the demands on organization, overseeing and implement-
and expectations of fnance leaders, ing adequate fnancial control infrastruc-
particularly as they have become central ture. Tis met the needs, in particular, of
to helping their organizations navigate an large divisional industrial corporations
increasingly complex business world. that strived for fnancial control and
transparency across many divisions and
Prior to the 1990s, the main emphasis business units. Since then, the range of
of the CFO’s role was typically as the responsibilities of the CFO has expanded,
6 The Role and Expectations of a CFO

driven by complexity as a result of global- strategic and operational decision mak-

ized capital and markets, regulatory and ing in a “business partnering” capac-
business drivers, growth in information ity in addition to fulflling traditional
and communications, and changing stewardship responsibilities relating to
expectations of the role of the CFO. governance, compliance and control,
and business ethics. In forward-looking
In addition to being the fnancial gate- organizations, the CFO and the F&A
keeper, the CFO is also expected to function are evolving from a transactional
participate in driving the organization and cost efciency focus to an increas-
toward achieving its objectives. As part of ingly value-adding strategic focus.
the leadership of the organization, CFOs
are expected to increase their support of

A good CFO should be at the elbow of the CEO, ready to support and challenge
him/her in leading the business. Te CFO should, above all, be a good communi-
cator — to the board on the performance of the business and the issues it is fac-
ing; to his/her peers in getting across key information and concepts to facilitate
discussion and decision making; and to subordinates so that they are both ef-
cient and motivated. Other priorities for a CFO are to have strength of character,
personality, and intellect. I take it as a given in reaching such a position that an
individual would have the requisite technical knowledge and fnancial skills.
— James Riley, group fnance director and executive director, Jardine Matheson
Holdings Ltd.
 How the CFO Role is Changing 7

CFOs continue to be stretched and scruti- • engaging and communicat-

nized. Tey need to maintain a high-level ing efectively with colleagues,
view of the organization and the environ- investors, customers, suppliers,
ment in which it operates and demonstrate regulators, and other internal
a range of specifc skills and attributes in a and external stakeholders.
variety of diferent roles and responsibili-
ties. In addition to overseeing the F&A Te contemporary CFO is increasingly
function and related information systems, focused on being a key organizational
CFOs’ responsibilities typically include: leader and communicator, which requires
• demonstrating ethical leader- a strong professional and ethical founda-
ship and business integrity; tion. Given their professional education
• balancing short-term concerns and training, and relevant career experi-
and pressures, such as managing ence and aptitude, professional accoun-
cash, liquidity, and proftability, tants in the CFO role should be well
and long-term vision and sustain- placed to manage the requirements of
able organizational success; varied expectations and responsibilities.
• fulflling stewardship responsi-
bilities by ensuring efective com- Is There a Typical CFO Role?
pliance and control and respond- Te expectations of CFOs change
ing to ever increasing regulatory over time and are infuenced by vari-
developments, including fnancial ous external and internal drivers that
reporting, capital requirements, afect organizational circumstances and
and corporate responsibility; requirements. External drivers include
• sharing strategic leadership respon- prevailing economic and business chal-
sibilities with the CEO and other lenges, characteristics of the industry
senior managers and ensuring the and competitors, and the demands
F&A function supports the business of investors and key stakeholders.
at a strategic and operational level;
Organizations shape the CFO role to meet
• driving and managing change
current needs and expectations, particu-
and innovation within the
larly in terms of the expectations the CEO
organization; and
and chair have of the CFO, and in relation
8 The Role and Expectations of a CFO

to the existing composition and skills of In a small organization, professional

senior management. Te type of organiza- accountants are ofen the only profes-
tion, whether it is in the public or private sionally qualifed members of a staf
sector, and its history and culture will and will need to assume the role of
5
also infuence the type of CFO required. trusted advisor of the entrepreneur(s).

Organization size is also a crucial For larger organizations, four distinct

determining factor in the type of CFO profles of the CFO role have been identi-
employed. Small businesses generally fed — the fnance expert, the generalist,
need to consider the appropriate time to the performance leader, and the growth
hire a CFO; an important internal tip- champion — to illustrate how the CFO role
6
ping point is when information needed is multidimensional. Te type of CFO
to help the business make timely and could also vary depending on whether
4
important decisions is not being prepared. the role is at the corporate center, in a
division or business unit, or within a
Professional accountants with strong business line such as operations or sales.
commercial and leadership skills help
develop areas such as customer proft- 5 Chartered Institute of Management Accountants, Finance
Transformation: A Missed Opportunity for SMEs?, 2011 and
ability, pricing, sales, and marketing. Association of Chartered Certifed Accountants, Accountants
for Small Business, 2013.
6 Ankur Agrawal, John Goldie, and Bill Huyett , “Today’s
4 Jef Tomson, “Signs a Small Business Needs a CFO,” CFO: Which Profle Best Suits Your Company,” McKinsey,
Forbes, February 14, 2013. January 2013.
 9

Principles Guiding the Role

and Expectations of a CFO
Principle 1

Te CFO should be an efective organizational leader and a key member

of senior management.

As an efective leader and key member of senior management, the CFO needs
to facilitate the delivery of sustainable value creation and preservation.

As a senior manager, the CFO’s pri- emotional intelligence, analytical prob-

mary responsibility is to provide lem solving, and decision-making skills.
shared leadership and vision to the Tese are critical in all organizational
organization, its employees, and settings, including the public sector
other key stakeholders. Although this where the CFO is increasingly expected
should not be misconstrued as assum- to be involved as a partner with the
7
ing the role of the CEO, CFOs are an decision makers at the highest levels.
integral component of leadership.
CFOs are expected to facilitate organiza-
To be efective leaders, CFOs need to tional accountability and transparency,
create an environment where employees while providing strategic leadership. Tey
and other stakeholders, such as suppliers do so by helping an organization focus
and customers, are able to understand on creating and maintaining sustainable
and share the vision and aspirations of value for shareholders and other stake-
the organization. Te CFO has a pivotal holders, which involves more than simply
role in facilitating all organizational parts maximizing revenues and minimizing
to reach common performance objectives. costs. It requires a focus on decisions that

To perform efectively as leaders, CFOs 7 Chartered Institute of Public Finance and Accountancy,
need the requisite leadership and inter- Te Role of the Chief Financial Ofcer in Public Service
Organizations (2009) and Institute of Chartered Accoun-
personal skills, including communication, tants in England and Wales, A CFO at the Cabinet Table?
Strengthening UK Government Finances for the Future
strategic thinking, change management, (2013).
10 The Role and Expectations of a CFO

maximize expected economic value, while and requires a CFO to be an efective and
taking into account wider sustainability infuential communicator and negotiator.
considerations and other stakeholder
interests. Te focus on sustainable value CFOs may also take on oversight respon-
creation and preservation requires CFOs sibility for other organizational func-
to strike a balance between coping with tions and aspects, such as infrastructure
volatility, uncertainty, and short-term management, IT, human resources and
pressures and executing the long- term payroll, operational responsibilities, and
vision and objectives of the organization. administration. Tis is ofen the case
in small- and medium-sized organiza-
CFOs need to develop efective partner- tions, where CFOs frequently need to
8
ships with other members of the leader- fulfll various roles and responsibilities.
ship team, creating a common vision
and view of organizational performance An expanded operational role has led
and challenges and opportunities. Other to some CFOs taking responsibility
members of senior management ofen for traditional chief operating ofcer
see the CFO as the voice of reason and functions. Tis broader operational
refective second thought, and as pro- remit provides opportunity for CFOs
vider of alternative options. Te role of to align support functions and cre-
CFOs is also outward facing, involving ate high levels of efectiveness and
various stakeholder relationships and efciency by ensuring that processes
engagements, including with the external transcend functional boundaries and
auditor, investors and analysts, banks, are integrated to better support business
regulators, government, industry, and needs and objectives (see Principle D).
trade groups. Te range of internal and
external stakeholders CFOs work and
8 IFAC, Te Crucial Roles of Professional Accountants in
build efective relationships with is large Business in Mid-sized Enterprises (2008).

CFOs have to position themselves as primary drivers of corporate strategy along with
CEOs. Tey have to work as a strategist rather than a tactician to ensure the fnancial
health and sustainability of their organizations and, most importantly, to ensure that
shareholder expectations are met.
— Dr. Murtaza Abbas, CFO, Siemens (Pakistan) Engineering Company Limited
 Principles Guiding the Role and Expectations of a CFO 11

Principle 2

Te CFO should balance the responsibilities of stewardship with those

of business partnership.

Te CFO role requires an appreciation of the importance of the dual aspects of

conformance and performance. Conformance includes providing stewardship
of organizational assets and ensuring that the organization conducts itself in
accordance with relevant legal and regulatory requirements. Performance includes
helping the organization develop strategy, obtain resources, and deliver its strategic
objectives sustainably. Tese diferent and distinct facets of the CFO’s role need
to be undertaken with integrity and without compromising one another.

9
While the nature of the role gives CFOs objectives. Stewardship responsibilities
a good vantage point within the orga- include being a custodian of corporate
nization, it brings with it particular governance in conjunction with the CEO
responsibilities and challenges. Tese and company secretary where one exists,
include ensuring that stewardship aspects asset stewardship, fnancial planning and
of the role do not compromise, and are analysis, organizational reporting and
not compromised by, the increasingly transparency, and tax and treasury.
important aspect of business partner-
ing, and that CFOs retain credibility Te governance role of the CFO is
and the ability to deliver both aspects multi-faceted and governance practices.
of their responsibilities efectively. Some aspects of the role may require a
broad range of skills and competences.
CFOs’ stewardship responsibilities have In general, the governance role covers:
become ever more complex, particularly • the CFO as executive support
where they deal with diferent account- to the board of directors in the
ing, tax and treasury, regulatory, and legal provision of fnancial and non-
environments across multiple jurisdictions. fnancial information, both historic
and forward looking to support
Stewardship involves directing and over- the board’s decision making;
seeing various “hygiene factors” that are • the CFO as support to CEOs — for
critical to ensuring an organization safe- example, it is usual to see both
guards its assets against abuses and does the CEO and CFO presenting the
not lose its license to operate. Stewardship organization’s results to inves-
depends on efective governance, including tors and other stakeholders; and
risk management and internal control, that
supports the organization in achieving its 9 IFAC, Evaluating and Improving Internal Control in
Organizations (2012).
12 The Role and Expectations of a CFO

• the CFO as an active participant in Te duties of a CFO appointed to his/

the organization’s investor and stake- her organization’s board extend to the
10
holder relations engagement strategy. whole organization; his/her duties are
not limited to those of his/her individual
Te CFO may also be a director of a 11
executive role. In such cases, it is
company with statutory duties. In some sometimes recommended that the CFO
jurisdictions, it is standard governance takes up a non-executive director posi-
practice for boards to comprise both tion on another board to broaden his/her
executive and non-executive directors, and understanding of board responsibilities.
for the CFO to be appointed to the board. In some jurisdictions, such as the US,
Tese boards are referred to as unitary the number of CFOs who are directors
boards. CFOs who are directors should of their own boards is in decline, refect-
be aware of their legal responsibilities and ing a general trend for greater board
fduciary duties while driving processes independence with the CEO as the only
to help other directors and management executive director on the board.
12

understand and take responsibility for

fulflling their duties to the organization
and its shareholders and stakeholders. 11 Financial Reporting Council, Guidance on Board Efective-
ness (2011).
12 Maxwell Murphy, “A Waste of a Board Seat,” Wall Street
10 CGMA, Governing for Performance, 2012. Journal, October 15, 2012.

Te CFO is the key person in supporting management teams to make strategic

decisions on how the organization will sustainably create value. Although providing
fnancial and non-fnancial information and analysis is part of the role, and plays to
the traditional strength of professional accountants, a CFO is expected to contribute
to strategic and management thinking as the partner to the business unit heads. At
the end of the day, the organization and CFO are judged on the success or failure of
the strategic choices made.
— Ed Lam, chief fnancial ofcer, Li and Fung
 Principles Guiding the Role and Expectations of a CFO 13

While fulflling a stewardship role, Tis awareness leads to more efec-

CFOs are also expected to help drive tive business partnering with the CEO
the performance of the organization by and leadership team, and being able
participating in strategy development to add greater value to business seg-
and validation, implementation, and ments and operational units. Business
evaluation. In strategic performance partnering includes supporting oth-
management, CFOs need to ensure that ers to deliver strategic and operational
the F&A function supports strategic and objectives, whether around market,
operational functions and the delivery of cost, or innovation leadership.
business objectives and provide greater
visibility and understanding of perfor- Efective business partnering involves
mance. Providing greater insight on busi- managing collaborative relationships and
ness performance also typically requires potential conficts, and being a trusted
CFOs to oversee data and information and proactive partner in decision mak-
management, including implementation ing. Business partnership and steward-
of information systems, business intel- ship responsibilities can be likened to the
13
ligence, and data mining. Ultimately, accelerator and brakes on a car, which are
CFOs need to go beyond delivering both needed and not in confict with one
numbers and information to delivering another. Safeguards need to be built into
insights into performance and the fac- organization design, reporting structures,
tors afecting it. For CFOs in technology and professional development to deal with
companies, data and performance analy- all the risks associated with driving busi-
sis can be a signifcant part of the role.
14 ness performance and growth, particularly
with short-term business objectives in
Delivering business insights requires mind. Managing cultural clashes between
CFOs to have a good understanding diferent parts of an organization can also
of the external and internal business be critical, such as those that may arise
environment, including the complexi- between the team responsible for ideas
ties and challenges faced by various and innovation and the F&A function,
organizational functions as well as which might apply traditional fnance
by the organization as a whole. metrics and decision rules to early stage
ideas rather than more fexible portfolio
15
13 IFAC, Predictive Business Analytics: Improving Business approaches to project evaluation.
Performance with Forward Looking Measures (2011)
14 David McCann, “A New Breed of CFO,” CFO Magazine, July 15 CGMA, Managing Innovation: Harnessing the Power of
25, 2013 Finance (2013)
14 The Role and Expectations of a CFO

Business partner:
Driving proftable
growth

Steward: Ensuring
business integrity,
fnancial health,
and control

The partnership and stewardship roles should have a dynamic, complementary relationship.

As business partners, CFOs need to with expert-level business acumen.

be alert to situations that might com- Providing collaborative challenge to
promise their professional objectivity. peers requires a business understanding
Te most efective safeguard against and intimacy that extends beyond an
accountability confusion arising from understanding of fnancial performance.
potential tensions between stewardship
and business partnership is to adopt a CFOs should be able to balance and
business mindset without sacrifcing the manage both stewardship and business
objectivity and skepticism that CFOs partnering without compromising their
require to persuasively challenge poten- responsibility to connect, support, and
tially imprudent managerial decisions. challenge the organization. Tis improves
Te training professional accountants the quality of important decisions to ensure
bring to the CFO role is an advantage business strategy delivers the highest fnan-
in terms of uniting an ethical mindset cial value at an appropriate level of risk.

Finance has a seat at the table in the management team of the business; however, we
have to prove our value every day. Te fnancial professional has to fnd the balance
between supporting the business and challenging where necessary, which involves
holding up a mirror to business colleagues. Efective business partnering requires
a combination of a straight back and commercial insight.
— Hein van den Wildenberg, vice president, control, governance, risk and assurance,
16
Shell

16 Nederlandse Beroepsorganisatie van Accountants,

“Hein van den Wildenberg: ‘Ik geloof in evolutie’”,
July 16, 2013.
 Principles Guiding the Role and Expectations of a CFO 15

Principle 3

Te CFO should act as the integrator and navigator for the organization.

With their broad perspective of the organization and the environment in which it
operates, CFOs need to help their organization navigate through the processes and
challenges of strategy development, management, and execution. As integrators and
navigators, CFOs should facilitate the sustainable creation of value by helping to
ensure that their organizations incorporate or integrate economic, environmental,
and social factors at all levels of decision making and reporting.

To perform efectively as integrators and enables an understanding of how things

navigators, CFOs need to be positioned infuence one another within a whole and
centrally, alongside the CEO, in the emphasizes the relationships among a
strategic management of the organiza- system’s parts, rather than the parts them-
tion. Tis involves being able to facilitate selves. Good governance afects the entire
a common and unifying perspective on organizational cycle of strategic plan-
an organization’s strategic objectives, ning, resource utilization, value creation,
opportunities and threats, business model, accountability, and assurance and can
and critical success factors — includ- lead to cheaper and broader-based capital.
ing resources, capabilities, and compe- Adopting a holistic approach ensures that
tences — needed to deliver the strategy good governance and risk management are
in relation to changing circumstances not “bolt on” but “built in” — integrated
17
and environmental factors and trends. into all aspects of an organization.

CFOs can leverage their broad perspective Situated at the intersection of strate-
of the organization, and their understand- gies, processes, and information, CFOs
ing and experience, to ensure that their need to lead and coordinate high-quality
organization identifes and addresses communications and reporting through
18
relevant factors. Such factors include efective reporting processes. Enhanced
competitor and market dynamics, tech- forms of business reporting, including
nological change, and innovation in the integrated reporting, can be used as part
course of strategy development, manage- of an efective communications strategy
ment, and execution, as well as facilitat- for an organization to address the increase
ing the sustainable use of resources. in the volume and frequency of informa-
tion made available. It helps to ensure that
CFOs can facilitate integration within investors and other stakeholders gain more
organizations by applying a “systems think- insight and understanding of the organiza-
ing” approach to implementing governance, tion’s current and future performance.
management, and reporting processes, such
as risk management, internal control, and 17 IFAC, Integrating Governance for Sustainable Success (2012).

business reporting. A systems approach 18 IFAC, Principles for Efective Business Reporting Processes
(2013).
16 The Role and Expectations of a CFO

Te broad-based experience acquired by a professional accountant is sound prepara-

tion for the CFO to lead the integration across the entity, supporting the alignment of
resources with strategic choices and ensuring the organization understands fully the
performance and outcomes of such choices as part of a continuous review cycle. Te
forthcoming integrated reporting requirements will be a new challenge for us all in
helping organizations understand and embrace the spirit of sustainable thinking and
actions.
— Alan Johnson, CFO, Jerónimo Martins

Corporate responsibility, or sustain- at engaging a wider range of stakehold-

ability, is becoming a key consideration ers and bringing diferent parts of an
for management action in terms of how organization closer together, such as
to integrate economic, social, and envi- through efcient integration of business
ronmental factors in interactions with processes, to improve connectivity and
stakeholders and business practices. understanding of the drivers of value.
CFOs should be well placed to take on By bringing together various business
responsibility in this area, particularly functions, processes, and systems, CFOs
in integrating and connecting fnancial can also better support the information
and non-fnancial performance. Tis needs of governing bodies, manage-
responsibility requires them to be adept ment, and external stakeholders.

CFOs Increasingly in the Driver’s Seat on Sustainability

In a 2012 Deloitte global survey, 26% of CFOs reported that they are the person in
the organization who is accountable to the Board for their company’s sustainabil-
ity strategy — a nine point increase over 2011. A majority of CFOs (53%) said their
involvement in sustainability increased in the past year; even more (61%) expect
greater involvement in sustainability in the next two years.
 Principles Guiding the Role and Expectations of a CFO 17

Principle 4

Te CFO should be an efective leader of the F&A function.

Te CFO needs to lead an efcient and efective F&A function, guiding the organiza-
tion to efciently use resources at the same time as delivering value to its customers.
Te CFO should be able to assess and optimize the benefts, and manage the chal-
lenges, arising from trends, such as centralization, outsourcing, and ofshoring of
the F&A function, while ensuring that fnancial talent and capability is retained
and groomed within the organization.

Providing leadership to the F&A function role, establishing strong and competent
involves developing and implementing a leadership to oversee the various elements
vision on what it should look like in terms of the F&A function is a critical task.
of structure and service delivery, and
how it can meet the needs and expecta- As part of F&A leadership, it is impor-
tions of the organization. A vision and tant to have a core of F&A professionals
service delivery model typically involves who have undergone appropriate profes-
managing the cost base, at the same time sional accountancy or related training
as sustaining growth strategies by provid- and qualifcation programs, and who
ing business insight to support decision have a good understanding of the current
19
making. CFOs are expected to ensure the requirements of fnancial reporting and
20
F&A function delivers proactive business related compliance work. CFOs also need
partnering and serves as a role model for to consider how greater diversity and range
other functions in the areas of transpar- of competences can enhance the contribu-
ency, quality, ethics, and innovation. tion of the F&A function. Tis may involve
recruiting individuals from diferent
Aligning the F&A function with deliv- sectors, with diferent backgrounds and
ering the organization’s objectives experiences, who can fulfll the expand-
involves developing an efective talent ing, and increasingly complex, roles
recruitment and management strategy and responsibilities of F&A functions.
to attract, develop, and retain fnance
talent and the skillsets required to sup- Career paths within F&A in many
port stewardship and business partner- organizations are becoming less clear,
ship responsibilities. To create time for particularly driven by the utiliza-
the broader responsibilities of the CFO tion of shared business services and

19 Association of Chartered Certifed Accountants and the 20 IFAC, Integrating the Business Reporting Supply Chain
Institute of Management Accountants, Finance Leaders (2011), Recommendation: A Minimum Level of Qualifcation
Survey Report: December 2012. Should Be Required for Preparers of Financial Information.
18 The Role and Expectations of a CFO

outsourcing. Many global organiza- more time for the retained F&A func-
tions strive for a unifed F&A service tion to focus on business partnership,
delivery model and, increasingly, a they have also given rise to some poten-
unifed wider-business service delivery tial challenges CFOs have to manage.
model where transactional fnancial and Tese include balancing cost reduction
other operational processes and activi- pressures with service delivery quality,
ties are centralized and standardized. securing operational improvements when
process ownership does not transcend
Centralization has coincided with functional boundaries, and managing
trends toward outsourcing and ofshor- talent and career pathways that might be
ing. Although these trends have created fragmented as a result of outsourced or
signifcant opportunities for streamlining disjointed service structures.
and increased efciency, and providing

At Unilever we operate a hybrid model, using a number of business process outsourc-

ing relationships to provide transactional fnance activities, but also we are now
setting up operating centres that ofer fnance services further up the value chain to
the organisation to drive the efectiveness of our fnance operations.

In terms of the talent challenge there are some issues from the operating centre
perspective — our work is focused on higher-value fnance activities and, as we have
moved in country fnance operations and centralised them, we have lost some expe-
rienced F&A people. So, trying to recruit that level of fnance “capability” and tacit
knowledge into the centre is always going to be a challenge. It’s about counter- bal-
ancing losing the tacit knowledge in the retained fnance function/in country by the
benefts and expertise you get from standardisation and centralisation in the operat-
ing centres. Our aim is to build and retain valuable deep Unilever accounting knowl-
edge in conjunction with centralised fnance models, standardised fnance processes,
and increased automation.
21
— Arnold van Boven, director fnance and accounting operation, Unilever

21 Association of Chartered Certifed Accountants,

Talent and Capability in Global Finance Functions
(2013).
 Principles Guiding the Role and Expectations of a CFO 19

CFOs are, therefore, expected to assess and the development of sufcient knowledge
optimize the benefts and address the chal- and expertise for both stewardship and
lenges deriving from these changes. Tey business partnering responsibilities.
need to ensure that a sufcient number of
talented professionals are available in the Facilitating the engagement of F&A with
organization and, where appropriate, are the rest of an organization is critical to
groomed for senior roles. Some CFOs are enhancing trust and credibility. A key
challenging their organizations’ approach challenge is lack of interaction beyond
to managing F&A operations through the F&A function to arrive at a shared
outsourcing and ofshoring arrangements, view on how F&A activities meet busi-
particularly as the economics of alterna- ness needs. Efective business partnering
tive operating models (e.g., outsourcing requires frequent and proactive commu-
versus insourcing) and the extent to nication between line managers and F&A
which the activities are crucial to day- staf, far beyond the limited interaction of
to-day operations, impact decisions.
22 periodic reporting. Applying “lean think-
ing” principles (delivering customer value
In an organization where core F&A without waste) can help to better meet the
processes have been outsourced, CFOs needs of the organization. Tis involves
ofen need to combat an “us versus identifying those organizational objectives
them” culture that can develop between and departments that the F&A function is
those in a shared service center and serving and building efective and infu-
those within the retained F&A func- ential relationships with them, including:
tion. In addition to ensuring quality • operations — enhancing operational
control over outsourced work, CFOs and supply chain efectiveness;
need to ensure that career paths allow • marketing and branding — assess-
ing the return on marketing
22 Kathleen Hofelder, “Controllers Eye Alternatives to Out-
sourcing,” CFO Magazine, November 14, 2012 and brand investment; and
20 The Role and Expectations of a CFO

• research and development Efective leadership also involves ensur-

(R&D) — ensuring efective invest- ing the F&A function is adaptive and
ment in R&D and innovation. changes as the organization and its needs
change. Tis requires embracing more
A customer-focused approach helps to dynamic and responsive approaches to
ensure the F&A function delivers its planning and performance management
products and services efectively and that enable the organization to respond
efciently in a way that meets the needs to the uncertainties of a rapidly chang-
of the organization without compromis- ing business environment that afect key
ing the integrity and objectivity that business drivers, such as product/service
stakeholders expect to be refected in demand, resource input, prices, and
23
the work of the F&A function. availability. CFOs will also have to increas-
23 Institute of Chartered Accountants in England and Wales, ingly exploit and feel comfortable with
Special Report: Lean Tinking (2012). Also see the UPS case
study on customer and stakeholder focus from the perspec-
new technologies that enable new ways
tive of the CFO in Integrating Governance for Sustainable of working, such as real-time reporting.
Success (IFAC, 2012, p. 21).

It is critical that the Board and the senior management of the organization realize the
evolving contribution of the fnance-business partnering. Only through this partner-
ship relationship the CFO and his/her team could deliver results and meet expecta-
tions of internal customers arising from the ever changing business dynamics and the
fast moving economic cycles. On this, the CFO also has to fulfll a leadership role to
help establishing business visions and values, organizational structure, culture, and
mindset for the organization to deliver results.
— William Lo, executive director — fnance, Airport Authority Hong Kong
 Principles Guiding the Role and Expectations of a CFO 21

Principle 5

Te CFO should be a professional and bring professional qualities to the role

and the organization.

CFOs should bring professional qualities to their role and encourage ethical behavior
and decision making throughout an organization to ensure sustainable value cre-
ation. In performing the CFO role, professional accountants are anchored by their
fundamental principles of integrity, objectivity, professional competence and due care,
confdentiality, and professional behavior.

Strong ethical leadership and good gov- objectivity, in addition to business acumen
ernance are prerequisites for sustainable and business partnering skills, in CFOs.
value creation and require organizations
to go beyond compliance with laws and CFOs have a shared responsibility to
regulations. Organizations that do not act ensure the entire organization is attuned
ethically eventually lose their “license to to high ethical standards and aligned
operate” with the resulting failure likely to with the values, goals, and objectives of
have an impact on a variety of stakehold- the organization. Foremost, CFOs should
ers. An ethical culture and accountability help to set the tone at the top by display-
starts with the tone-at-the-top and an ing and encouraging professionalism and
ethical mindset applicable to all parts of an ethical behavior. Tey can encourage an
organization. CFOs’ most important lead- ethical culture in their organization and, if
ership capability is viewed as their ability need be, encourage senior management to
to demonstrate integrity, both in their proactively demonstrate the importance the
24
words and actions. External stakeholders, organization places on ethical behavior. Te
such as investors, increasingly place weight right tone at the top permeates throughout
on ethical leadership and good gover- and organization and can be facilitated by a
25
nance and they value professionalism and prominent values-based code of conduct.

24 Financial Executives International (Canada), Beyond the 25 IFAC, Defning and Developing an Efective Code of Con-
Numbers: Te Evolving Leadership Role of the CFO, (2011). duct for an Organization (2007).
22 The Role and Expectations of a CFO

New Brooms Sweep Clean

We need to make sure corporate governance clearly defnes the mandatory boundar-
ies, but then — at the same time — it needs to provide space for responsible entrepre-
neurial behavior. Tere are a few overarching principles:
• focus on the longer term;
• work on the real and sustainable values; and
• consider the interest of stakeholders.

Compliance is not a program, but the foundation of sustainable business. We defne

clear responsibility and accountability aligned to our organizational structure and our
chain‐of‐command processes accordingly.
26
— Joe Kaeser, former CFO and current CEO, Siemens
26

A key advantage and added value that such as ensuring information is

professional accountants bring to the prepared fairly, honestly, and in
role of CFO are their ethical standards accordance with relevant professional
and professionalism, which are governed standards, regardless of whether
by the International Ethics Standards it forms the basis of management
Board for Accountants’ Code of Ethics information or external disclosures.
for Professional Accountants or equiva- • Objectivity: not allowing profes-
27
lent national codes. Troughout all the sional or business judgments to be
activities they perform as CFOs and in overridden by bias, confict of inter-
diverse settings, professional accoun- est, or the undue infuence of oth-
tants are anchored by their fundamen- ers and taking reasonable care and
tal principles of integrity, objectivity, judgment to maintain objectivity in
professional competence and due care, the CFO’s professional activities.
confdentiality, and professional behavior • Professional competence and due care:
that apply in performing a CFO role. maintaining professional knowledge
• Integrity: being straightforward and and skills to ensure the organization
honest, which provides the basis of receives professional and competent
transparency and can be applied service based on the requirements of
to various aspects of the CFO role, various aspects of the role. In rela-
tion to stewardship, this will involve
ensuring information fairly represents
26 IFAC, “Interview with Joe Kaeser: New Brooms Sweep
Clean,” Financial Reporting Supply Chain Teme 1, the performance and condition of an
June 1, 2010.
organization, and complies with all
27 International Ethics Standards Board for Accountants,
Code of Ethics for Professional Accountants (2013). applicable legislative requirements.
 23

As a business partner, professional Applying professional qualities, such as

competence extends to doing one’s professional judgment, can involve recon-
utmost to ensure that the goals of ciling conficting commercial, fnancial,
the organization are delivered. sustainability, and stakeholder interests.
• Confdentiality: not disclosing or Tensions and conficts can arise at all levels
using confdential information and, therefore, CFOs will increasingly need
acquired as a result of a profes- to apply their professional qualities and
sional and business relationship ethical leadership in support of sustainable
outside the organization without value creation. Tis may involve question-
authority or a legal or profes- ing decisions that appear to be directed at
sional right or duty to disclose. short-term gain at the expense of longer-
• Professional behavior and profes- term objectives or those decisions made for
sionalism: not engaging in any action personal gain. CFOs are also expected to
that discredits the accountancy apply their judgment to balance a need for
profession and the CFO’s professional organizational nimbleness, which requires
reputation. Professional behavior quick and intuitive decision making, with
requires compliance with relevant a need for evidence-based decisions. Tese
laws, regulations, and professional characteristics are central to the distinctive
and ethical standards and being attitude, outlook, or way of thinking that
guided by the spirit of those laws and should be the mindset of an experienced
regulations as well as the wording. professional accountant in business.

With the move toward business partnering, there is a potential threat to fnance pro-
fessionals as they may lose objectivity. However, this should not be a concern where
the organization’s fnance staf are professional accountants and retain their member-
ship in an accounting institute, complete their continuing professional development
obligations, and comply with its professional code of ethics.
— Keith Luck, strategic programmes director, Serco plc and deputy president, Char-
tered Institute of Management Accountants
 Recommendations for the Accountancy Profession and Employers of Professional Accountants 25

Recommendations for
the Accountancy Profession
and Employers of
Professional Accountants
To fulfll the expectations placed on Te accountancy profession and employers
CFOs and efectively operate as a key can take the following actions to help pro-
member of the leadership team, CFOs, fessional accountants leverage their techni-
and professional accountants aspiring to cal knowledge and professional skills, and
become CFOs, need a broader perspec- prepare for a strategic leadership role.
tive and a wider set of capabilities and
skills than those needed for carrying out For Professional
only core F&A responsibilities. From Accountancy Organizations
an individual perspective, professional 1. Identify and address any signifcant
accountants need to consider how to gaps between the skills organizations
develop the necessary competences for expect of their CFOs and fnance
fnance leadership, such as through leaders and the qualifcation and
appropriate education and experience, and professional development of accoun-
lifelong learning that can be enhanced tants. Bridging any identifed gap
through mentoring and coaching, work- can involve PAOs reviewing multiple
ing closely with others, and networking. aspects of the work they do, including
engaging with various stakeholders to
A research report from Robert Half
ensure that the qualifcation, train-
Management Resources reports that
ing, and continuing development of
a third of surveyed executives fnd
professional accountants adequately
it difcult to source candidates with
prepares them for fnance leadership.
the right experience to implement a
28
business partnering approach. 2. Proactively engage with employers
and business communities to under-
stand their needs and requirements,
particularly in relation to supplying
28 Robert Half Management Resources, Business Partnering
Report 2013, 2013.
relevant candidates for CFO and
26 The Role and Expectations of a CFO

other fnance leadership roles. A deep their long‐term careers, without

awareness and understanding of these compromising the fundamental F&A
needs informs the decisions PAOs and human skills that form the basis
make in relation to the content and of professional accountants’ core
delivery of their educational frame- competence. Te core competencies
works and support services, qualifca- for Certifed Public Accountants
tions, and training at both a pre- and (CPAs) identifed in CPA Horizons
post-certifcation level. Employer 2025 are communications skills,
engagement also allows PAOs to leadership skills, critical-thinking
facilitate employers’ understanding of and problem-solving skills, antici-
the benefts that professional accoun- pating and serving evolving needs,
tants can ofer in fnance leadership synthesizing intelligence to insight,
30
roles. Tis can involve promoting and integration and collaboration.
employers’ awareness of the on-going Topics and issues that are relevant to a
support provided by PAOs to mem- career in business or the public sector,
bers, including keeping members’ which are also relevant to aspiring
knowledge current and providing CFOs and fnance leaders, include:
business networking opportunities, • corporate responsibility
which has correlated benefts for and sustainability;
employers of professional accountants. • leadership, people, and
3. Ensure that the scope of qualifca- change management;
tion and training of professional • managing and dealing
accountants incorporates broader with uncertainty;
professional and interpersonal capa- • strategic management
bilities and skills, which will need and planning;
to be further developed and refned • corporate fnance;
29
throughout a career. Although these • performance management;
capabilities and skills will mainly be • operations;
developed afer certifcation, the foun- • relationship and project
dation for their development should management;
be covered in accounting education • marketing; and
and training. Attention should be • information technology
given to defning the competency and systems.
requirements accountants need for 4. Foster and encourage a commitment
to lifelong learning among profes-
sional accountants. Although it is
29 International Education Standard (IES) 3, Initial Profes-
sional Development — Professional Skills, provides the the responsibility of the professional
range of professional competence areas and related learning
outcomes needed by professional accountants to demonstrate accountant to develop and maintain
competence. IES 3 was revised and released as an Exposure
Draf in 2012. Details on the revised standard, including
tentative timing for fnal publication, are available on the
International Accounting Education Standards Board 30 American Institute of Certifed Public Accountants, CPA
website. Horizons 2025 (2011).
 Recommendations for the Accountancy Profession and Employers of Professional Accountants 27

professional competence through • Promoting and supporting

continuing professional development credentials specifcally for profes-
(CPD) and education, PAOs can sional accountants in business.
facilitate access to CPD opportuni- • Providing a broader range of
ties and resources, and adopt pre- specifc CPD courses and train-
scribed requirements relating to the ing opportunities that help
development and implementation of prepare aspiring accountants to
appropriate measurement, monitor- senior leadership roles, assisting
31
ing, and compliance procedures. in development of business skills
Te Internet and mobile technologies needed to be an efective CFO.
also enable professional accountants Tese are ofen delivered through
to engage in education whenever and collaboration arrangements
wherever it is needed, which pres- with third party institutions
ents an opportunity for PAOs to be and education providers, such
more innovative in how they support as university business schools,
their members in lifelong learning. providing access to relevant
5. Engage more efectively with profes- postgraduate educational pro-
sional accountants in business. An grams that can assist preparation
increasing number of PAOs provide for management leadership.
specifc and targeted support struc- Some PAOs currently do not admit profes-
tures and services to help their prepa- sional accountants in business as members.
ration for senior fnance leadership Tese PAOs also have the opportunity
positions. Various approaches include: to help prepare professional accountants
• Establishing, within the PAO, who wish to move into fnance leader-
dedicated governance-support ship for the challenges they will face in
structures for professional working in an organizational context.
accountants in business to help
identify and deliver appropriate
For Employers of
support and development activi- Professional Accountants
ties (e.g., establishing professional
1. Develop closer relationships with
accountant in business-focused
PAOs and other education provid-
faculties, interest or advisory
32 ers to help ensure that professional
groups, and committees).
accountants in the organization are
able to provide efective support
and maximize their potential and
the value they add to the organiza-
31 IES 7, Continuing Professional Development (Redrafed),
prescribes the necessary continuing professional development tion. Where appropriate, establish
(CPD) for professional accountants required to develop and
maintain their professional competence so as to provide high
targeted training schemes to sup-
quality services to clients, employers, and other stakeholders. port the qualifcation and training
32 IFAC, Establishing Governance: A Guide for Professional
Accountancy Organizations (2013).
of professional accountants in the
28 The Role and Expectations of a CFO

business environment to facilitate placements or exposure to broader

the preparation of individuals that commercial and operational roles is
bring the relevant skills, competency, essential. According to the research
and experience into the workplace report Future Pathways to Finance
from the outset of their careers. Leadership, of nearly 750 CFOs
2. Ensure that investments in training surveyed worldwide, the majority
and development go beyond devel- (61%) have never taken roles outside
oping technical skills, particularly of the fnance team, spending their
for prospective fnance leaders. careers entirely within the boundar-
34
Development needs should cover ies of fnance. Tis represents an
the acquisition of leadership and on-going challenge for fnance leaders
analytical skills and the behavioral in developing their commercial acu-
competence and cultural mindset men and understanding, and suggests
required to be successful outside much of these developments takes
of a specifc job or role, which can place in the role as CFO, rather than
all be molded and enhanced by during the career journey. Rotation
exposure to non-fnance areas of an through, or exposure to, business sup-
organization, such as operations and port services might also be a critical
sales. Although poor interpersonal part of developing career paths for
skills are ofen the main reason for fnance leaders. Tis recognizes that
an employee’s failure to advance in prospective CFOs must also under-
an organization, organizations are stand business service operations and
far more likely to ofer training in how the business operates to provide
more technical categories — account- products and services to customers.
ing or fnance, and information 4. Develop human resources develop-
33
technology — than in sof skills. ment strategies that respond to the
3. Where feasible, provide job rota- complexity of global F&A functions
tion and placements around various that might spread across geographies
parts of organization to help pro- and, therefore, need to deal with
vide professional accountants with language and cultural diferences,
wider business understanding and and virtual teams located disparately.
further develop their business acu- In this context, the efective delivery
men. Afer starting a career in one of training and development ideally
of the key parts of the F&A function requires a combination of face-to-
(e.g., planning and control, decision face development time, on-the-job
support, treasury, tax, internal audit, learning, coaching, and mentor-
accounting operations, etc.), job ing, as well as digital and real-time
approaches that allow fexibility for

33 Neil Amato, “CFOs say sof skills are needed, but many 34 Association of Chartered Certifed Accountants and Institute
aren’t ofering training in them,” CGMA Magazine, July 1, of Management Accountants, Future Pathways to Finance
2013. Leadership (2013).
 Recommendations for the Accountancy Profession and Employers of Professional Accountants 29

F&A professionals to access learn-

ing according to their preferences
and needs. CFOs should also look
to support training programs or
learning interventions put in place to
facilitate the development of fnance
careers and future fnance leaders.
5. Capitalize on professional accoun-
tants’ training in, and understanding
of, ethical conduct by, for example,
encouraging them to share their
knowledge and professional stan-
dards and guidance with others in
the organization, including in the
context of developing organizational
codes of conduct and ethics.
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