As the business world veers towards constant changes--be it on technological advancements, regulations and policies, or sustainability standards and initiatives, finance leaders must know their way.
The Finance function undoubtedly undergoes several transformations to keep up with the pace and changes, and chief financial officers are now faced with the inevitable task of fulfilling roles within their organisations that they may not have signed up for initially.
CFOs work in their roles as strategic advisors to the C-suite team, with specific strategies at hand to employ and drive business growth and innovation.
For Danny Ho, chief financial officer at Sa Sa International Holdings Ltd., the evolution of the role of CFOs has accelerated following the COVID-19 pandemic and incumbents are having to adapt quickly, otherwise they'll face being left behind.
Partnering with other C-suite executives
To be able to adapt to the shifts, Ho takes note of the fact that CFOs often have a seat on the Board and are required to act as the CEOs' business partners working hand-in-hand to steer the company through the current economic climate.
"‘Partnering’ is nothing new," says Ho. "What’s new is the extent and how far that reaches. CFOs are often asked to oversee additional functions on top of traditional finance and accounting."
This, according to Ho, can be any combination of investor relations, corporate communications, technology, procurement, legal and corporate service and, strategy and development.
"There is what I would call a Golden Triangle of critical knowledge and experience that comprises technology awareness, commercial acumen and numerical proficiency that is essential for navigating the business world," Ho explains. "Having one of the three would make you a useful contributor, having two of the three would make you an invaluable asset but having all three and you would surely be leading your enterprise into the future."
Ho adds that CFOs are in the fortunate position to be experts in numerical proficiency and with the opportunity to develop experience in the other two areas.
"With intimate knowledge of the company’s strategic direction but one step removed from the CEO role, CFOs are almost better positioned to see the end-to-end strategic implementation and cross-functional alignment that is required to succeed."
Driving digital transformation
Often responsible for the company’s core ERP system, Ho says CFOs are increasingly taking an interest in technology itself and helping to lead the company through the evolving technology landscape to a better future.
"Knowledge of ERP and internal back-end systems is no longer enough," says Ho. "The modern CFO develops knowledge in the second triangle, that is, he or she understands the consumer journey and the route-to-consumer, and can address how technology adoption can allow the company to ‘win’ in both these areas."
He takes note that front-end B2C systems such as CRM, and supply chain enablement systems such as QR codes can be of help for channel inventory tracking.
In addition to the digital shifts, Ho explains that given the numerical proficiency and access to data across the organisation, CFOs are best placed to manage data analytics centrally.
"We all know data is the new currency but having an effective data analytics function setup can be the difference between getting value from data or not," Ho says. "While Excel remains important, dashboards and visualisations set up on PowerBI that update in real-time can make all the difference and significantly raise the bar in terms of productivity."
Ho notes that CFOs, with their wider lens, can lead a team to draw insights from data to address specific strategic needs.
"There is a clear distinction between data analysis for analysis sake (e.g. 'sales of suntan lotion have increased 10% and gross profit percentage dropped 1%'), and data analysis that addresses commercial questions (e.g. 'after the price matching on one suntan lotion SKU our gross profit margin dropped 1% but our sales increased 10% and gross profit dollars increased'), while we recovered our market share."
Furthermore, Ho thinks they should look at price matching on another three SKUs and discontinue the bottom two SKUs. "This should lead to further market share gains and reduce inventory turnover days and investment."
However, Ho concedes that CFOs will find it challenging to scale the data analytics function without an understanding of data structures and data warehouses. "CFOs will find it even more challenging to move into the space of non-financial data and customer data platforms."
According to the Sa Sa International CFO, moving into these areas will enable the company to make faster and more accurate data-based decisions in daily business operations and improve cooperation between different functions; understand consumer purchasing behaviour; and identify emerging trends, spot risks and opportunities.
Innovation and planning
Part of the strategies to drive innovation in the business include external presence and taking a role in the industry. Ho explains that as a core stakeholder alongside the CEO, CFOs should be seeking to shape the industry they operate in taking an active role in the industry and society in general.
"This can take the guise of participation in industry forums and connecting with industry peers. This external lens can help CFOs better understand the industry and economic risks and opportunities, develop growth leads, introduce new vendors to reduce costs, attract talent and more."
Often with responsibility for investor relations, Ho says CFOs can help communicate their business to outside stakeholders and build the company brand.
Ho also highlights the importance of organisational planning, talent development and succession planning, explaining that this is often one of the most underestimated and overlooked areas of management due to a need to deliver short-term results.
"While primary responsibility lies with the HR function, they may not always have the commercial lens, knowledge of processes, understanding of emerging technologies or the strategic direction to make recommendations that will foster innovation and growth."
Ho believes CFOs can fill this gap and play a sounding board role with the CEO.
Cross-functional collaboration
"With our remit often covering oversight for strategy, technology and data, we are increasingly charged with the responsibility for championing the adoption of technology and ensuring company performance is benefitting in the present and into the future."
Ho says the CFO role typically involves orchestrating a coordinated approach across functions. "Orchestration at this level includes education, influencing, execution project management and performance reporting and other."
"As opposed to budgeting, I prefer to set ‘targets’', says Ho. "There is a fine line between the two but a very necessary one. Budgets encourage a ‘fixed mindset’ and caps under which we operate. Targets on the other hand encourage an ‘open mindset’ and for us to plan what we want to achieve backed up by clear action plans on what we intend to do."
Once results differ from expected, Ho says they can analyse and understand what did not go according to plan and whether they executed all actions as intended.
"With a rapidly changing external environment, it is near impossible to ‘budget’ for more than a month ahead, but we can plan actions and establish targets for a longer timeframe."
He adds that by adopting the Objectives with Key Results (OKR) framework, they can collaborate with and coordinate functions to achieve corporate goals, and measuring financial and non-financial results against target will help us to track progress and steer outcomes over time.
"Having a fit-for-purpose organisation design will determine how efficient your cost structure is, how effectively teams will work together, how quickly decisions are made and ultimately how far your organisation will grow."
Ho believes CFOs are uniquely placed to partner with HRDs to plan these structures or even lead the transformation given their intimate knowledge of strategic direction and available finances, critical roles and performance measures. CFOs can provide HRD with data-driven insights to inform effective workforce investment decisions, optimising remuneration and compensation structures, and improving employee productivity.
"CFOs can also take a leading role in the designing of incentive schemes which typically are numerically and strategically challenging. CFOs are taking a lead role in spearheading the adoption of new financial technologies, such as cloud-based enterprise systems, robotic process automation, and advanced analytics tools."
Danny Ho
Ho says leveraging their financial expertise to provide IT with a clear business case for technology initiatives can help to maximise the return on these investments.
"We also collaborate with or oversee IT to enhance data governance, security, and integrity, which are critical for reliable financial reporting and decision-making," Ho notes.
