11/15/2021 | News release | Archived content
The rapid modernization of the CFO and finance function provides significant opportunities to accelerate the value contribution of professional accountants to business success.
In 2019, IFAC set out a vision for future-fit CFOs and finance functions in the context of significant societal and business transformations driven by digital and sustainable development.Since then, the COVID-19 pandemic has greatly accelerated digital and workplace transformation and elevated sustainability and climate action into the spotlight. Concurrently, CFOs and finance functions have had a central role in helping organizations navigate through the crisis and its operational and financial implications.
The recent period of crisis management is turning into recovery involving fundamental shifts in how work gets done and how value is created for key stakeholders (customers, employees, investors, society), the planet as well as the organization itself.
Consequently, professional accountants in business are more deeply involved than ever before in navigating organizations through opportunities and threats to value creation arising from various areas including climate action and environmental, social and governance factors, supply chain, changing consumer preferences, and digitalization and decentralized finance.
The key message from IFAC's recent Professional Accountants in Business (PAIB) Advisory Group meeting, including two excellent sessions with Reliance Industries and Standard Chartered Bank, is that CFOs and finance functions are more strategic and focused on critical decisions around business and operating model transitions and disruption that require the involvement of multiple stakeholders, collecting data from various sources, applying advanced analytics and analysis, and dealing with complex issues and solutions. This requires a significant shift from "business partnering" to "value partnering".
Value partnering involves a much more strategic contribution with a relentless focus on activities and actions that enable value creation for the organization, customers and other stakeholders. This means finance teams must understand how the organization creates value and provide information and analysis to help maximize value. This is at the heart of the chief value officer mindset that CFOs and finance and accounting professionals need to adopt to elevate their role.
The CFO and finance function's strategic focus on higher value activities covers various areas from leading or enabling transformation initiatives within the function and across organizations, ensuring sustainability objectives are integrated and aligned to business priorities and decisions, and leading other functions and business units towards achieving value creation priorities.
Mastering Change: The New CFO Mandate
McKinsey's latest research of 351 finance leaders in March to April 2021 highlights that CFO responsibilities have grown in a few important areas. Between 2016 and 2021, the share of finance leaders who say they are responsible for their companies' digital activities has more than tripled. Investor relations has also grown dramatically as an area of focus, as well as their role in aligning ESG programs to strategic and financial objectives.
Capturing the Value Partnering Role of CFOs and the Finance Functions
The PAIB Advisory Group highlighted the following key features of the modernization of the role of the CFO and finance function in a value partnering role:
For PAIBs, achieving value partnering involves
Example: Prudential Financial's Finance Forward transformation program involved focusing on talent management, and experience working outside the finance function and making an impact throughout the organization to change customer outcomes and increase market competitiveness.
Example: Maersk. As a partner, the finance team must "challenge and own" through being an active member of business teams, influencing decision making by driving performance management discussions and taking ownership and responsibility for decisions.
Example: the digital solutions enabled by agile management approaches that are modernizing source-to-pay processes connect finance more closely to other functions and processes to deliver greater value to customers. The PAIB report Enabling Purpose Driven Organizations, highlighted how procurement and supply chain models are dramatically changing the role of finance functions in this area.
Example: For Reliance Industries, delivering on its net carbon-zero commitment and strategy is an opportunity to become one of the world's leading new energy and new materials companies. Achieving this involves a business model transition and significant investments in talent and partnerships, research and development (R&D) and innovation to decarbonize its operating model.
Example: The finance team in Pakistan International Airlines collaborated with business operations to understand route profitability. Using simulation models, the team examined cost and revenue drivers, and benchmarked competitors to determine actions to improve profitability or where to shut down routes.
For further insights from IFAC's PAIB Advisory Group, see the meeting report: The Role of Accountants in Mainstreaming Sustainability in Business