From CFO to Chief Future Officer – so near, yet so far?

New study reveals the evolvingrole of the CFO to shape banks’ growth strategies

Bertrand Lavayssiere, managing partner at international financial management consultancy, zeb 

The role of the modern CFO appears to be changing. Where this role traditionally focussed solely on tasks such as management reporting, accounting and regulatory reporting, today’s CFO is now moving towards the larger role of a Chief Future Officer who contributes to creating value and shaping the future of the bank. Three quarters of CFOs and executives of large UK and European banks who took part in zeb’s proprietary research, see themselves as sparring partners of the CEO and the executive committee in driving strategic discussions, while only 4% solely deal with the “number crunching” at large.

However, despite this general shift, many CFOs struggle to balance their traditional activities with those that include strategic development. All too often major improvement projects and forward-looking analyses take second place behind mandatory standard tasks. As they see it, their traditional roles are:  preparation of the monthly and yearly statements, preparing the regulatory reports, preparing management dashboards, and piloting cost management exercises. The new components of their roles are emerging because of the new regulatory frameworks and specifically those related to the forward-looking initiatives, which require a comprehensive understanding of the institution’s own business models.

CFOs at banks increasingly recognise the importance of digitisation in their industry yet it is still regulatory constraints that they expect will have the biggest influence on their work in the next few years. Indeed, as digital transformation and ever more stringent regulatory requirements continue to dominate the industry’s agenda, these two aspects are set to be at the very core of the struggle faced by those with ambitions to play a more strategic role in their banks.

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Amidst the effects of a long-lasting, low yield environment, evolving regulations and the requirement to manage the advent and maturing of new technologies are the major concerns that CFOs of financial institutions foresee affecting their functions. Their concerns mirror what they see as the industry challenges posed by digitisation – of clients, of their bank and of the entire banking environment – and the emergence of serious new competitors based on new business models facilitated by new regulations like open banking or PSD2.

Therefore, the new CFO roles are slowing evolving to include:

  • Performance measurement: CFO to provide proactive engagement in performance measurement and the integrated financial resources, management tools and support (details business models levers analysis, for example)
  • Resource optimisation: based on those tools, CFO to challenge the business performance and the utilisation of the scarce resources, encompassing the core banking topics: equity, liquidity, debt and leverage – all have become scarce in the last 10 years.
  • CFO/CRO collaboration:CFO to build with the CRO, the adequate simulations for optimising the utilisation of the scarce resources and highlight the issues arising in terms of business strategies and priorities. The new IFRS9 regulation, for example, will force CFOs and CROs to plan for credit provisioning together.

A digital future

Most CFOs are aware of the measures required to increase efficiency and effectiveness in their area. Finance executives recognise clear and significant benefits from digital technology, particularly for process optimisation and management decision-making. As banks adopt new technologies, finance functions will increasingly make use of next generation analytics, smart automation and high-quality,consolidated data. Highly automated and needing substantially fewer staff, the finance function of the future will proactively support revenue generation across the bank, for instance through better resource management, wallet analyses and pricing.

So far, however, the benefits of technological advances are neither reflected in banks’ digital strategies nor in corresponding budgets. 80% of CFOs bemoan their organisation’s unclear priorities, lack of a clear digitalisation strategy and insufficient investment. “New” technologies are not widely used at present, the study found. Moreover, the need for digital skills development within finance teams is widely recognised as a major obstacle to progress – more than two thirds of CFOsface a lack of skilled employees among their current teams, saying the skills profiles of the past are not enough to meet new requirements.In other words, for most CFOs such digital tools remain with insight but not within reach.

Although the transition for CFOs to the role of Chief Future Officer is not going to plain sailing, here are four areas of focus for CFOs looking to move towards a more comprehensive future role:

  1. Advanced analytics: use of advanced analytical tools to gain new insights and support revenue generation, notably via resource management benchmarking, wallet and pricing analysis
  2. Strategic resourcing: use of high-quality dataas a strategic resource means; consolidating the core data around smart data lakes for process efficiency and accurate analytics; thinking with persistence of the structured/unstructured data opportunity with IT colleagues; planning for the future real-time world; bulk data transport as impacting data quality and availability.
  3. Skills development and partnering: developing new skills and partnering, as future finance functions will be based on a clear separation of analytics and production; building the CFO eco-systems to develop agile working models with partners for economic modelling and external data.
  4. Smart automation:the potential for automation varies greatly across the CFO sub-functions – accounting operations and standard reporting are highly automatable and could even be outsourced to some extent to shared services platforms; AI functionality, such as chatbots, should be tested and implemented wisely; planning for end-to-end, front-to-back automation across the organisation is big prize but is probably more of a long term goal for most CFOs. 

Not just looking, but moving forwards

Of course, not all current CFOs will take on these expanded roles in the future; in part, it’s a skills issue and in part an organisational one. Looking into how the CFO function is positioned within banking organisations, it’s obvious that there is not a “one size fits all” – it varies according to the CFO profile, the CEO profile and the history of the bank. As each bank is different, the way to succeed are going also going to be specific to each institution.

The zeb CFO study 2018/19 gives foundation to what many have been observing anecdotally until now: a strong majority of CFOs want to play a more strategic role in their bank’s future. To take on the mantle of Chief Future Officer, CFOs now need to need to communicate a clear overview of where the finance function is and where it should go, setting priorities and rollout timelines for the next three to five years. They must bridge the gap between what they actually do and what they’re capable of doing to help their banks grow.