An Amrop Partner draws a vivid picture of the volatility re-shaping the finance domain over the last few years. “Risk and business impact have come from places where traditionally we would not have seen them, and definitely not at this pace. Consider Covid, how fast the world shut down and supply chains changed. Ways of working and different industries were impacted tremendously.  

“Financing is now being affected by the regional conflicts, the lack of money compared to before and the restrictive financial measures we are seeing in many places, with interest rates rising significantly in a very short time. Suddenly, geopolitical and environmental factors are becoming major issues. And that means that risk is fast evolving into a strategic priority for many.”  

A strategic shift 

This turbulence is compounding a steady evolution in the scope of the CFO role: from ‘bean counter’ to ‘business strategist’. As one Amrop Managing Partner puts it: “They need to know how to manage defense now, not just offense.” 

Another confirms: “Everybody wants not an accountant but a strategic CFO, understanding the business drivers and able to help shape the organization by understanding the financial forces and risks. So that’s been the big shift within the last fifteen years.” 

This Amrop Partner has observed a move towards a “business partner discussion with business cases, strategizing with data.” It is also about informing the decision-making process: “helping the organization speak data and numbers, as opposed to ‘people with opinions’.”  The perspective has fundamentally changed: “From a retrospective reporting CFO role to a forward-looking business partner; much closer to the organization.”  

The CFO needs a true north  

In our exploration of the C-suite ecosystem2 we saw an unprecedented need for today’s C-suite to foster a compelling organizational purpose, culture and values. All must embody wise and purposeful leadership, holistically combining individual, socio-environmental, and business purpose.  

A sense of purpose will help the CFO resolve business paradoxes, particularly ‘health versus wealth’. This means combining profitability with the sustainability (and ESG) agenda: ‘doing well by doing good.’ Especially in crisis, painful choices must be navigated such as satisfying shareholders whilst preserving jobs.

Volatility in the financial markets, interest rates, cyber- and geopolitical threats. As one Amrop Partner puts it: “Typically the most measurable impact of risk tends to be financial, so it ends up in the CFO domain.” The energy crisis was a recent nasty surprise. To this, another Amrop Partner adds cyber-risk: “Then operational risks, complicated by digitization and digital channels.”  

Whether risk is part of the CFO’s mandate depends on the size and sector of the organization. But in general, there is a growing need for Chief Risk Officers (or equivalents). In financial services, the CRO is critical, says this Amrop Board Member: “It helps determine your credibility with the regulators.” The sector’s need for outstanding people also makes it a good source of CROs for hiring organizations in other sectors.  

Avalanche warning: Chief Financial Officers are struggling 

The Financial Times recently signaled a ‘decade-high turnover’ of CFOs. The reporting burden is one reason, it says. Recent regulatory changes have broadened the scope: “depending on the jurisdiction, these involve climate change, diversity policies and cyber security.” 5 

This Amrop Board Member questions the place of regulatory reporting on the task list of today’s CFO: “When it starts to take on more of a compliance mindset you’ll have people well versed in the regulatory side. To me those elements of the (CFO) role are the less value-added.” 

One time-consuming reporting issue is ESG. A recent Amrop report6 cites a Deloitte poll revealing that only 46% of professionals are satisfied with the ability of their reporting teams to gather and report on financial metrics for regulatory compliance.7  

Is the load on the CFO set to lighten? An Amrop Board Member: “It’ll depend on the size of the organization whether ESG measurement should be part of the CFO role or a stand-alone.” Still, thousands of organizations operating in the EU will now become liable to comply with reporting directives, given Europe’s drive to become the first climate-neutral region by 2050. 

The Amrop Board Member thinks the focus on ESG will continue until the arrival of the next generation who are skilled around all its elements.  

The CFO’s evolution into CEO  

The CFO and COO have traditionally been lead contenders for the CEO role (together with the COO). Now the slate is broadening. As one Amrop Managing Partner put it: “I think if we look at culture, values, and sustainability then it could be any CXO.” To qualify, financial acumen and strategic weight alone will no longer suffice. As this Amrop Partner puts it, if a competent CFO “is an introvert and not capable of communicating, of embracing the company with their personality and so on, that’s taxing.” The CFO will likely need coaching, training and/or the support of other CXOs. It will take self-awareness and humility to listen, learn, and accept help.  

This Amrop Board Member is optimistic: “We’ve seen more and more CFO’s moving into that CEO realm and doing it very effectively. And of course, depending on the discipline it would also talk to where their gaps might be and how they would need to bridge those gaps. It’s a fascinating journey to see how that role has evolved.”  

Many CFOs have already developed a good understanding of the CEO role, enriched and deepened by the close relationship between many CFOs and CEOs. There is everything to play for, and the stakes are rising.