Role of Indian CFO
Past, Present and Future
-Siddharth Agarwal MS12A086
Note – I, Siddharth Agarwal declare that the following document is an original work. References have been mentioned if used.
i.1 Hence. Hence. the role of the CFO was limited to purely accounting based. Main focus of CFOs was on maintaining formal accuracy and analysing past performance financials.Alli Rani. one can say that CFO plays an important role of an all-rounder in any organization. present and future of an Indian CFO.
Before 1990. From being a chief accountant who keeps records of the finances of the company to becoming the main strategist. After the year 2001. Naik told in a CII seminar dedicated to finance heads that the book-keeper was now emerging as the conscience-keeper in corporate India. Over the years. The skills of a CFO were limited to accounting and budgeting and technical analysis of the performance of the company.e.itcportal. The position of a CFO in the organization setup has been shown in Figure 1. there has been a significant change in the role of CFO.
Press report: www. With the change in the competitive environment and market scenario. one who is involved in deciding on the strategies of the organization. CFOs are now considered as the coordinators between non-financial matters and company’s investments and financial processes.com
. Back then. CEOs at two of the country’s biggest conglomerates accepted to have put their chief financial officers at the forefront of decisions that determine where and how their companies will go in future and that was the time when CFO’s were seen coming out of their desks and financial papers to stand alongside the thought leaders. the functions have grown far more than what the name CFO or Chief Financial Officer suggests. the CFO took the role of a value creator who strived for cost-efficiency and profitable growth. As the industry used to be production oriented. the era of globalisation came to India and hence the role of a CFO in an Indian company was redefined. let’s see how the role of CFO has evolved over the years and what shape i s it going to take in future. global environment and mitigating risks. CFOs went onto spread their knowledge areas beyond the field of finance and developed understanding about various financial instruments and legal requirements of the business. It was in September 2003 that ITC head Yogi Deveshwar and Larsen & Toubro (L&T) spearhead A. From being just a chief accountant in the organizational setup to becoming the key decision maker. As Mrs. not only CFO must have knowledge of past trends in the industry and current economic situation but also should be able to envisage the future business environment.Today's CFOs are juggling more balls in the air and that. the past.M. In the current scenario of increasing economic uncertainty. the role of an Indian CFO was better known as Chief Accountant or Chief Controller. It was only after the economic reforms of 1991. L&T announced that the role of a CFO will now be more of strategic one. The role then was mainly internal or company centric. CFO of Concor and also the recipient of Best Women CFO award suggest that in the current scenario. too. It has become more complex and demanding than ever. P. in front of an audience which is more demanding and knowledgeable than ever before. accessing competitors. a CFO is not only expected to access the past as in accessing the history of company investments but also forecasting the future by predicting cash flows. Now a CFO was not just an accountant but a financial specialist who knew the market dynamics and had a better business understanding.
The company can now track the availability of the rooms at all its properties across the country. but the things have changed with time. capable across various functions varying from financial to strategic to operations. CFOs are increasingly involving themselves in all areas of company management including strategy selection.Out of the box thinking approach are the new required skill sets for a CFO.ITC. greater shareholder involvement. government regulations. Some of the important ones are: 1.2 3. Strategist. 4. rather than going by acquisitions went on to build its own brand. This helps not only in revenue maximization but also results in better customer experience and satisfaction. Change of economic environment. CFOs are faced with ever-broadened functional responsibilities. Hence. One of best examples of innovation is by AirTel who asked its vendor and suppliers to share costs till the money rolled in from users. The role of CFOs is evolving to what we can call as “Strategic CFOs”. They are no longer the controller of finances but a business partner. 2. This was one such example of many incidents where important strategic decisions involved a CFO. the companies want their leaders to take up the challenge. and a day to day changing Indian economy have dramatically changed the role of the CFO. CFOs today have to be multi-specialists and not just generalists. today. The role of a CFO has stretched beyond what it was in the past. value management and most importantly strategy architects. It includes adding strategically important functions such as investor relations. It is the CFO’s responsibility to keep a check on the financial whereabouts of the organization and make sure that all transactions are carried out with due diligence. The finance division at ITC also led the use of information technology (IT) in the hotels business. With Intrapreneurship being the top priority among companies so as to showcase a better and different brand from its competitors. a better and more cost-effective approach. ITC Ltd. It was him who was involved in the strategic decision of saying no to acquisitions to grow business in the consumer goods business. Governance is about taking the right decisions that balance the interests of all the stakeholders. Feb 6. enhanced disclosure norms. This helped Airtel to save huge amount of money thus giving the spark of innovation from CFO in India. Rajiv Tandon. CFOs can be seen performing in various roles across the length and breadth of the organization. CFOs now understand that with the help of IT they can actually reduce costs. The Conscience Keeper – The Satyam fiasco raised concerns about the corporate governance and ethics among all the organizations. 2011
The Economic Times. With IT. Never before a CFO’s role been more complex.CFOs today are better seen as the chief decision makers who are involved in building the organizational strategy to implementing it. A recent example of this can be attributed to Mr. CFO. multifaceted and rewarding. Besides being a financial expert. linking financial policies to strategy in the context of managing the company.The Present
Today. ITC has better information about their customers and serve them better leading to more revenue generating opportunities. an understanding of technology for CFOs today is as important as understanding the financial details of the company. Technologists – CFOs used to believe that IT was just another cost centre. Innovators.
the competitive world with cut-throat competition. over the years. Innovation will be an important factor which will create substantial value to the organization and will add to the value offerings of the CFO. CFO must make sure that the strategies and business goals are aligned. What is clear is that tomorrow's CFO will be a more complete professional. the companies follow various strategies which on one hand would suggest cost cutting measures while the other would suggest growth. Infosys gave the option of ESOPs to its employees in 2010. Michael Fabbish. The role of CFO today may be across various domains but the core around which it is built remains the same. In the days to come. Future CFOs will need to ensure appropriate policies in relation to capital investments and shareholder return. It was the CFO’s job to decide on how many shares to give and how much the company can shell out.5. Today’s CFO need to add creativity and vision to their strategic skills to prepare themselves for the upcoming challenges. The required skills set now includes an ability to be a strategist. when Indian companies are competing with foreign brands across the geographies. He has to make sure that the finances of the company are robust and secured. Ervin Schellenberg. 5.com Cfoconnect. Understand the drivers of the organization and the power of data analytics which can give them a competitive advantage
The future roles of CFO would require development of multiple skills. I believe. inter domain knowledge and understanding of economic scenario. Today. Ranging from the decisions of giving out ESOPs to the employees to cutting out on the number of employees are all cost and cash dependent. 6. The Strategic CFO . Lutz Firnkorn Business Standard Economic Times Cfoinstitute.com
. The People Manager – A CFO can be seen as a people’s manager as his decisions play an important role on the HR policies of the company. CFOs should be a part of regulation policies development so that these policies are aligned with the strategies and business model of the organization.
The CFOs role in future will be wider and hence would need additional skill sets to handle it. it is evident that competition is going to increase and to be in the race. 7. thus balancing risks. innovation can prove to be a differentiating factor. 3. lead change initiatives and prepare value-added analyses to enhance the company's value. The evolution of CFO’s role that is already underway will continue to evolve in the coming years.Ulrich Homme. CFOs can support innovation in the organisation by giving voice to the trends and patterns they see in the data.
References: 1.com The Wall Street Journal Blog Itcportal. 4. 2. The following will be the key factors in the years to come CFO's role as business strategist and influencer will become more important.
BOARD OF DIRECTORS
LEGEND External relationship Internal relationship
Fig 1: Internal and External (Outside the organization) relationship with CFO and other entities CEO and CFO Frequent interaction and cooperation regarding Strategic Management CFO and Corporate Centre Potential alignment of business disclosures such as Strategic Planning CFO and External Entities Relationship between CFO and other external entities such as Customer. Shareholder and Government