CFOs are assuming a greater role at their organizations in the midst of the COVID-19 pandemic and are likely to hold onto those greater responsibilities once the pandemic subsides, according to a new report from the Institute of Management Accountants and the Association of Chartered Certified Accountants.
For the report, the IMA and ACCA surveyed 1,152 of their members and found that 72 percent of the respondents believe the role of the CFO will either “increase or increase significantly” in importance. Seventy-eight percent of the respondents indicated that the ethical lens was a differentiating factor for the CFO in comparison to other executives. Meanwhile, 82 percent of the CEO respondents surveyed feel the role of CFO would increase or significantly increase in importance, and 68 percent of CEO respondents say that people highly value the strategic insights of CFOs.
Allan Koltin, CPA, CGMA, is the CEO of Koltin Consulting Group, a Chicago-based consulting firm that specializes in working with professional and financial services firms in the areas of practice growth, practice management, human capital, and mergers and acquisitions. A nationally recognized speaker and industry analyst, Allan has appeared on the CNN, WGN and Fox Television networks and has been quoted frequently in such media as the Wall Street Journal, New York Times, Washington Post, Chicago Tribune, Los Angeles Times, USA Today and New York Post, as well as Bloomberg News, BBC World Service, Business Week, Forbes and Reuters. He has also spoken nationally and internationally at hundreds of conferences including those held by the AICPA, international CPA associations and state CPA societies.For twelve consecutive years, Allan has been named by Accounting Today as one of the Top 100 Most Influential People in the accounting profession. Koltin was also voted one of the 10 Most Recommended Consultants, for the seventh straight year, in the “Annual Survey of Firms” conducted by INSIDE Public Accounting. In 2012, Allan was named by CPA Practice Advisor as one of the Top 25 Thought Leaders in the profession. He was one of the first inducted into the Accounting Marketing Hall of Fame by the Association for Accounting Marketing (AAM). He has also been a recipient of the NACVA Instructor of the Year Award and winner of the Journal of Accountancy Literacy Award. Previously he was recognized by the Illinois CPA Society with the Distinguished Service Award for outstanding service and commitment to the profession. Koltin is the author-editor of three books for professional services firms: CPA Firm Merger Strategies That Work, CPAs That Sell and the AICPA’s Marketing a Consulting Niche. He is a founding member of The Advisory Board, a think tank for the accounting profession, and has served on various advisory boards, including Outsource Partners International (OPI), the Association for Accounting Marketing (AAM), the National Association of Certified Valuation Analysts (NACVA) and H&R Block (HRB Business Services). Previously, Allan was the President and CEO of PDI, Global, Inc. which was the largest publisher of marketing newsletters for professional services firms. Allan originally sold PDI Global to H&R Block in 1998, buying it back in 2008, and then selling it again to Thomson Reuters in 2011. Prior to that, Allan was a Senior Partner in the Chicago-based accounting and consulting firm of FERS, where he served as the leader of the Investment Banking Group, as well as the Law Firm Consulting Group. At age 27, Allan had the distinction of being named the youngest partner in the history of the firm and was also a member of the firm’s Executive Committee. FERS was acquired by H&R Block in 1998. Allan attended both the University of Wisconsin – Madison and the University of Wisconsin – Milwaukee and received degrees in accounting and marketing. He lives in Chicago with his wife, Sharon, and his three children, Jack, Brian and Julia. His passion is facilitating retreats and providing coaching for firm leadership and partners. His specialties include strategy, governance, profitability, compensation, growth, human capital, and mergers and acquisitions.
Kate Risch Choi is a senior product manager for treasury and payment solutions at BMO Harris Bank.
Tom Hutton is managing partner for XL Innovate, the venture capital arm of XL Catlin. After working as a Consultant at McKinsey and Company, Tom served for ten years as the first CEO of Risk Management Solutions, a pioneer and global leader in providing risk modeling software, data and analytic services related to catastrophic risks to the insurance industry. His insurance career continued as CEO of White Mountains Re and board director of several insurance and reinsurance companies including XL Group, Safeco, Montpelier Re, Centre Cat, and Palomar Specialty.
In 2011, Tom founded New Energy Risk in partnership with XL Group. Tom served as CEO until the founding of XL Innovate in 2015, and currently serves as chairman. New Energy Risk addresses opportunities to apply insurance to support the development and financing of clean technology and renewable energy solutions and infrastructure, through an innovative form of insured technology performance.
Tom currently serves as a board director at several private and venture-backed companies including SoFi, a leading fintech company redefining consumer lending and financial services; Lemonade, a revolutionary personal lines insurance carrier; and Slice Labs, a provider of on-demand insurance in the sharing economy. Tom’s investments at XL Innovate also include Embroker, a tech driven commercial distribution company that is radically improving how mid-sized businesses buy and manage insurance coverage. Tom earned his BA in Economics and MS in Mechanical Engineering from Stanford University and his MBA from Harvard Business School. Tom is involved in several non-profit organizations with an emphasis on secondary school education and environmental issues. He recently served for several years as the President of Trustees at Phillips Exeter Academy, in New Hampshire.
“This is in a sense a followup study to a joint study we did with the ACCA eight years ago and we had made predictions back then about how the role of the CFO would change,” said IMA vice president of research and policy Raef Lawson. “It was extremely rewarding to see that our predictions were right on. We had predicted that the role of the CFO would be transitioning from financial reporting and stewardship to more of the strategic business partnership role, more engaged through external stakeholders. That’s all taken place. The interesting thing is that the pandemic seems to have just accelerated this change.”
It’s no longer enough for CFOs to simply oversee the finances at the companies where they work. More and more, they’re playing an essential role in the management and governance of their organization. “That entails not only an immediate focus on cash management and cash flow, which are incredibly important during the pandemic, but having a broader engagement in the operations of their organizations and being more involved in the strategy formulation of their organization,” said Lawson. “What we envisioned about the CFO eight years ago is really now essential for organizations. CFOs have a unique perspective of their organizations. They see all the moving parts and help their organizations adjust their strategy and implementation of that strategy, almost on a real-time basis.”
The IMA and ACCA see various ways in which the future role of the CFO seems to be evolving. The CFO may become more focused on stakeholder and investor management rather than safeguarding and reporting. The CFO will likely have a leading responsibility for business strategy formulation, validation, and execution. The focus of the role seems to be shifting from mostly historic-based cost control to growth optimization. The role is likely to encompass measurement of all aspects of the strategic objectives of the organizations. The CFO will provide the greatest value to the organization through forward insight rather than retrospective reporting. According to some respondents, CFOs are increasingly expected to eventually take on the CEO role as the next progression in their career development.
The urgency of the pandemic and the recession it caused have accelerated that increasing role for the CFO, forcing a reexamination of the company’s strategy, risks and business model. It has also forced technological changes such as the need for remote work arrangements.
“Technology is something that we have emphasized a lot at IMA in terms of changing the role of finance in general and the CFO, but this has accelerated the technological transformation of finance,” said Lawson. “We’re all working from home now, or many of us are, learning new technological skills that we probably wouldn't have done otherwise. Not just in terms of working from home skills and communication, but moving to the cloud has become accelerated. We’re all learning new ways to improve our processes to be more efficient, This transformation has been accelerated by the pandemic. The old saying is may you live in interesting times, and COVID has certainly made these times very interesting for CFOs. It’s made the role more challenging, but also made it more essential to the survival and prosperity of their organizations.”
The survey didn’t ask about specific technologies, but it did ask about what priorities were on the CFO’s agenda, and transformative technology was cited as one of the biggest challenges for CFOs. “I think their technological plans probably went out the window or had to be accelerated by the coronavirus,” said Lawson. “It necessitated the introduction of new technologies like Zoom or Microsoft Teams. For many companies, it’s been an adjustment, but those that made the adjustment have seen how more effective and efficient their finance functions are. I think that many businesses won’t go back to business as usual.”
Technical skills are considered to be important, with 54 percent of the survey respondents saying that an accountancy qualification or master’s degree is essential, with 27 percent considering it to be strongly recommended but not essential. Only 2 percent believe neither is needed.
The economy seems to be recovering since the start of the pandemic, but the continuing spread of COVID-19 across the U.S. and other parts of the world leaves many business leaders uncertain about the future.
“The economy is recovering, but it’s going to take time and it looks like there will be bumps in the road in this economic recovery,” said Lawson.
The outcome of the November election is another uncertain factor weighing on the minds of CFOs. “I don’t want to get into politics, but I think the different major parties have different economic agendas and different approaches to handling the pandemic and stopping its spread, so I think the election could have a major impact on the recovery,” said Lawson.
More and more CFOs are getting involved in supply chain issues after experiencing shortages at the start of the pandemic. “One of the interesting results from our current study is that CEOs seem to place more emphasis on the supply chain, which perhaps is due to their broader perspective, but regardless of that, the supply chain is a critical issue as we’ve come to see with the supply chain disruptions brought about by the pandemic,” said Lawson. “CFOs can no longer ignore that part of the business and the risks that supply chain disruptions can bring.”
