Achief financial officer (CFO) is anofficer of a company or organization who is assigned the primary responsibility for making decisions for the company for projects and itsfinances; i.a.:financial planning,management offinancial risks, record-keeping, andfinancial reporting, and, increasingly, theanalysis of data.The CFO thus has ultimate authority overthe finance unit and is the chief financial spokesperson for the organization.
The CFO typically reports to thechief executive officer (CEO) and theboard of directors and may additionally have a seat on the board. The CFO directly assists thechief operating officer (COO) on all business matters relating to budget management, cost–benefit analysis, forecasting needs, and securing of new funding. Some CFOs have the titleCFOO forchief financial and operating officer.[1] In the majority of countries,finance directors (FD) typically report into the CFO, and FD is the level before reaching CFO.
The appointment of a CFO or FD may be mandated by law. For example, in India, per the provisions of Section 203 ofCompanies Act 2013 everypublicly listed firm having a paid upshare capital of Rs. 10 Crores, requires a full time CFO. In the government sector this may be specified also: The USChief Financial Officers Act, enacted in 1990, created a CFO in each of 23 federal agencies. (See alsoOffice of Management and Budget andOffice of Federal Financial Management.)
The chief financial officer was traditionally viewed as a financial "gatekeeper". Over time, the position has become one of an advisor and strategic partner to theCEO.[2][3] According to one source, "The CFO of tomorrow should be a big-picture thinker, rather than detail-oriented, outspoken rather than reserved, prefer to delegate rather than be hands-on, emphasize what gets done rather than how things are done, and make collaborative rather than unilateral decisions".[4] The duties of a modern CFO, therefore, now straddle the traditional areas of financialstewardship, as well as the more progressive areas of strategic- andbusiness leadership, with increasingly direct responsibility and oversightof operations.[5] This significant role-based transformation is best-evidenced by the "CEO-in-Waiting" status that many CFOs now hold.
Here,CEOs increasingly expect their CFOs to be active participants in shaping the strategy of their organizations, including challenging the current strategy.[6] CFOs thus play a critical role in shaping theircompany's strategies today, especially in light of the highly uncertain macroeconomic environments,[7] where managing financial volatilities is a centerpiece for many companies' strategies.[8] Indeed, the 1990s saw the rise of the strategic CFO, and many companies have created achief strategy officer (CSO) position.[9] See alsoStrategic financial management.
The CFO is then as much a part ofgovernance and oversight as the CEO, playing a fundamental role in the development and critique of strategic choices. Relatedly The CFO is expected to be a key player in stockholder education[10] and communication and is clearly seen as a leader and team builder who sets the financial agenda for the organization, supports the CEO directly and provides timely advice to theboard of directors."[11]
The rise of digital technologies and focus ondata analytics to support decision-making, places more pressure on CFOs to meet the expectations of theirC-Suite colleagues.[12] Here, many organizations have created a Financefunction based on four pillars:
CFOs are increasingly being relied upon as the owners of business information, reporting and financial data within organizations - thereby also assisting indecision support operations to enable the company to operate more effectively and efficiently.The CFO must then serve as the financial authority in the organization,[13] ensuring the integrity of data, and modeling transparency and accountability. CFOs have then become more focused onfinancial reporting, although (as of 2016) a majority still spend much of their time in traditional accounting tasks such as transaction reporting.[14]
Additionally, many CFOs have made the realization that an operating environment that values cash, profit margins, andrisk mitigation is one that plays to the primary skills and capabilities of aprocurement organization; CFO's have been encouraged to appoint achief procurement officer (CPO) where this post does not exist, ensure the post-holder is accountable for procurement success, and to become increasingly involved (directly via oversight or indirectly through improved collaboration) with the procurement function according to several research reports which have looked at the CFO's relationship with the procurement function and the CPO.[15][16][17]
CFOs and FDs often hold aprofessional accounting qualification - theCPA,CA,CMA, orCIMA - along with itsrequisite bachelors and/ormasters in accounting. The certification is specified given that responsibilities extend totax andfinancial reporting.[18] Similarly,financial managers are oftenqualified accountants.[citation needed]
In large companies,[citation needed] CFOs and FDs may hold additionalpostgraduate qualifications,[19] such as aMaster of Business Administration,[20] orMaster of Science in Finance;[21] theChartered Financial Analyst is also common.[19] These complement the accounting perspective with more generalstrategic, leadership andfinancial market considerations, and give exposure to broader financial and operational issues.[19]
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