Industry Trends

The World of the CFO

In your quest to become a Trusted Business Advisor, it is essential that you comprehend the World of the CFO. 

The role of the CFO has become more complex than ever.  They are doing more with less and juggling as never before in a climate of fierce competition, rising costs and increased customer demands.  CFO’s expanded roles include managing people, systems and technology infrastructure in an era of intense regulatory scrutiny.

CFO stands for Chief Financial Officer – the person in a business who directs the organization’s finances. 

Historically, the CFO’s roles and responsibilities were narrowly defined.  Their focus was limited to financial planning and record keeping as well as financial reporting to higher management.  Success was seen in terms of balance sheet protection.

The Modern CFO

The modern-age CFO is radically different than his or her predecessors.  They are required to be business generalists with an in depth knowledge of their enterprise.  They are custodians of organizational knowledge.

Today’s CFO faces pressure to cut costs, grow revenue, institute controls, and are even put at personal risk for the company’s mistakes.  One reason the CFO’s job is so fraught with challenge is because it’s really four jobs in one! 

  1. The first is that of steward, preserving the assets of the organization by minimizing risk and getting the books right.
  2. The second is operator, conducting finance operations efficiently and effectively.
  3. Third is strategist, influencing the company’s overall direction.
  4. And fourth is the catalyst, installing a financial mindset for execution and risk-taking throughout the business.

A key objective of the CFO is to improve the ability of their beyond insuranceorganization’s decision makers – especially the CEO.  The CFO accomplishes this by delivering reliable information to the company’s management team, and helping these people analyze the data to facilitate the decision making process.  Today’s CFO excels at strategic planning, performance management, infrastructure design, deal making, team development, and external communication. 

Relationship with the CEO

The CEO relies greatly on the CFO.  A strong relationship and mix of skill sets allow the CEO and CFO to share the workload of managing the business.  As a standard, the CEO expects the following skills and characteristics of the CFO:

  • Strong financial and leadership skills
  • Experience with technology and information systems
  • Ability to identify and capitalize on revenue growth opportunities
  • Understanding of business and market challenges
  • Ability to align day-to-day operations with long term strategic goals
  • Mindset to reduce costs without compromising productivity
  • Ability to effectively interact with all departments within the organization
  • Passion for what they do and the desire to go above and beyond their job description

Now that you’ve discovered the characteristics of a modern-age CFO, do you feel better prepared to approach one?

In our next post, we’ll share some common situations a CFO typically needs to address, and describe the ways in which they need the help of insurance and risk management professionals.

In our previous blog post, you became acquainted with the challenges modern CFOs face in their role.

Today, we’ll go in-depth into the roles a CFO must play, and how these situations relate to insurance and risk management professionals like you.

5 Roles of the CFO:

1. Adviser to the CEO: The CEO relies greatly on the CFO.  A strong relationship and mix of skill sets allow the CEO and CFO to share the workload of managing the business.  As a standard, the CEO expects the following skills and characteristics of the CFO:

  • Strong financial and leadership skills
  • Experience with technology and information systems
  • Ability to identify and capitalize on revenue growth opportunities
  • Understanding of business and market challenges
  • Ability to align day-to-day operations with long term strategic goals
  • Mindset to reduce costs without compromising productivity
  • Ability to effectively interact with all departments within the organization
  • Passion for what they do and the desire to go above and beyond their job description

2. Execution Maestro:  The CFO focuses on operational excellence; instilling his or her organization with operational disciplines to streamline organizational efficiencies, without sacrificing critical business functions.

3. Growth Navigator:  The CFO works closely with the CEO and other beyond insurancemembers of his or her management team to develop aggressive plans to achieve profitable growth through acquisitions.  As Growth Navigator, the CFO is adept at resource management, business planning and performance management.

4. Business Transformer:  Today’s CFO is expected to recognize opportunities for strategic innovation and take advantage of them.  He or she must be a consensus builder, selling appropriate goals for the business model in order to deliver upon the performance objectives.

5. Turnaround Surgeon:  The most difficult task of any CFO is that of restoring the financial health of his or her business.  As a Turnaround Surgeon, the CFO must be capable and confident to make changes where the business is failing.  For this reason, the CFO must have an in depth knowledge of the business as well as analytical tools to assess the state of the business, set priorities, and allocate resources to impact change.

Insurance and Risk Management

CFO’s are well equipped to manage finance and related areas.  However, research indicates that they are not equipped to handle other key responsibilities including risk management.

A 2006 Los Angeles Times article stated that fewer than 20% of CEO’s believed that their CFO was doing a good job in managing risk.   The Los Angeles Times article is supported by a September, 2008 survey by Addis Intellectual Capital in which 100 CFO’s stated that they have limited time and technical expertise to identify the exposures facing their business.

The challenges and time constraints of the CFO creates a wealth of opportunities for insurance agents and brokers.  Today’s multi tasked CFO is starving for an insurance agent or broker who has the desire to go beyond insurance to become their organization’s outsourced risk manager.

The CFO is searching for a new bread of insurance agent and broker – consultative, diagnostic, results-oriented and focused on managing and mitigating risks rather than selling insurance.

They too want you to be their Trusted Business Adviser.

Scott Addis