The Changing CFO

The Changing CFO
Prepared for the
CFO Alliance-NY Breakfast Roundtable
by
Professor Howard P. Tuckman, PhD
GRADUATE SCHOOL OF BUSINESS

“ The Wall Street Journal reported that in the first seven months of this year [2008], 70 CFOs at Fortune 500 and S&P 500 companies exited their jobs.”
“ As difficult as 2008 has been, 2009 has the earmarks of being even more challenging as CFOs bear the brunt of the global economic crisis.”
FEI president and CEO James J. Able, December 2008
A Changing Environment

Why is the situation so challenging?
“ Today’s CFO must be something to everyone: the firm’s top accountant, the CEO’s strategic partner, the gatekeeper for new initiatives, the chief metrics officer, the head of financial reporting compliance, a spokesperson for external constituencies, and the board of directors’ (or at least the audit committee’s) new best friend. And in this post-Enron, post-WorldCom, post-Tyco world, the CFO must be as squeaky clean as Clark Kent. She, or he, must be the Super CFO.”
Jonathan Karpoff, the Norman J. Metcalfe
Endowed Professor in Finance, UW Business

Old Skills
Historian - Documentor of the past
Statistician - Data provider and interpretation
Treasurer - Proficient in cash management
Active in securing debt or raising equity capital
- Internally focused -
New Skills/Old Skills

New Skills
Formulate and execute strategies
Able to deal with rising stakeholder expectations
Staying ahead of a increasingly complex competitive landscape

New Skills (con’t)
On top of new technologies
Plugged into the changing regulatory environment
Able to oversee and ‘own’ risk management
Comfortable in a truly global environment
- Externally focused -

Three Areas of Balance

Pressure to show that the balance sheet is honest, understandable, and accurate
At the same time
Pressure to find innovative and novel ways of raising capital
Area of Balance – Transparent Creativity

CFO must continue to build profits and to use the latest products
At the same time
CFO must focus on ethics as opposed to to complex or potentially obtuse deals
Area of Balance – Ethical Profits

CFO Must make solid forecasts of revenue
At the same time
New pressures on CFO to play role in strategic planning, analysis of balance sheets, and risk management
Area of Balance – Strategic Revenue

P/E ratios have fallen dramatically suggesting that expectations about cash flow have fallen.
CFO must find what drives expectations and explain to stakeholders.
In Addition

Value measurement
Business taxation
Adoption of eXtensible Business Reporting Language ( XBRL)
Convergence of U.S. GAAP and IFRS
Merger of the Financial Accounting
Standards Board (FASB) and International Accounting Standards Board (IASB) Presentation of Financial statements
taken from FEI (modified)
List of Top Challenges for 2009

Complexity in financial reporting, controls and risk management
Employee benefits issues including the new health care proposal
Climate change legislation/ reduction of carbon emissions
Emphasis on sustainable business
taken from FEI (modified)
Challenges Continued

Predicting timing and shape of recovery
Dealing with potential inflation and deflation at same time
Dealing with tighter rules for credit
Factoring in differences in global recovery
Protecting the supply chain
Securing equity capital
Partial List of Economic Challenges

Pick one of the three balance areas
Transparent Creativity
Ethical Profits
Strategic Revenue
Which affects you the most?
What impacts have you seen on your job and company?
What are you doing to overcome the issue?
Discussion

The Changing CFO

by cfoalliance on Jul 28, 2009

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