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The Changing CFO

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As the business environment has changed, so has the CFO skill set evolved to meet new demands. An analysis of the 'Old Skills' of the CFO vs. the 'New Skills' required to navigate as a financial leader in today's world showed a shift in perspective. The comparison highlights a move from internally focused skills to a stronger emphasis on external skills such as strategic development and knowledge of a global environment.

Published in: Business, Technology
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The Changing CFO

  1. 1. The Changing CFO <ul><ul><li>Prepared for the </li></ul></ul><ul><ul><li>CFO Alliance-NY Breakfast Roundtable </li></ul></ul><ul><ul><li>by </li></ul></ul><ul><ul><li>Professor Howard P. Tuckman, PhD </li></ul></ul>GRADUATE SCHOOL OF BUSINESS
  2. 2. <ul><li>“ 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.” </li></ul><ul><li>“ 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.” </li></ul><ul><li>FEI president and CEO James J. Able, December 2008 </li></ul>A Changing Environment
  3. 3. Why is the situation so challenging? <ul><li>“ 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.” </li></ul><ul><li>Jonathan Karpoff, the Norman J. Metcalfe </li></ul><ul><li>Endowed Professor in Finance, UW Business </li></ul>
  4. 4. <ul><li>Old Skills </li></ul><ul><li>Historian - Documentor of the past </li></ul><ul><li>Statistician - Data provider and interpretation </li></ul><ul><li>Treasurer - Proficient in cash management </li></ul><ul><li>Active in securing debt or raising equity capital </li></ul><ul><li>- Internally focused - </li></ul>New Skills/Old Skills
  5. 5. <ul><li>New Skills </li></ul><ul><li>Formulate and execute strategies </li></ul><ul><li>Able to deal with rising stakeholder expectations </li></ul><ul><li>Staying ahead of a increasingly complex competitive landscape </li></ul>New Skills/Old Skills
  6. 6. <ul><li>New Skills (con’t) </li></ul><ul><li>On top of new technologies </li></ul><ul><li>Plugged into the changing regulatory environment </li></ul><ul><li>Able to oversee and ‘own’ risk management </li></ul><ul><li>Comfortable in a truly global environment </li></ul><ul><li>- Externally focused - </li></ul>New Skills/Old Skills
  7. 7. Three Areas of Balance
  8. 8. <ul><li>Pressure to show that the balance sheet is honest, understandable, and accurate </li></ul><ul><li>At the same time </li></ul><ul><li>Pressure to find innovative and novel ways of raising capital </li></ul>Area of Balance – Transparent Creativity
  9. 9. <ul><li>CFO must continue to build profits and to use the latest products </li></ul><ul><li>At the same time </li></ul><ul><li>CFO must focus on ethics as opposed to to complex or potentially obtuse deals </li></ul>Area of Balance – Ethical Profits
  10. 10. <ul><li>CFO Must make solid forecasts of revenue </li></ul><ul><li>At the same time </li></ul><ul><li>New pressures on CFO to play role in strategic planning, analysis of balance sheets, and risk management </li></ul>Area of Balance – Strategic Revenue
  11. 11. <ul><li>P/E ratios have fallen dramatically suggesting that expectations about cash flow have fallen. </li></ul><ul><li>CFO must find what drives expectations and explain to stakeholders. </li></ul>In Addition
  12. 12. <ul><li>Value measurement </li></ul><ul><li>Business taxation </li></ul><ul><li>Adoption of eXtensible Business Reporting Language ( XBRL) </li></ul><ul><li>Convergence of U.S. GAAP and IFRS </li></ul><ul><li>Merger of the Financial Accounting </li></ul><ul><li>Standards Board (FASB) and International Accounting Standards Board (IASB) Presentation of Financial statements </li></ul><ul><li>taken from FEI (modified) </li></ul>List of Top Challenges for 2009
  13. 13. <ul><li>Complexity in financial reporting, controls and risk management </li></ul><ul><li>Employee benefits issues including the new health care proposal </li></ul><ul><li>Climate change legislation/ reduction of carbon emissions </li></ul><ul><li>Emphasis on sustainable business </li></ul><ul><li>taken from FEI (modified) </li></ul>Challenges Continued
  14. 14. <ul><li>Predicting timing and shape of recovery </li></ul><ul><li>Dealing with potential inflation and deflation at same time </li></ul><ul><li>Dealing with tighter rules for credit </li></ul><ul><li>Factoring in differences in global recovery </li></ul><ul><li>Protecting the supply chain </li></ul><ul><li>Securing equity capital </li></ul>Partial List of Economic Challenges
  15. 15. <ul><li>Pick one of the three balance areas </li></ul><ul><ul><li>Transparent Creativity </li></ul></ul><ul><ul><li>Ethical Profits </li></ul></ul><ul><ul><li>Strategic Revenue </li></ul></ul><ul><li>Which affects you the most? </li></ul><ul><li>What impacts have you seen on your job and company? </li></ul><ul><li>What are you doing to overcome the issue? </li></ul>Discussion

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