Anneke Fourie is the Chief Financial Officer at Bravura, an independent investment banking firm now twenty years old that specialises in corporate finance and structured solutions. Anneke has extensive experience in financial reporting and International Financial Reporting Standard applications.

There is no question that the prominent cases of corruption and poor governance in Corporate South Africa have tarnished the integrity and credibility of our finance profession. It is astounding that such illegal and fraudulent activities could have occurred on the watch of the CFOs of major corporates once considered beyond reproach. If anything, these recent scandals underscore the fact that today’s CFO has a far wider mandate than yesterday’s “number cruncher”. With an influence that extends across the company, are South Africa’s CFOs up for the job?

In the past few years the responsibilities of the CFO have expanded beyond traditional accounting and finance to include other business areas that play critical roles in the functioning and sustainability of the entities they are responsible for. Back in 2013, a survey of Fortune 1000 CFOs found that the vast majority felt that they were viewed in the company as “strategic business partners” and were involved in top-level decision-making. Today it is par for the course that in addition to safeguarding and guiding the company’s financial performance, as CFOs we must be capable strategists who contribute to the leadership team.

The CFO as leader

Leadership today is more demanding than ever before. Increasing competition and economic constraints in markets around the globe have given rise to significant business complexities. Research by global accounting and finance staffing firm, Robert Half International, indicates that 66% of CFOs believe it is more challenging to be a company leader today than it was five years ago. This is particularly true in South Africa where an ever-increasing regulatory environment demands that companies and their leaders have the ability to adapt and change.

As markets rapidly change, CFOs should be able to respond with sound financial and business strategies. As revenue streams become more disrupted and diversified, we must have the knowledge and confidence to advise and act on investing into new processes or platforms that can increase profitability. A host of “high tech” risks from cyber security to guaranteeing customer privacy add to the operational and financial risks that fall within the scope of the CFO.

Besides these capabilities, the CFO should have the ability to predict the future financial picture of the organisation, meaning that the big picture (and especially cash flows) must remain firmly front and centre. Cost management is always a focus of the CFO, even more so in times when economic growth is slow. Now more than ever organisations should not be taking their eye off the ball.

The journey to CFO

CFOs are made not born and as the saying goes, the journey is as important as the destination. If the contemporary CFO’s role is one that involves risk, strategy, analytics, people management and technology, this requires varied experience and depth of understanding of both the business environment, the industry and the company.

When career patterns of CFOs in the Fortune 100 (F100) were analysed last year it was found that 70% of internally promoted CFOs had worked for at least 11 years at their organisations prior to their promotions. As many as 41% had more than twenty years of experience at their organisations before becoming CFO.

In terms of prior experience, 40% of F100 CFOs cited significant corporate accounting experience and 36% had treasury experience, 32% had senior corporate finance and divisional or regional controller experience and 31% indicated strategy or corporate development experience.  Critically, the analysis found that there is a distinct shift in the journey of the potential CFO from “analysis and allocation” to “global strategy and operations”.

Beyond the lure of the large corporation

In South Africa, the journey to CFO may present more diverse opportunities as our developing economy continues to evolve. Besides large entities and listed companies where placements are limited and competition is fierce, the SME market is poised for growth. Currently SMEs make up 91% of formalised businesses in South Africa and provide employment to about 60% of the labour force, with a total economic output accounting for an estimated 34% of South Africa’s gross domestic product. Last year government committed R1.5 billion to the Small Business Fund which sends a signal to the private sector and investors alike of the potential that government sees in developing the sector.

My own journey to the CFO position that I now hold at Bravura, included leaving one of the Big Four accounting firms to join a much smaller business working alongside the CEO in the position of CFO. It was here that I experienced one of the steepest learning curves of my career. Although technically astute, I was young and I still had a great deal to learn about business, particularly the differences between the institutional environment of a global firm and the workings of a dynamic smaller company.

In smaller companies there are varied responsibilities which necessitate that the CFO must be able to juggle strategic and operational balls on a daily basis. There is an urgency to learn fast and adapt swiftly, applying flexible thinking to solve challenges. In smaller companies the CFO operates close to the coalface which brings into sharp focus the fact that each decision will have a direct impact on the company.

Although smaller companies can provide a wealth of business acumen, there can be unanticipated hurdles. There are instances where a smaller company is led by a maverick CEO who has strong preferences for how operations should be run. Here the CFO should always bear in mind that as a financial professional, our responsibility is to the financial assets and long-term sustainability of the company and not only to the charismatic CEO. There are no grey areas.

Good governance a mandate of the CFO

Neither are there grey areas when it comes to good governance. Governance can never be separated from the business; it is integral to the business as a whole and is one of the key pillars of the role of CFO (the other being financial guidance to the business as a whole).

Governance is about making sure controls, policies, compliance and accurate reporting reflect the view of the financial position of the company and are the checks and balances to ensure proper administration and financial management.

As the custodians of governance, the CFO should develop a comprehensive knowledge of the regulatory requirements to which the organisation must comply. This includes those broad company codes of good practice such as King IV and specific internal processes and procedures concerning ethical conduct.

If the company is found to be non-compliant or liable for penalties due to inconsistent or incomplete reporting information, the oversight rests squarely with the CFO.

The future of South African CFOs

As companies look at strategies not only to remain sustainable but to enhance their competitive edge, the responsibility of South Africa’s CFOs will continue to expand. Do we have what it takes? The time is now for CFOs to consider those aspects that will equip their companies to adapt to future challenges.

Technological advances are creating disruption for certain industries but are also a catalyst for innovation and growth.  CFOs need to spend time considering how we use the technological advances in the finance space to innovate and grow our businesses.

Talent needs change as businesses evolve and new technologies are incorporated into processes. CFOs must ensure that our teams stay ahead of the game with the right tools, skills and capabilities.  Part of the role of the CFO is to attract and retain top finance talent which is becoming more of a challenge.

Supporting business growth whether organic, as a result of mergers and acquisitions, or new product lines is challenging for the CFO. But as economic conditions remain constrained this is something that we must embrace.

Finally, it is up to all of us as CFOs to ensure that the integrity and credibility of our finance profession is compromised no further. More than ever the business community requires us to lead by example, adopting faultless ethical standards as we navigate the ever-changing and complex areas of our businesses.

Categories: News
Published: Accountancy SA