roles of cfo

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ROLES OF CFO

FINANCIAL MANAGEMENT


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FINANCIAL MANAGEMENT

Planning, d irecting, mo nit o ring, o rganizing, an dcontr o lling of the mo netary res ou rces of an o rganizati on.

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CHIEF FINANCIAL OFFICER

The Chie f F inancial Off icer (CFO) of a comp any is the co rpo rate off icer p rim arily res po nsible fo r m anaging the f inancial risks of the bu siness o r agency.

CFO is als o res po nsible fo r f inancial p lanning an d rec o rd-kee p ing, as well as f inancial re po rting to higher m anage m ent.

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TRADITIONAL ROLE OF CHIEF

ACCOUNTANT

The Chie f Acc ou ntants u se d to p er fo rm several tasks which were:

Pre paring acc ou nts Pre paring bud gets Op erati onal re po rting an d inter p reting Eval u ating op erating res u lts Pre paring inc om e tax ret u rns Establishing internal contr o l p roce du res

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TRANSITION FROM CHIEF ACCOUNTANT

TO CFO

D u e to increase d g overnance req u ire m ent there arises a nee d to e mpow er the chie f acc ou ntant an d to m ake him res po nsible by req u iring him to sign the acc ou nts.

There com es the cod e of co rpo rate g overnance, which m akes the chie f acc ou ntant pow er fu l an d mo re res po nsible.

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RESPONSIBILITIES TOWARDS BOARD OF

DIRECTORS

The CFO is req u ire d to fu rnish necessary an dclassi f ie d in form ati on to the boar d of d irect o rs.

Ann u al bu siness p lans Cash f low p rojecti on Fo recasts Long ter m p lans Bud gets Variance analysis etc.

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RESPONSIBILITIES TOWARDS

SHAREHOLDERS

The CFO is req u ire d to p rovide all the necessary d ata to be p resente d in the D irect o rs Re po rt.

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ROLES OF CFO

To reg u late, s up ervise an d imp le m ent a tim ely, fu ll an d acc u rate set of acc ou nting boo ks of the f irm

To imp le m ent contin uou s f inancial a ud it an dcontr o l syste m s to mo nit o r the p er fo rm ance of the f irm

To tim ely, reg u larly an d du ly p re p are an dp resent to the Boar d of D irect o rs f inancial state m ents an d re po rts

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ROLES OF CFO

To comp ly with all re po rting, acc ou nting an da ud it req u ire m ents impo se d by the ca p ital m arkets

To p re pare an d p resent fo r the a pp roval of the Boar d of D irect o rs all f inancial an d bu siness do cum ents

To alert the Boar d of D

irect o rs an d to w arn it regar d ing any m atter which cou ld o r do es have a f inancial imp licati on.

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ROLES OF CFO

To co llab o rate an d coo rd inate the activities of ou tsi d e s upp liers of f inancial services

To m aintain a wo rking relati onshi p an d todevel op a dd itional relati onshi p s with f inancial instit u tions

To fu lly compu terize all the ab ove activities in a

com bine d har dw are -s of tware an dcommu nicati ons syste m

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FOUR FACES OF CFO

the CFOs job is s o f ra u ght with challenge, its really fou r jo bs in one. We call these d istinct ro les the fou r f aces of the CFO.

1 .Ste war d , p reserving the assets of the o rganizati on by m inim izing risk an d getting the boo ks right.

2. Op erat o r, condu cting basic f inance op erati ons e ff iciently an d e ff ectively.

3 . Strategist, in f lu encing the comp anys overall d irecti on. 4 . Catalyst, instilling a f inancial m ind set to exec u tion an d

risk -taking thr ou gh ou t the bu siness.

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CASE STUDY

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ABOUT MCB

MCB is one of the lea d ing banks of Pakistan Inc o rpo rate d in 1947

D e po sit base of ab ou t Rs. 2 80 billion Total assets of ar ou n d Rs. 300 billion 1 ,0 2 6 branches, incl ud ing 8 I sla m ic banking

branches, an d o ver 300 ATM s, in a m arket with a popu lati on of 60 m illion.

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CORE RESPONSIBILITIES OF CFO AT

MCB

Lea d ing an d d irecting the f inance fu ncti on D eter m ining the res ou rces, expertise an d syste m s for

the f inance fu ncti on that are s uff icient within the overall

f inancial f ra m e wo rk. Imp le m enting robu st p rocesses for recr u itm ent of

f inance sta ff Revie wing the per form ance of the f inance fu ncti on an d

ens u ring that the services p rovid e d are in line with the exp ectati ons an d nee d s of its stakeh o ld ers.

Seeking contin uou s imp rove m ent in the f inance fu ncti on.

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PROMOTION OF FINANCIAL

MANAGEMENT

Assessing the o rganizati ons f inancial m anage m ent style an d the imp rove m ents nee de d to ens u re it aligns with the o rganizati ons strategic d irecti on.

Actively p romo ting f inancial literacy thr ou gh ou t the o rganizati on.

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VALUE FOR MONEY

Challenging an d s uppo rting d ecisi on m akers, es pecially on a ffo rd ability an d val u e for mo ney, by ens u ring po licy an d op erati onal p ropo sals with f inancial imp licati ons are signe d off by the f inance fu ncti on.

D evel op ing an d m aintaining a pp rop riate asset

m anage m ent an d p rocu re m ent strategies. Managing long ter m comm ercial contract val u e.

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SAFEGUARDING PUBLIC MONEY

App lying str ong internal contr o ls in all areas Establishing bud gets, f inancial targets an d p er form ance ind icat o rs Imp le m enting e ff ective syste m s of internal contr o l Ens u ring that delegate d f inancial a u th o rities are res pecte d . Promo ting arrange m ents to identi f y an d m anage key bu siness risks,

incl ud ing sa f eg u ar d ing assets, risk m itigati on an d ins u rance. Overseeing of ca p ital p rojects an d po st comp leti on revie ws. App lying d isci p line in f inancial m anage m ent Imp le m enting a pp rop riate m eas u res to p revent an d d etect f ra ud an d

co rrup tion Establishing p ropo rti onate bu siness contin u ity arrange m ents for f inancial

p rocesses an d in form ati on. Ens u ring that any partnershi p arrange m ents are u n der p inne d by clear an d

well do cum ente d internal contr o ls.

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ASSURANCE AND SCRUTINY

Re po rting per fo rm ance of bo th the o rganizati on an d its partnershi p s to the boar d an d o ther p arties as req u ire d .

Suppo rting an d a dvising the Aud it Comm ittee an d relevant scr u tiny group s.

Pre paring pu blishe d bud gets, ann u al acc ou nts

an d cons o lidati on data fo r g overn m ent -level cons o lid ate d acc ou nts. Liaising with the external a ud ito r.

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RESPONSIBILITY FOR FINANCIAL

STRATEGY

Agreeing the f inancial f ra m e wo rk with s po ns o ring o rganizati ons an dp lanning d elivery against the d e f ine d strategic an d op erati onal criteria.

Maintaining a long ter m f inancial strategy to u nd er p in the o rganizati ons f inancial viability within the agree d p er fo rm ance f ra m e wo rk.

Imp le m enting f inancial m anage m ent po licies to u nd er p in s u stainable long -ter m f inancial health an d revie wing per fo rm ance against the m .

App raising an d a d vising on comm ercial oppo rt u nities an d f inancial targets.

D evel op ing an d m aintaining an e ff ective res ou rce all ocati on mod el tod eliver bu siness p rio rities.

Lea d ing on asset an d balance sheet m anage m ent. Co-coo rd inating the p lanning an d bud geting p rocesses.

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FOUR FACES OF CFO AT MCB

The ste war d Acc ou nting, contr o l, risk m anage m ent an d

asset p reservati on are the p rovince of the ste war d . The ste war d mu st ens u re comp any comp liance with f inancial re po rting an d contr o l req u ire m ents. In fo rm ati on qu ality an d contr o l rati onalizati on are top-of-m ind iss u es fo r the ste war d .

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The op erat o r Eff iciency an d service levels are the p rim ary

areas of fo cu s fo r the op erat o r. He dyna m ically balance cost an d service levels

in delivering on the f inance o rganizati on's res po nsibilities, an d a da p t f inance's op erating mod el as necessary.

Talent m anage m ent

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The strategist As a strategist, he is a d irect o r, fo cu se d o n d e f ining the

fu tu re of the comp any in o rd er to enhance bu siness

per fo rm ance an d shareh o ld er val u e. He p rovid es a f inancial pers p ective on inn ovati on an d

p rof itable grow th; leverages this pers pective to imp rove risk -a wareness, strategic d ecisi on -m aking an dp er fo rm ance m anage m ent integrati on; an d translates the expectati ons of the ca p ital m arkets int o internal bu siness imp eratives.

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The catalyst The catalyst, instilling a f inancial m ind set to

execu

tio

n an

drisk

-taking

thr

ough

out the

bu siness. Fo r insight int o the challenges CFOs enc ou nter in each of their ro les, click on the a pp rop riate seg m ent of the Fou r Faces of the CFO F ra m e wo rk to the le f t.

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IMPACTS OF THE ROLE OF CFO

Reliable re po rting an d contr o ls Acc u rate an d tim ely in fo rm ati on

D evel op e d an d retaine d cu rrent sta ff , while als o fo stering ne w skills

Better -in fo rm e d d ecisi ons an d str u ct u re df ra m e wo rk fo r eval u ating ne w oppo rt u nities

Increase d level of locality in e mp loyees &cu st om ers

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SWOT ANALYSIS

Strengths

Eff ective an d w ell -jud ge d ste war d shi p of f inancial res ou rces Consistently high p rio rity given to d is perse as mu ch fu nd ing as

po ssible Increase d levels of sta ff ing, o ther res ou rces an d ca p ital p rovisi on to

sch oo ls Emp hasis on p rovisi on of qu ality off ice, incl ud ing s u staine d p rogra m

fo r the rati onalizati on, re fu rbish m ent an d d evel opm ent Eff ective Payr o ll Services well integrate d w ith Hum an Res ou rces CFOs have e m erge d as key bu siness partners to the CEO.

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Weaknesses: The CFOs mu st the mo st learne d an d ex p erience d

p ers on. Bu t there is no check in this state of a ff air,

which lea d s the comp any towar d loss. The res po nsibilities an d po siti on which is the right

of a CFO, is no t p rovid e d by the d irect o rs. The hu ge num ber of res po nsibilities m akes the

CFO crazy an d in hassle there are m any chances of m istakes do ne by CFO.

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Oppo rt u nities: Eff ective commu nicati on strategy

Balance acc ou ntability to the boar d an dshareh o ld ers fo r m aintaining the integrity of the f inancials an d a pp rop riate risk m anage m ent with loyalty to the CEO

Mo re training is risk m anage m ent

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CONCLUSION

CFOs' res po nsibilities g o w ell bey ond f inance int obalancing comp liance an d risk m anage m ent with bu siness -per form ance g oals.

the ro le of CFO bec om es very impo rtant as he contr o ls the re f lecti on of p er form ance, which is re po rte d to d iff erent a u th o rities an d the o rganizati on is assesse d by the m , an d they mu st

p er form their job with p rof essi onal comp etency an d integrity, s o that the f inancial state m ents give cre d ible in form ati on to its u sers.

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RECOMMENDATIONS

CFOs sh ou ld now s p en d mo re tim e on strategy an dop erating iss u es an d less on bud geting an dacc ou nting.

D irect o rs sh ou ld wo rk with CFOs mo re closely D irect o rs sh ou ld m ake s u re there is agree m ent

a mo ng the m anage m ent tea m ab ou t the mo st a pp rop riate m eas u res to ga u ge a CFO's s u ccess

CFOs mu st have br oa d-base d bu siness an df inance ex perience an d bu ild exce p tional tea m s on whom they can rely u nc ond itionally

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