From CFO to CVO (Chief Value Officer)

The economic reforms that came about in the early 90’s heralded globalization, liberalization and privatization. Most countries opened their markets as per the GATT agreement, facilitating international trade. Prior to this, companies were largely domestic, handling opportunities and challenges within the country. As such, a vast majority – 80% to 85% – of the company’s fair value sat on the balance sheet. 

The CFO’s role was therefore primarily a controller; handling the controls and compliance of the company, and a performance manager; keeping the company on track with robust and timely performance tracking. The value reporting and value protection nature of these roles has helped CFOs keep the company safe from controllable losses, accurate and timely recording of transactions, reporting to internal and external stakeholders, establishing an efficient finance function, and having oversight of the fixed and working capital.

Post economic reforms, international trade saw an uptick, and every nation hosted multinational companies. Nations now felt the impact of events that occurred beyond their borders. Due to this globalization, the CFO now had to take on two additional roles of co-strategist or co-pilot and value manager, in addition to the two roles of controllership and performance manager. 

In the co-pilot role, the CFO partners with the business teams to jointly grow the business. The CFO looks at how to increase the organization’s market share, increase margins, develop a resilient business model, and also oversees growth initiatives and M&As, for instance. 

Despite the growing scope of the CFO, it has been difficult to quantify the impact a CFO has on the P&L. For finance to add value that could be independently measured, the CFO had to take on the role of value manager. In this role, the CFO looks at managing the effective tax rate, finance cost, interest cost, driving cost-reduction initiatives, and improving return parameters on equity or assets, for instance. 

Key enablers that have facilitated success across these four roles: 

• An engaged, capable, and winning team
• Collaborating effectively with other key functions such as cybersecurity, risk, treasury, or sustainability on a joint agenda to drive increased value 
• Understanding how to adopt digital capabilities in the finance function