One of a CFO's key tasks is helping the board of directors handle emerging commercial challenges. However, with so many new issues on the horizon – from changing technology to new regulations – staying abreast of their corporate governance responsibilities can be taking up an increasing amount of senior finance executives' time.
Corporate governance researcher Dr Diaswati Mardiasmo says that corporate governance is receiving heightened attention from CFOs, because of growing public interest in businesses being good corporate citizens.
“CFOs have the opportunity and obligation to be the architect of the company's governance structure and system and to increase transparency around things like acquisitions and the issue of stock options," says Mardiasmo.
“Because of that, CFOs have to be up-to-date with new technologies and data management systems," she adds.
Julie Garland McLelland is a professional Non-Executive Director. She says increasingly, boards are questioning CFOs on such topics as: what Bitcoin could mean for their businesses; how adopting new payments technology might speed up internal processes; and the potential risks of doing business with small FinTech or RegTech companies.
“The CFO has to be ahead of the board on these issues," McLelland says, explaining that boards will want the CFO to explain potential strategic advantages for the business through technology.
“They also want the CFO to talk about how to manage the risks of investing in new technology, how to create audit trails and how to ensure there's accountability around any tech investments," she says.
Board paper innovations
CFO's are generally tasked with preparing papers for board meetings. New tools are emerging to help make this task easier and to deliver more accurate, timelier information to directors.
“There's a tremendous amount of work going on around new governance systems. Today, boards need to be able to drill down into the actual, real time financial results of the organisation, to satisfy themselves on queries. These tools allow them to do that," McLelland says.
There are numerous online board paper management tools available. These are technologies that sync with the business's financial accounts system to prepare comprehensive, up-to-date reports that are routinely sent to directors prior to board meetings.
These new tools could potentially drastically reduce the time it takes to prepare this information.
Once CFOs have the right technology in place to help produce the best possible board papers, they could be in a better position to translate the numbers in a more meaningful way for directors.
“It's the CFO's job to help the board to understand the financial implications of strategic decisions and how different financing structures and strategies will change those implications, as we now have the ability to handle much better and bigger data sets," says McLelland.
“This means the CFO and board can better compare and contrast the outcome of potential strategic decisions – for instance the difference between setting up a subsidiary in The Netherlands versus Ireland," she says.
CFOs who plan to use such tools, may find it worthwhile to invest time in mastering the software first, she adds.
“This requires the CFO to really have a deep understanding of how to use new tools and technology properly to allow the board to explore the potential for a number of different strategies, particularly around financing, legal and organisational structures."
Robotics and machine learning top of mind
Many businesses are already considering the potential for emerging trends such as artificial intelligence (AI), machine learning and robotics to transform their operations.
McLelland suggests that in this environment, a top priority for CFOs is to use artificial intelligence to analyse data in real time and get a better understanding of their customers' behaviour and preferences.
“What's critical," she says, “is for CFOs to consider how to use AI to empower people, rather than just to use it to replace them with something cheaper."
Chat bots – technology that responds to online queries in a similar fashion to a human – are a good example.
While these tools may be useful to answer simple queries, there could be a risk that more complex queries remain unresolved if the automated technology is not properly implemented or does not allow the consumer to easily talk to a representative.
“If the chat bot can't answer a question with the standard responses it's programmed to provide, the consumer can end up getting the same responses again and again. Whereas, in the same situation a human may be able to respond to the query in a more efficient manner, especially if it's relatively complex," McLelland says.
While many CFOs have a growing list of responsibilities and roles, corporate governance remains at the core of their work. Harnessing new technologies to help get a better bird's eye view of the company's strategic and financial situation could be an option to deliver rich and accurate data to the board and to the business.
The idea is for CFOs to constantly review the market to ensure the business has the best corporate governance tools at its disposal and to ensure it is meeting its obligations to keep directors and shareholders fully informed of the business's current position and its risks, opportunities, challenges and threats.
- CFOs may find efficiencies in electronic board paper preparation technologies to deliver better, real-time insights to directors.
- Finance chiefs could investigate how emerging tools that use artificial intelligence, machine learning and robotics might improve their operations.
- New tools might help enhance the work employees do, rather than simply to replace them.