Welcome back, and I'm glad you've decided to come along on this journey with me. We have much to cover, so let's get right to it. In this lesson, we're going to survey what competencies the modern CFO embodies. So in the schematic of how I approach development of the finance function, this lesson will focus on us the CFO. in later lessons, we will work outwards to our team and then to the role of our team inside and external to the organization. A number of really smart people have studied the role competencies and skill of the modern CFO.
The findings between various studies are generally consistent. For our purposes of this presentation, I'm going to use a study that was done by Queen's University and the Institute of Chartered Accountants of Ontario, Canada. The AIG had to perform the study, looked at literature on CFO competencies and then administered a survey to C suite executives to reach their overall findings, there are four thematic areas that the CFO embodies. The first is the steward role, which is perhaps the most traditional and recognizable role of Finance. A steward generally represents the minimum threshold for a senior financial professional, and includes mastery over such matters as financial reporting and internal controls. The operator role is one of the leading and effective and efficient finance function.
The strategist and catalyst roles are growing in importance, and are responsibilities that are closely shared with the CEO. However, these are roles which many CFOs seek to participate, but find it hard to do so given the amount of time they spend on the stewarded operator roles. The research studies finding suggests not surprisingly, that experience is the best way to develop true competency. However, professional education like this course, along with sponsorship and mentorship are also important elements of your professional life. element to consider. My suggestion to you is to use this competency map throughout your career to become or improve your professional leadership skills in the CFO role.
You can also map to identify areas of personal weakness, then seek out professional development or experiential opportunities to reinforce or improve your proficiency. Let's take a few moments to look at the four areas and a little more depth so you can get an indication of what the ideal modern CFO should bring to the role. Beginning with the stewardship competencies. The research identified that, as one might expect, the CFO possesses a working knowledge of risk management, budgeting and forecasting. Also, the CFO possesses knowledge of investment and credit risk. It's no surprise that the CFO has a proficiency in accounting knowledge and taxation.
But don't mistake accounting knowledge as the same thing as financial reporting. Financial Reporting is broader and includes external finance. As well as other information that gets released, including m dnase, and internal control reports, etc. The CFO also needs to appreciate information systems and information on the needs of decision makers. Now this is a key way which CFOs add value to the organization, the CFO and oversees systems, processes and internal controls across the enterprise. The modern CFO understands the business environment context, which is so important if you want the finance function to participate in decision making, and operations management.
The CFO is often the unspecified champion of fraud prevention, detection and investigation. And finally, the CFO plays an integral role in corporate governance, including an ability to institutionalize best practices, creating a culture of excellence and ethical performance. Next, let's look at the competencies of the operator CFO. This group of companies CS focuses on the achievement of economy and efficiency in meaning a service level commitment within the finance department and across the organization. This specific competencies include the CFO conduct staff planning to attract and retain top financial talent. Staff management, including an ability to empower team build establish accountability, the CFO is often the leader in identifying, developing and overseeing projects, which need to be delivered on time and on budget.
Corporate Finance marries together strategic goals with financial measurement to ensure that operating decisions maximize value and are adequately funded. Treasury and investment management includes the execution and ongoing management of various financial instruments including cash, investments, debt and equity. The CFO should be a key player in mergers and acquisition type activity from providing due diligence support negotiating a fair value and appropriate terms that optimize the strategic elements. Outsourcing is a common functional strategy. But the CFO is often a key stakeholder in making the decision on which function to outsource and which to retain. It goes without saying that the CFO needs to foster a culture of achievement and results not only within your own department, but across the organization.
And finally, the CFO is often tasked with maintaining and protecting the large amounts of data that are generated within the organization. The strategist competencies are perhaps the most challenging for many CFOs to develop, but also the most important from a value creation perspective. The strategist CFO provides a financial insight on innovation and profitable growth. This insight, improves risk awareness, strategic decision making, performance management. It sounds very exciting, doesn't it? Let's take a closer look.
Vision And goal setting is often the domain of the CEO. But the CFO has an important role to contribute as a facilitator, a protagonist, and a sounding board, then within the finance function to build congruence and alignment. Strategic risk management speaks to managing the biggies understanding of major risks and opportunities to the organization and its business model, and then responding appropriately. thinking strategically and making strategic decisions requires broad appreciation of current factors and future trends. The strategist CFO keeps different perspectives in mind simultaneously. By recognizing synergies and interdependencies.
The CFO contributes innovative, creative and outside the box thinking to advance the organization's mission. The CFO is most likely to be called upon to take the strategic plan and integrate a performance management system to roll up the strategy measure performance and monitor Through the results. Critical Thinking enables the strategist CFO to support and make decisions based on sound logic and evidence. The CFO distinguishes between fact and opinion and ask questions makes detailed observations and uncovers invalid assumptions. The CFO must be comfortable with uncertain situations and partial information to effectively manage ambiguity. The pace of change in modern business challenges the CFO to continuously make improvements in themselves, their departments and across the organization.
As an advocate for the organization, the CFO is often a representative inside and outside the organization. This includes networking with shareholders, analysts, suppliers, customers and the public at large. The CFO must have a keen sense of when and how to best portray both positive and negative information about the organization. Are you getting goosebumps yet? About the opportunity that lies ahead for you. And finally, we have the catalyst CFO.
Catalyst is a term meeting an agent for change. And many of these competencies focus on the softer skills of management and leadership. First and foremost, the catalyst CFO displays leadership and exhibits influence. The CFO inspires, motivates provides direction to achieve goals and objectives. The catalyst CFO relies on their strong communication and presentation skills to build an executive presence. The presence is instrumental for connecting with others, persuading others and communicating messages that are understood and received as intended.
And I myself am personally working to develop is the ability to negotiate with others in both friendly and adverse circumstances. It could be related to a new employees, new credit facilities, allocation of budget resources, all of these required ability of the CFO to consider different negotiation strategies to achieve an optimal level. Come. The canvas CFO is strong at relationship building and collaboration. It should go without saying that the CFO must be an individual of high personal integrity and ethics. The CFO alone has a pervasive effect on setting an appropriate tone at the top for the entire organization.
Change Management is an important discipline because it deals with people, this capitalist CFO cannot advance the corporate agenda without the willing support of his people. Finally, two very personal competencies. The first is self awareness and insight. That CFO has a level of personal humility that allows them to recognize their own shortcomings, and coach others in this regard. Insight is an intangible quality that allows the CFO to add value in any conversation. And secondly, the CFO possesses the courage and the resilience to persist in the face of adversity, being passionate about one's work and the mission of the origin.
Ization engages persistence and models that for others to follow. Here's a quick story about how I got my first CFO appointment. I was turning around a US subsidiary of a global fish processing companies, great company, lots of potential terrific people, but so much wrong with it. Namely, the company didn't make any money. I was working for a turnaround private equity fund at the time. And I was brought in as a quasi consultant at the senior management level to implement directives from a board of directors.
After about six months with only marginal improvements, I wrote a memo to one of the directors who also happened to be my boss, I could see what was wrong with this company and what needed to be fixed, but I was having trouble getting any traction. So I had the audacity to suggest that I could have fix it and extract the memo is presented on the screen in front of you. That's coming up with 101 things to do was kind of catchy. My boss asked me what I wanted to do when I fully suggested that he appoint me as president of the US company. I suggested that was interesting. No outright refused.
I love working for this guy. Anyway, we flew down to Boston and gathered the executives, the company was without a president leaving what I thought was a natural void for me to fill. So with the executive team gathered, this led the director to share his plans to appoint me as the president. Needless to say, I did not get very much support for very valid reasons, including I didn't know very much about the industry, I was younger than everyone at the table. And I didn't even live in the city of Boston, and so all very valid, but really, it was irrelevant to me, because knowing that it was unlikely that I would get much support. A more realistic plan was to appoint me as the CFO.
Regardless of my title, I still have the same mandate from the board, which was to cross off the items on my list of 101 items which they generally supported. I share this little story with you to show that the CFO can fulfill the strategist and catalyst roles just as easily as perhaps the person who could, but in some reflection, notice how I still had yet to develop those relationship building and negotiate skills that prevented me from attaining the top job in this situation, so as to who got the top job. Well, that's another interesting story for another course. So let's finish this lesson with a reflection of where we begin your own self awareness of what the modern CFO can bring to the organization, as well as our own strengths and weaknesses help us prepare, even before we embark on our first hundred days, a CFO may not be proficient in all these areas, very few are but in the meantime, you can build a team around you and pursue self improvement to fill in the gaps.
We will take this up further in later lessons. Finally, if you find this information interesting, you want to learn more, do a simple search on CFO competency map, you will be directed to a study to which I refer to in this lesson. The map itself is much much deeper than what I've had time to share with you today. So on that note, don't stop