New and complex issues face global corporations – managing digital transformation, big data, and cyber security, whilst developing leaders for an unknown future. Traditionally these were not issues for Chief Finance Officers but that’s changing. Egon Zehnder consultants discuss implications of digital for the leaders of finance and other C-suite functions...

Cagla: The whole changing landscape associated with digital is having a different impact on the finance function at large, but I don’t think we’re seeing new types of individuals in the role consistently yet at the senior level. Finance leaders today need a much broader appreciation of business issues and sharper antennae in terms of what’s happening in the world around them and a CFO needs to understand how technology provides an immense opportunity to build the business. I would be keen to discuss how technology affects the whole business model and the other functions.

Sven: In the same way as digitisation is challenging today’s remit of the Chief Marketing Officer, one could argue that crypto-currencies are challenging tomorrow’s CFO, because if you are dealing in rupees and pound coins maybe at some point your board member will come to you and say: what about bitcoin? And who will they go to for an expert opinion? They might go to the CIO, CTO or the CEO but I think they’ll go to the CFO – who at least needs to have a view.

Chris: I think Sven’s absolutely right – it’s only a matter of time before digital currencies are readily accepted and that’s a great example of where digital will impact the finance function. Of course there are then many security aspects around this as well.

Cagla: The CFO used to be seen as the guardian of governance in the company – with opportunities both from new developments and managing risk, including around digital. This may put more traditional CFOs on increasingly uncertain ground because potentially they’ll need things need on their horizons which may not be there now and this impacts on how we think about what a great CFO looks like and how we assess for that.

Sven: Yes. Another angle on digital may be that CFOs obviously need to be very interested in the kind of finance systems they run, what software brings appropriate efficiencies and what enterprise software developments may help them in leading their function.

Chris: Building on what you said is the topic of big data and analytics. Certainly the finance function is seeing the impact of how you sort through what seems to be an ever increasing amount of data you want to turn into information. One aspect of this is the inbound data and the other is access to relevant information. Increasingly people are looking to access information anytime, anywhere, through any mode – to what extent do you allow them to self-serve or not, and what are the potential risks around that? I suspect this is something the CFO or finance function needs to be thinking about.

Sven: Another question is who owns the management information dashboard –the CEO, or CFO? I would argue the proliferation of financial information and demand for access increases the need for more sophisticated ways of turning aggregated data into actionable insights which should be co-owned by the whole leadership team of the business.

Hugo: This is important actually for others in the C-suite too. The general counsel, for instance, is also a guardian of risk and needs to be in a position to advise the executive committee and board on potential issues and risks looking forward. So they also need access to the information dashboard - and I think the same is also true for HR directors.

Gizem: And this is also where the Chief Corporate Affairs Officer comes into play. Increasingly stakeholder conversations are online, with digital completely changing how companies interact. The risk and reputation management aspect of the Chief Corporate Affairs Director role can no longer be reactive. And in today’s integrated world, where the smallest bit of information shared online can have a major commercial impact, the CCO and the CFO need to collaborate proactively to define the voice of the organization internally and externally.

Nicole: We all know you can use the same information to create and to deliver different messages. The CFO needs to be the person who’s making sure that the information provided is driving the right behaviours – this brings us back to leadership.

Sven: Also there is a breed of CFOs in technology-related companies where their ability to tell a story about an emerging situation or company is really important – and this requires them to understand the broader ecosystem behind the massive growth of the technology landscape. These people need to give a very rational under-pinning to stock market valuations of companies in new markets. I would assume tomorrow’s CFO has to become more broadly aware of fundraising mechanisms that challenge traditional ways of raising finance, such as crowdsourcing.

Nicole: So an interesting part of this is what else you need in a CFO - is your CFO almost your glass half empty guy? After all, he's your checks and balances and that part of his or her role can’t disappear. It’s easy to get excited about all these other things and amazing new technologies but in the end it has to be about whether someone can actually go back to the core business and understand how to use technology to drive the business model and to drive growth.

Cagla: I think what we’re saying is great CFOs of the future will look different than those today. In terms of additional skills, capability to deal with complexity, innovation, and indeed all the things that we’ve talked about. Therefore, they will need continuously to show great potential around engagement, insight and determination throughout their career because even if they’ve made it by now, the world is constantly changing around them.

Hugo: We’re seeing something similar happening in other functions too. A general counsel I think in 10 years’ time will need to at least be cognisant of issues around privacy, data protection and so on, especially in data heavy businesses. Right now there are still a lot of general counsels who’ve come up through the more traditional corporate/M&A routes which may be relevant for the roles they’re in today but may not necessarily match up to the requirements of a digital business. Meantime there’s a shift already in legal functions as they push to deliver much smarter legal services, and this impacts the way teams are structured, managed, where they sit in the business, and if you need big teams or to outsource everything to law firms for example. So I think from a leadership perspective you’ll see quite an interesting shift in what is required to be a successful general counsel.

Chris: This certainly resonates with what we heard recently when we hosted a dinner in New York for the general counsels, legal advisers and IT professionals of a group of Fortune 500 global companies. In particular we asked them to discuss how a company should respond in the event of a cyber-attack, not just from a technical but also from a legal standpoint - and how best to protect assets, reputation and managing communication with external stakeholders. The whole cyber-security approach is not to build the walls higher and the moats wider, it’s to build the perimeter of the fences but also have to have a much more agile and thoughtful approach to detection, identification, remediation and, and inoculation internally. This was what clearly came through – plus having a plan on how you manage that and making sure that the investments in security are up to some generally accepted standard – so you’re prepared for the worst case scenario.

Gizem: In fact, a number of global companies are making information security a business differentiator in a competitive market, hiring communications directors exclusively dedicated to these issues. They are finding that when there is a team member, whose sole focus is cyber protection, it greatly improves organizational agility and response time.

Sven: Something I’m mindful of is how the risk of cyber and information security raises the stakes for the CFO magnificently – and you can apply the same argument to a CIO or CISO. Imagine a supermarket chain that sends its CIO to conferences, they talk about how great their defences are, but then they become a target. Once you’ve been hacked, you’re fired – you might be the flavour of the month on the conference circuit but suddenly you can go from hero to zero. If there’s a breach of confidential financial information the CFO will be implicated in some shape or form. So not having an awareness of that risk level and how it applies to your function can be a career killer.

Hugo: Other functions also take responsibility for technology and cyber-security however. So if information leaks and the company’s hacked surely that can’t all be attributed to the CFO?

Sven: It’s similar to the discussion around who owns big data in the business. You could argue that the leadership of a business is negligent if for example the CEO has no concept of or understanding of what big data means for their company. Equally if there’s no collective ownership of cyber and information security and all you do is create a fall guy without curing the problem.

Chris: Ultimately the CIO and CEO are responsible but the key on security and cyber-security has to be a companywide mind-set, it can’t be a technology solution and when it is, there’s failure.

Sven: Generally I’d say both individual leaders and organisations need to be better at dealing with creativity, and mastering complexity. This is clearly becoming a more important part of the CFO role, both as leader of the function and a key leader in the overall business – indeed often a right hand to the CEO. It means that you need to build a different level of leadership moving forward – where all of the functional skills are a given, but looking ahead, they also need to take it to the next level.

Sven: Broadly I see three distinct buckets of talent from which the new generation of CFOs may come. There’s the CFO of a company which is agile, high growth, has a high need for capital, the Silicon Valley style business where the CFO has a very particular role in being the co-creator of the story you tell the markets. The second is the CFO in a traditional business that is being digitally disrupted and therefore sees fundamental changes to its operating model. Then the third might be the CFO of a traditional company which sits in competitive ecosystem that is being fundamentally disrupted.

Cagla: I think the point is that for somebody to be great in this function in the next 10 years all three types have to learn from each other, and they have to take the best of each other. All the executive committee members need to step up and play a slightly different role I think. This is also probably one of the cases where it’s all about joint accountability and joint responsibility

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About Egon Zehnder

Since 1964, Egon Zehnder has been at the forefront of defining great leadership in the face of changing economic conditions, emerging opportunities and evolving business goals. With more than 440 consultants in 69 offices and 41 countries around the globe, we work closely with public and private corporations, family-owned enterprises and nonprofit and government agencies to provide board advisory services, CEO and leadership succession planning, executive search and assessment, and leadership development.

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