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View from India: CFO’s responsibility increases with the pandemic

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Balance sheet and capital expenditure, profit and loss and revenue growth are top priorities for any CFO. Reinventing oneself is the buzzword as the pandemic has compelled the CFO to wear multiple hats.

With the pandemic, almost all operations have come together on a digitised platform. In that sense, everything is more or less visible and digitisation makes it possible to track and monitor any section of a company. This has brought a paradigm shift in the world of the chief financial officer (CFO). The role has broadened and is holistic across the entire organisation and, in order to extract value, the CFO may have to chalk out measures to enhance business outcomes.

In its new avatar, the CFO may be at the forefront of decision making as transactions across the board are customised. “The CFO’s role goes beyond making the payroll more effective. It’s like a 30,000-feet view of all functions that are interlinked. What could happen in the future, is that they can engage in the services offered by the company,” said Manish Thakore, CFO at Daimler India Commercial Vehicles, discussing the role of CFOs in New Digital Era organised by ASSOCHAM and Nexdigm.

Remote working requires collaborative work between or among professionals. The intra-office outcomes are reflected in the backend operations. Technically, this requires finance automation. That’s one side of the coin; the other side is represented by preparedness. “The business contingency plan is laid out for the company to start early and be able to respond to a crisis, if any. So the CFO focuses on reducing risk, while also working on profitable measures. Goals are being redefined and even streamlined in order to sustain the momentum. The challenge lies in engaging the customer and not losing sight of the goal,” added Altaf Jiwani, CFO at Welspun Group.

Digital transformation is not about job loss but job efficiency. It requires more capital investment in order to make the company future-ready. Digital investment is not by choice but by compulsion; its success depends on the company’s approach towards making itself visible. For a high turnover, it’s important to manage risk, work on improving customer satisfaction, and enhance revenue. The CFO initiates strategies for the organisation and tries to work out a vantage position for transactions. Those CFOs who deliver good outcomes, could probably become a natural choice in the company’s succession plan. “Organisations evolve as they go through learning processes, which enables them to be more customer friendly, agile, customise ERP (enterprise resource planning) and integrate AI [artificial intelligence] and ML [machine learning]. Of course, the CFO requires the right caliber to take this forward. It could be a blend of technical expertise and financial knowledge linked to the digital ecosystem,” observed Jiwani.

The pandemic has popularised video calls, automated processes, and facilitated collaborative work. Consequently, the CFO’s functions have evolved. “Departments such as human resource and IT, that have worked closely with the CEO, will also have to co-ordinate with the CFO. In short, the CFO may have to contribute towards the creation of an IT vision of the company. For example, in B2B companies, the IT strategy is a backend process. In the case of B2C companies, the IT strategy is more customer focused,” said Sanjay Banka, CFO at Senco Gold Ltd.

We are in a volatile, unpredictable, complex, ambiguous (VUCA) world. Wherever required, the CFO uses agility for change management. Through agility, the company rolls out risk-mapping measures against any alarming situation that could stagger the growth. “What was good for the organisation two years ago, doesn’t seem to work now. The value drivers differ for each company. The entire backend operations need to be linked with the frontend team as the customer environment is rapidly changing. The company’s digital transformation encompasses all stakeholders in order to bring in a change management in real time,” said D Muthukumaran, chairman of the National Council for CFOs, ASSOCHAM, and CFO at ReNewPower.    

Perhaps organisations could align with universities and apex bodies to build a CFO talent pool. Going ahead, the overarching role of the CFO will extend to address sustainable issues related to the environment, social and government. It may seem farfetched, but it’s necessary. It’s probably because the millennial generation tends to look at products differently; many of them are conscious of the water consumed or carbon footprint required to create a product before being retailed.

Another pandemic-led outcome is that the thrust on compliance issues is increasing. That’s because the CFO may have to interact with vendors and third parties. Regulatory amendments are important when it comes to CFOs. “Several companies are digitising processes like end to end operations, online documentation and digital signatures. At the government level, optic-fibre connection is paving the way for rural connectivity. Apex bodies could also coordinate with the government for the same. Perhaps processes could be initiated for organisations to implement,” observed Dr Waseem Hoeneini, co-chairman of the National Council for CFOs, ASSOCHAM, and CFO at Schlumberger India.  

The ERP should cover the company’s requirement as well as the compliance. Professionals are leveraging software to be compliant. Going forward, the software upload will be integrated with ERP; every vendor’s invoice would require compliance; invoicing and payments can happen in real time, and we could perhaps look forward to a time when technology will be integrated into compliance. This may lead to new business models and new capabilities will be developed to support and grow businesses. “Today it may not be possible to pursue a business without compliance. Customarily, compliance and the supply chain were two distinct operations within the framework of the business. Now the entire ecosystem, along with the supply chain vendors, should be compliant. And that’s where technology helps to mesh all the components with compliance,” said Swaroop Repaka, director of strategy at Clear.

When we look at the big picture, the government has set the template for compliance by plugging in all players in the system. The government has brought in verticals and allied services on to a platform for efficient operations. For instance, the direct and indirect tax has been connected within the framework of income tax. E-invoicing and goods and services tax are also connected. All this has led to both data collaboration and exchange. It’s easier for the government-initiated services to leverage such information for tailoring citizen centric services. To that extent, these national initiatives could probably set an example for other countries to emulate.

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