For the CFO
Chief Financial Officers are becoming more responsible for strategic direction. Boards, CEOs, and CFOs, recognize that corporate strategy is most effective with critical input and direction from the CFO. Long before this trend developed, FinEx worked with CFOs to define, develop, and implement strategic policies, projects, and roles.
The Strategic CFO. Finance by definition is strategic, and all strategic activity results in a financial impact. The CFO is the center of the financial function. The CFO’s role in corporate strategy should be no less central. Strategic planning is ineffective without financial and operational support; it is driven by data and information — financial and operational — and by the need to understand and manage risk. Corporations realize this and are tasking their CFOs to set the strategic framework and agenda.
Capital Budgeting, Free Cash Flow, and Value. The generation and allocation of free cash flow determines corporate value. In defining and measuring free cash flows, the CFO directs the allocation of capital. Corporations typically focus on revenue, earnings, and net income. But the importance of free cash flow to capital budgeting, value creation, and returns requires an understanding of cash earnings, investments, and cash available. In turn, this requires the development of cash metrics and benchmarks to measure performance.
Developing Financial Leadership. The financial management training role of the CFO is another role of strategic importance to the firm. The CFO is responsible for the recruitment, training, and retention of financial talent in the firm. Small or large, the company needs a supply of talent for operational purposes and succession.
Cash as a Strategic Tool. Every company uses cash strategically, and every company does it differently. To maximize its strategic impact, cash use should be optimized. It is the CFO’s role to define the strategic uses of cash — whether for paying off debt, capital budgeting, strategic investment, or managing risk — and to cause these strategies to succeed.
Short-Term vs Long-Term. The CFO is uniquely positioned to understand and champion both short-term and long-term company goals. Over the long haul, the company needs to grow and prosper. The CFOis best situated to connect short-term operations and finances to the long-term strategies and targets. This requires the ability to think ahead for years at a time, and to bring that forward-thinking into focus today. The CFO is challenged with this task on a daily basis. Strategy does not work weill without it.