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VALUE BEFORE PROFIT ― CFOs must adopt a value-centric approach if the finance department is to retain its strategic role for businesses. A strong body of research has been developed in recent years, much of it carried out by ACCA, that tracks the changing role of the CFO. By Liz Fisher, journalist
First published in the ACCA AB Magazine, June 2023
While the role of the CFO is fundamental to organisations, it is not static, and its trajectory is being informed by the need to create sustainable organisations that deliver value to a broad range of stakeholders. In particular, the traditional view of assessing organisations in terms of profit (and reporting on their performance in these terms) is being replaced by a wider consideration of value. As a result, a new role, a chief value officer (CVO) responsible for the creation and measurement of value, is beginning to emerge in some organisations. But what does that mean for the CFO?
well beyond financial stakeholders. Value is a long-term concept, and its generation is continuous. This means that while the financial perspective may remain paramount, CFOs are increasingly being asked to balance financial and non-financial drivers. ‘As an all-embracing concept, value optimisation may necessitate taking decisions that are not, in strict terms, financially optimal,’ explains the report. Existing skills
A new report from ACCA and BDO, The chief value officer: the important evolution of the CFO, examines the emerging role of the CVO, drawing on the views of almost 100 finance leaders worldwide. On the basis that CFOs are increasingly adopting a value-centric approach, the report argues that the CVO is a natural extension of the CFO role, and is one that professional accountants should prepare to embrace. Enablers of value The report begins by dissecting the meaning of value within an organisation, starting with the six capitals of the International Integrated Reporting Council’s Integrated Reporting Framework, which it describes as the ‘enablers’ of value, or the levers an organisation uses to create value through its activities. Organisations convert these enablers into value (and report on its progress) through a combination of people, processes, technology and data – for the benefit of a wide range of stakeholders that goes
50 / orient-magazine.com
So what does this mean for the current skillset of the CFO? CFOs require a combination of financial, business, value and data acumen, as well as skills in project and change management, and ethical awareness. Is this sufficient to meets the demands of a CVO role, or will additional skills be needed? Finance professionals taking part in the discussions that informed the report argue that many of the requirements of a CVO role are already being undertaken by the CFO, and that their role as CFOs has already moved significantly beyond the traditional perception. One participant explained: ‘The role of the modern day CFO is more like a T-shape where you have got that depth of knowledge from an accounting perspective but then you have got the bar along the top with a broader understanding of different parts of the business that you link to integrated reporting, and it brings in different points of what we say value is about being… the worth or the usefulness of something to the business or whatever your objective may be.’
Issue 95 / November 2023
