‘CREATING value is not just about the numbers.” I had said this in an interview last month, and admittedly it must have sounded strange coming from a chief finance officer (CFO). Conventional wisdom assigns to the title CFO a dedicated focus on numbers, and this is essentially correct. I have learned, however, from my 33 years of working in finance, that a CFO is able to create greater value for the company by defining oneself beyond the conventional. The CFO in today’s world has to be a strategist, an operator, a catalyst and a steward.
The CFO as strategist. The new CFO has to be able to manage risks and opportunities by developing a flexible corporate strategy and must know when to shift from defense to offense so that value is created even in periods of uncertainty. In short, one has to create a sustainable business model that is anchored on shareholder value creation through cycles. Such a model should be based not only on project studies but also on insights based on one’s experience, as well as inputs from experts. One cannot rely solely on numbers because they can be flawed, being built on assumptions that might be flawed themselves. A strategic thinker must be alert to the chance that numbers can lull one into making wrong moves.
The CFO as operator. The new CFO has to be equally adept at making sure that the strategy is executed properly, cascading it to the operational units in a manner that not only manages resources but also optimizes them, and maximizes the opportunities they present. After the broad strokes of strategy, one has to be able to go down to granular level so that operations generate margin improvements. As operator, the CFO must learn to improve one’s discipline as a problem solver. Experience has taught me to break the issue into smaller, manageable chunks—to try to understand the problem at the smallest units possible. I do research and use analogy to gain insights into the problem that a more direct approach might not yield so readily, if at all.
The CFO as catalyst. The new CFO has to see himself in a position of a catalyst. The time is ripe for shaping and advancing the country’s economic development, and the new CFO can spur such change by seeing opportunities in the competition, such as learning from new paradigms. Regional exposure should not render companies vulnerable but stronger because of collaboration, with diverse entities coming together with their distinct advantages and expertise. The Asean integration brings with it the chance to make new business partners, to achieve advantage in technology transfer, and to benefit from the transfer of operating knowledge. With these opportunities right in front of him, the CFO has the responsibility to take a proactive role in instituting necessary reforms and participating in the national economic agenda.
The CFO as steward. Ultimately, the CFO must strengthen his traditional role of stewardship in these contemporary times, where the line separating what’s right and what’s not has grown blurry. The last decade has exposed accounting malpractices and corporate governance failures in a number of firms worldwide, bringing economies to their knees and compromising the lives of the public they must serve. Therefore, the CFO as a steward must preserve the assets of the company and ensure its longevity in the most ethical manner possible. The CFO’s stewardship role means acting as the conscience within the organization. He goes beyond compliance to serve as chief moral compass of the company and guardian of good corporate governance and prudent risk management—and makes sure that they are institutionalized and embedded in the day-to-day management process.
Redefining the role of the CFO is now very crucial. 2015 is the year of the Asean integration, with the Philippines hosting the Asia-Pacific Economic Cooperation. There is strong investor appetite for the country and our competitiveness ranking has improved 23 notches from 2011. While these strides put our country in the spotlight and open up for us another level of sustainable gains, together with them comes fiercer regional competition that will exert more pressure on Philippine companies to up the ante. The CFO plays a critical transformational role in this period of transition, making sure that business is resilient.
As a strategist, operator, catalyst and steward, I believe CFOs can become more effective in creating value beyond numbers, endure competition and withstand various market challenges.
Mr. Jaime Ysmael is the 2015 Finex president and he is also the senior vice president and CFO of Ayala Land Inc.. The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of Finex. Free Enterprise is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Wednesday and Friday.