Section 2:
The investable CFO
Investors are looking at CFOs as agents of change. So much so that they identify the competence of the CFO as the second most important factor when considering investing in an organization, ranking only behind market expansion opportunity. Meanwhile, the competence of the CEO ranks as the seventh most important factor.
But what does ‘CFO competence’ look like? More than three-quarters of investors (78%) say CFOs must demonstrate technical, operational, and strategic competence to gain the confidence of investors. Finance leaders must be able to demonstrate proficiency in a range of areas beyond financial acumen, including data analytics, emerging technologies and systems, process optimization, resourcing, risk management, and market analysis.
THE 10 MOST IMPORTANT ORGANIZATIONAL ATTRIBUTES FOR INVESTORS
01.
Market expansion opportunity
02.
Competence of the CFO
03.
Clear strategy and vision for the future
04.
Robustness and transparency
of financial records and reporting
05.
Strong metrics and data
06.
Competitive advantage
07.
Competence of the CEO
08.
Sustainability credentials
09.
Brand equity
10.
Unique value proposition
Demand for big-picture thinking
Four-fifths of investors (80%) say their firm is usually aligned with CFOs on what their business should prioritize. When considering the top strategies for gaining a competitive advantage, both groups identify the importance of diversifying supply chains, increased use of AI and automation, and the need for optimized data management systems. However, while investors and CFOs are broadly aligned on the key strategies for organizational success, there is a gap between investor expectations for a successful finance leader and CFO priorities.
While investors are looking for finance leaders to think more holistically, CFOs are currently more inwardly and short-term focused. Four-fifths of investors (79%) say CFOs are too busy with operational duties to focus on the strategic elements of the finance function that attract investors.
Investors believe that, for CFOs to be successful, their primary focus should be on overall business strategy and risk management. This involves concentrating on the company’s long-term growth and building resilience against potential market shifts. Meanwhile, CFOs believe they should be focused on increasing operational efficiency, managing and understanding the company’s current operations, and their impact on the bottom line. Given that both groups place investor relations among the top three focus areas for CFOs, aligning these views will be critical.
The competence of the CFO is more important than the competence of the CEO when making investment decisions.
THE CFO SKILLS AND ATTRIBUTES INVESTORS VALUE MOST
Strategic vision/leadership and team management
Technology skills (including AI
and AR)
Capital allocation skills
THE FIVE MOST IMPORTANT FOCUS AREAS FOR A CFO
Investors
1.
Overall business strategy
2.
Risk management
3.
Investor relations
4.
Financial performance management (incl. monitoring, analysis and tracking)
5.
Compliance and governance
CFOs
1.
Cost management and efficiency
2.
Managing and understanding the business operations
3.
Investor relations
4.
Improving staff engagement
5.
Financial performance management (incl. monitoring, analysis and tracking)
A spotlight on corporate purpose
Today, investors are increasingly considering factors beyond financial returns when building their portfolios, with environmental, social, and governance (ESG) criteria fast becoming a key priority. Almost three-quarters of investors (73%) say that organizations should prioritize strengthening their ESG and sustainability credentials if they want to gain a global competitive advantage and make themselves as investable as possible.
Our study reveals that this focus on sustainability is strongest among investors in the UK (79%) and Singapore (83%).
THE % OF CEOS AND LOB MANAGERS THAT EXPECT THE CFO AT THEIR ORGANIZATION TO BE AN AMBITIOUS DRIVER OF CORPORATE GROWTH.
76%
US
79%
UK
71%
FRANCE
58%
GERMANY
65%
AUSTRALIA
83%
SINGAPORE
If organizations are going to optimize their investment, they need to have a robust decarbonization strategy in place: 88% of investors say they are more likely to invest in organizations with a comprehensive net-zero plan. This rises to 100% of investors with an AUM of over $3 trillion.
And when it comes to demonstrating progress in this area, the CFO has a crucial role to play: 85% of investors say that, today, a CFO must be able to quantify and improve other measures of corporate value, beyond profit alone. Again, our study shows this sentiment is strongest among investors in the USA, UK, and Singapore.
86%
US
86%
UK
87%
FRANCE
72%
GERMANY
83%
AUSTRALIA
95%
SINGAPORE
The CFO Premium
Eighty-five percent of investors say CFOs need to focus on building a long-term strategic vision to attract the most investment for their organization. It’s no small challenge, but the potential rewards are huge: on average, investors increased their initial investment in an organization where the CFO was the main strategic growth driver by 2.6%.
2.6%
Investor size, based on assets under management (AUM)
Average additional initial investment per organization
$10 billion — $100 billion
+2.9%
$100 billion — $500 billion
+2.2%
$500 billion — $3 trillion
+3.6%
“
Moving away from legacy systems and embracing automation will be central to modernizing the finance function. CFOs should be asking what low-value work they can automate to free up their teams to do the strategic analysis and immerse themselves in other areas of the business. The CFOs who really have their finger on the pulse of their organization are those who ensure finance teams foster strong partnerships with leaders across the organization, from operations to marketing and sales.”
John Kinzer, Board Member OneStream Software and former CFO of HubSpot
CFOs who drive the transformation of the finance function, embracing disruptive technologies and expanding the skillset of their teams, will be wellpositioned to attract additional investment. On average, investors increased their initial investment in an organization where the CFO has modernized the finance department’s operations by 2.9%.
2.9%
Investor size, based on assets under management (AUM)
Average additional initial investment per organization
$10 billion — $100 billion
+3.1%
$100 billion — $500 billion
+2.7%
$500 billion — $3 trillion
+2.9%