CFOs face one of the most complex and challenging operating environments in recent years, as geopolitical turbulence, persistent inflation, pressure on supply chains and uncertainty about global economic growth cloud the future.This uncertainty and volatility create new tensions between short- and long-term priorities, with 76 per cent of respondents to the recent <a href='https://www.ey.com/en_uk/cfo-agenda/dna-of-the-cfo-survey' target='_blank'>EY Global DNA of the CFO Survey</a> saying the current challenging market environment is increasing pressure on finance leaders to drive cost efficiencies and hit short-term earnings targets.Some organisations are responding to the short-term pressure created by economic and geopolitical headwinds by stepping back from their sustainability commitments. Data from the <a href='https://www.ey.com/en_gl/sustainability/how-can-we-accelerate-climate-action' target='_blank'>2023 EY Sustainable Value Study</a> found that the median target year for achieving climate ambitions is now 2050, compared with 2036 in the previous year’s study. It's just one example that shows how CFOs must weigh competing priorities today.There are three paradoxes that CFOs should navigate if they are to meet these new demands and expectations. Reconciling these paradoxes is key to increasing enterprise value, building a finance function that supports strategic goals, and succeeding as a strategic leader.

<h2>Creating long-term value despite pressure to cut priority investments in order to deliver results today</h2>CFOs are expected to align capital allocation with long-term priorities such as investment in ESG programmes and technology innovation. At the same time, they are under pressure to meet short-term expectations for financial performance. Half of CFOs are meeting short-term earnings targets by cutting funding in areas that they also consider long-term priorities, according to the <a href='https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/cfo/ey-dna-of-the-cfo-2023-report-low-res.pdf' target='_blank'>EY Global DNA of the CFO Survey</a>.The management team – including CEO and C-suite – will be a critical area where conflicts and disagreement play out when it comes to reconciling short- and long-term priorities. Balancing short-term performance expectations with long-term investments will likely require a CFO with the credibility and standing to challenge the CEO and executive team on the trade-offs that need to be made and the implications for long-term value.

<h2>Managing risk while creating value through bolder and more innovative change</h2>The EY DNA of the CFO study shows that only 16 per cent of finance leaders consider their finance function to be best-in-class. That is a sobering finding, yet only one in seven CFOs is making bold changes to transform the function for the future. And those 14 per cent of CFOs are 1.7 times more likely than the ones pursuing more incremental change to be confident that they will be best-in-class after their transformation.Finance leaders need to balance a bold, ambitious vision for finance with the need to maintain the integrity of processes such as financial reporting. By defining clear roles, responsibilities, and governance structures, they can help foster a culture of safe experimentation and create a “fail fast” mindset to capture and realise opportunities that a “no surprises” mindset may miss. Defining “failing fast” will be important so that teams understand the leeway for agility while also meeting macro performance targets.

<h2>Linking traditional finance skills with strategic leadership ambitions</h2>

More than eight in 10 CFOs in the EY DNA of the CFO survey agree with this statement but they also acknowledge that the CFO role is highly challenging. As the scope of their responsibilities continues to expand, almost half of them see the role as a stepping stone to the CEO position.This does not just tell us something about the significance of the CFO position in the hierarchy of an organisation. It also highlights the importance of finance leaders continuing to challenge themselves when it comes to skills, expertise and capability. The disciplines learned during a finance career can provide a strong foundation for succeeding as a CEO, but the chief executive role also demands very different leadership skills. <h2>The three paradoxes call for a new form of CFO leadership</h2>These new demands and expectations have created an urgent need to evaluate what it takes to lead a successful finance function.

It will require overcoming common obstacles. In the EY DNA of the CFO survey, CFOs said their top challenges were “finding time to build knowledge and expertise through exposure to external expertise and access to thought leadership” and “managing a wide range of operational responsibilities, including IT and HR”.These challenges are interconnected. As CFOs expand their operational responsibilities, they must acquire knowledge beyond finance such as HR and marketing skills. But time constraints can stop them from building this knowledge.It is clear that traditional finance skills may not always be enough. Two-thirds of finance leaders in the same survey agree that companies are willing to appoint candidates to the role of CFO even when that person has limited finance experience. This highlights a shift toward valuing strategic and inspirational leadership over just domain expertise, signalling a disconnect from the traditional perception of the CFO role.CFOs should develop new, non-traditional skills: the ability to engage and motivate talented people, foster constructive relationships across the C-suite, and embrace continuous learning — and a willingness to look for new ways to address today’s complex challenges.The role of the CFO is being rewritten. Where will it go next?<a href='https://ad.doubleclick.net/ddm/trackclk/N284201.140027FINANCIALTIMES/B31265248.386484923;dc_trk_aid=577953570;dc_trk_cid=208969870;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=;ltd=;dc_tdv=1' target='_blank'>EY Global DNA of the CFO Survey 2023</a>: Read the EY report to find out how finance leaders are reconciling the three critical paradoxes in their role.

Despite advances in artificial intelligence (AI) and the ongoing data analytics revolution, a new EY research report suggests there is still significant room to improve the finance function and transform the way finance teams operate.The recent <a href='https://www.ey.com/en_uk/cfo-agenda/dna-of-the-cfo-survey' target='_blank'>EY Global DNA of the CFO Survey</a> shows that only 16 per cent of CFOs are confident that they have the support of a high-performing finance function. And just 14 per cent of CFOs are making bold changes to transform their finance function for the future.This will make it difficult for finance leaders to meet increasing stakeholder expectations. For example, investors today demand increased transparency — particularly regarding credible and consistent financial and nonfinancial disclosures that not only show how the company will drive sustainable long-term performance, but also show how it will move from ambition to measurable results.However, the fifth <a href='https://www.ey.com/en_gl/climate-change-sustainability-services/climate-risk-barometer-survey' target='_blank'>EY Climate Risk Barometer</a>, which analysed the climate-related disclosures of more than 1,500 companies, found that while companies are investing more time and energy into the quality of their climate disclosures, only 53% provide a coherent plan for achieving transition.So how can finance leaders meet these changing expectations?

<h2>Take a human-centred approach</h2>The EY DNA of the CFO survey, which included responses from 1,000 CFOs and senior finance leaders worldwide, shows that the finance transformation agenda is dominated by technology and analytics. It also finds that talent could be underrated in terms of importance — it comes last in finance leaders’ list of priorities.

But people are central to successful transformation. “CFOs should pick their best people to lead transformation,” says Deirdre Ryan, EY Consulting Global Finance Transformation leader. “Unfortunately, this doesn’t always happen because finance leaders can struggle with the fact that the people who should be driving transformation are the great people they don’t want to lose from their day jobs.”More than three-quarters of CFOs experienced at least one underperforming transformation in the past five years, according to research by <a href='https://www.ey.com/en_uk/cfo-agenda/six-ways-cfos-can-increase-the-likelihood-of-transformation-success' target='_blank'>EY and the University of Oxford’s Saïd Business School</a>. EY analysis of the research notes that many finance leaders overlook the importance of team buy-in as part of successful transformations, and that they are not doing enough to address the psychological and emotional pressures experienced by staff during organisational transformation.On the flipside, the analysis suggests that leaders who are more effective at managing workforce stress and pressure are also more likely to make a success of their transformation programme. <h2>Encourage innovation with disciplined freedom</h2>Paying attention to the cultural aspects of technology and analytics transformation can help to alleviate the pressure on teams and increase their buy-in. This includes giving teams the freedom and permission to innovate and experiment.However, some team members might struggle with this because they traditionally see projects as only one of two things: a success or a failure.

To overcome that mindset, CFOs should create a safe environment where it is permissible to experiment. This includes setting clear boundaries around the scope of experimentation and establishing realistic expectations that experimentation and innovation are not open-ended. This form of disciplined freedom balances control and risk awareness with the opportunity for innovation and bolder change.But a more experimental approach can be difficult if the function’s culture is risk-averse and conservative. In the EY DNA of the CFO Survey, more than two-thirds of finance leaders say that traditional back-office mindsets in finance are slowing down the modernisation of the function.One step the CFO can take to support a shift in mindset is developing and clearly articulating a compelling vision of the future to motivate employees. Another is developing new skills and career paths for continued learning and growth. Setting out a bold vision for the future, and showing that the CFO prioritises personal and career development, will allow finance teams to attract the best talent. CFOs can differentiate their employee proposition – and underline the attractiveness of the finance profession – at a time of intense competition for talent.This calls for CFOs with particular management skills in addition to their traditional competencies. Empathetic leadership, for instance, will lead people through transformation and culture change. It requires emotional intelligence and an understanding of the issues that are priorities for different demographics of employees. Diversity and wellbeing, for example, could be important to younger members of the team.CFOs need the support of high-performing finance teams to succeed. Can they put humans at the centre of their transformation vision?<a href='https://ad.doubleclick.net/ddm/trackclk/N284201.140027FINANCIALTIMES/B31265248.386784798;dc_trk_aid=577958199;dc_trk_cid=208969870;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=;ltd=;dc_tdv=1' target='_blank'>Global DNA of the CFO Survey 2023</a>: Read the EY report to find out how finance leaders are reconciling the three critical paradoxes in their role.

Balancing short- and long-term priorities is a perennial issue for the finance leader. It can also be one of the most challenging. It can often require complex trade-offs and demand diplomatic skills and credibility to resolve conflicts and tensions within the leadership team.The CFO’s role here can be crucial. First, they should develop the cost efficiencies that support short-term financial performance expectations. Second, they should sustain momentum on long-term priorities, such as sustainability. And they are fully aware of this conundrum. In the recent <a href='https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/cfo/ey-dna-of-the-cfo-2023-report-low-res.pdf' target='_blank'>EY Global DNA of the CFO Survey</a>, more than three-quarters of finance leaders say that “effectively balancing trade-offs between short-term and long-term priorities is an important challenge for finance leaders”.

A similar proportion of respondents say that a challenging market environment is increasing pressure on finance leaders to find cost efficiencies. In response, nearly every finance leader surveyed (nine out of 10) is planning to reduce or pause spending across a range of areas, from marketing to people development.<h2>Sustainability could be at risk</h2>Surprisingly, half of the finance leaders in the EY survey are meeting short-term earnings targets by cutting funding in areas that are also considered long-term priorities. Sustainability is the area that is most vulnerable, according to the data: although 43 per cent of finance leaders see environmental, social and governance (ESG) programmes as a long-term priority for their organisation, more than one-third are pausing or cutting investment in this area to achieve their short-term earnings targets.This willingness to target long-term sustainability programmes might explain why progress in that area is faltering. The <a href='https://www.ey.com/en_gl/sustainability/how-can-we-accelerate-climate-action' target='_blank'>2023 EY Sustainable Value Study</a> found that business progress is slowing at a time when climate action needs to accelerate to meet the Paris Agreement’s long-term goal of limiting global warming to 1.5C degrees.<h2>Leadership tensions threaten the long-term vs. short-term balance</h2>Balancing short-term demands with long-term value requires collaboration and trust between finance leaders and the rest of the executive team. But two-thirds of the finance leaders in the EY DNA of the CFO survey say there are tensions and disagreements within their leadership teams when it comes to balancing short- and long-term priorities.

A finance leader who has the credibility and influence to challenge the CEO and executive team will often be the best person to manage these tensions. But the research also suggests that not all finance leaders are willing to voice their opinions all the time. Less than one third of CFOs always speak up when their opinion differs from the consensus, and even fewer always strongly challenge members of the executive team when they disagree on a key issue.<h2>Better nonfinancial reporting could encourage consensus</h2>High-quality, forward-looking data-driven insight will be key to navigating trade-offs, fostering consensus across the C-suite, and conveying to investors how a balance is being struck between short-term performance and long-term value. And finance leaders and their teams can play an important role here by integrating financial and nonfinancial (including sustainability) data into an enhanced corporate reporting model.That integration could address a gap that was identified by the <a href='https://www.ey.com/en_gl/assurance/how-can-cfos-uncover-the-material-among-the-immaterial' target='_blank'>EY Global Corporate Reporting Survey</a> in 2023. In the report, four out of five investors surveyed said many companies fail to properly articulate the rationale behind their long-term investments in sustainability. The survey also found that many finance functions are not ready to play their part in an enhanced reporting model. To prepare, companies should transform not only their technology and data analytics, but also their skills and operating models.Finance leaders should take a long-term view on priorities while also focusing on performing in the here and now. Enhanced reporting capabilities could be crucial to conveying to investors and other stakeholders how organizations are providing the short-term financial performance the market expects while driving long-term sustainable value.<a href='https://ad.doubleclick.net/ddm/trackclk/N284201.140027FINANCIALTIMES/B31265248.386785575;dc_trk_aid=577953576;dc_trk_cid=208969870;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=;ltd=;dc_tdv=1' target='_blank'>Global DNA of the CFO Survey 2023</a>: Read the EY report to find out how finance leaders are reconciling the three critical paradoxes in their role.

Today’s finance function should be able to process, analyse and visualise huge amounts of data from various sources at high speed – generating the strategic business intelligence and actionable insight required to unlock value for the enterprise. Therefore, chief financial officers (CFOs) should recognise that harnessing the transformative potential of technology should be their priority. When CFOs were asked in the <a href='https://www.ey.com/en_gl/cfo-agenda/dna-of-the-cfo-survey' target='_blank'>EY Global DNA of the CFO Survey</a> about their finance change agenda for the next three years, respondents put technology transformation first.<h2>The co-dependence of data and AI</h2>As part of that technology transformation, CFOs will likely need a close understanding of how generative AI (GenAI) can reshape analytics and insight-generation. While GenAI could transform the way finance develops strategic insights, successful adoption can depend on accurate, high-quality data.The link between data and digital technologies such as <a href='https://www.ey.com/en_gl/consulting/why-enabling-ais-full-value-requires-top-down-thinking' target='_blank'>GenAI</a> is a symbiotic one. Advances in artificial intelligence (AI) can be accelerated by the quality of the data used to train these complex systems. Higher-quality data inputs can create better insights through pattern recognition and prediction. By recognising this relationship, finance leaders can better leverage AI as a strategic enabler, helping them transform finance into a high-performing function integral to an organisation’s value creation.

However, EY research shows that many finance teams have further to go in building the governance, processes and capabilities required for data integrity. For example, the <a href='https://www.ey.com/en_gl/assurance/how-can-cfos-uncover-the-material-among-the-immaterial' target='_blank'>EY Global Corporate Reporting Survey</a> revealed that when it comes to reporting “investor-grade” sustainability data and disclosures, very few finance leaders have complete confidence in their ability to gather, clean and analyse the supporting data.Just 26 percent said they have access to all information required “in a systematic, controlled reporting environment” when trying to collate meaningful data to support mandatory or voluntary sustainability disclosures.A minority said that their finance functions have a robust capability when it comes to meeting reporting expectations, including skills, systems and data, and controls.<h2>People should be an essential part of the digital agenda</h2>Technology transformation is not always successful, and ignoring the people dimension can increase the chance of failure. For example, putting in the tools for data-driven visualisations will not necessarily provide organisations with greater value unless they have people with the technical skills to use advanced systems effectively as well as the ability to interpret the output and translate it into insights.However, talent is not always getting the focus it requires. Technology transformation might be a clear priority for finance leaders in the EY Global DNA of the CFO Survey, but talent was their least important priority in terms of the finance change agenda for the next three years. This could prove shortsighted.<h2>How to transform talent alongside tech</h2>1. Build a diverse team with diverse skillsThe team that can execute a finance leader’s vision of a digitised finance function is a diverse one. Its skills should include financial analysis, data science, and storytelling – as well as the kind of interpersonal skills that increase trust and influence at all levels of the organisation.Based on a vision for finance transformation that is aligned with the company’s overall strategic priorities, finance leaders can create a coherent talent and skills strategy that drives both functional and business outperformance. Successful execution will draw on a range of tactics, but could mean making changes to hiring profiles and starting to strategically replace existing skillsets with new ones.2. Create an innovative mindsetAs well as skillsets, mindsets are equally important. CFOs will likely require people who are willing to challenge traditional finance approaches and explore creative ideas for data analytics, seeing any setbacks as an opportunity to learn and grow.Finance teams might struggle to get any value from data analytics technologies if they still have a “back-office” mindset, because to use data analytics effectively they will have to experiment and collaborate effectively, including working across different functions to access the data that powers analytics platforms.

To shift mindsets, CFOs should model the behaviours they want to see in others – demonstrating that you yourself are open to challenging existing beliefs. They should also establish guardrails around innovation in finance: setting out that thoughtful exploration of new ideas is welcomed, even if reckless risk-taking is not. At the same time, finance people should be encouraged to learn from both successes and setbacks. In this way, finance leaders can show that experimentation and learning are prized.3. Stay up to date, continuouslyThe ongoing skills strategy should also tackle how people refresh their skills and keep them relevant. More than half of the senior finance executives in the EY Global Corporate Reporting Survey said that finance people “will need to do more to embrace self-learning and continuous improvement” to keep their skills relevant. This can also require a change in mindset: embracing a “growth mindset” where people see every new challenge or unknown as an opportunity to learn and develop rather than a threat.Finance people should embrace opportunities and experiences outside of the finance function. This can be critical when building their own knowledge and experience in diverse areas, from technology transformation to commercial awareness. Refining interpersonal skills can also be important – as well as the ability to “read” data, finance people will likely require the emotional intelligence to read people and understand their motivations.Finance leaders want to build world-class digital finance functions, but to do this they should take a more active role in the talent and skills agenda. Do they have the talent, skillsets and mindsets to achieve this?<a href='https://ad.doubleclick.net/ddm/trackclk/N284201.140027FINANCIALTIMES/B31265248.386783994;dc_trk_aid=577951203;dc_trk_cid=208969870;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=;ltd=;dc_tdv=1' target='_blank'>Global DNA of the CFO Survey 2023</a>: Read the EY report to find out how finance leaders are reconciling the three critical paradoxes in their role.

Decoding the DNA of the CFO

Explore the EY DNA of the CFO