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CFOs’ Roles

To start thinking like a CFO, you need a sense of what roles a CFO plays in your organization. One way to get some idea of this is by considering the kinds of questions a CFO might ask in relation to a purchase or investment decision. The CFO might ask, “What are the risks of this investment? Will there be unexpected costs? Are there better alternatives? Would there be consequences to doing nothing?”

The CFO roles most relevant to functional managers are managing cash and working capital, managing risk, ensuring compliance and financial reporting, strategic planning and decision making, and — most importantly of all — maximizing shareholder value.

The CFO is responsible for managing the organization’s cash. Cash is important for the organization’s day-to-day functioning and survival. Insufficient cash can be extremely disruptive, and can damage an organization’s ability to pay bills and procure raw materials. This can cause a sudden stoppage of services. That’s why effective cash management is a top priority for a CFO.

Effective cash management requires meticulous and continuous cash forecasting. These forecasts must be checked against actual results to monitor and improve the accuracy of the forecasting.

Managing risk for the organization is another role of the CFO. There are many dimensions to an organization’s risk, which a CFO must monitor and manage at a strategic level. Effective risk management involves three key things.