Amid the rapid geopolitical and technological changes currently affecting companies across industry, Fortune 500 companies have been taking steps to adapt — often with executive restructuring strategies that include creating new C-suite titles such as chief AI officer.
However, the same luxury is not afforded to midcap organizations. Instead, emerging responsibilities like AI oversight, ESG reporting, cybersecurity and compliance often fall to the chief financial officer — by default, if nothing else, due to their traditional skill set. That has had a large impact on the expectations of the position and their teams.
CFOs are no longer just a part of implementing the corporate strategy — they are playing significant roles in creating it. So the question becomes: How is this development reshaping expectations for the CFO and their departments at midcap organizations, and what can those companies and their leaders do to prepare for those changes?
Redefining the role of the midcap CFO
For years, the traditional responsibilities of a chief financial officer had been mostly straightforward and well-settled. Over the past several years, the role at midcap companies has expanded quickly and significantly, especially since the COVID-19 pandemic, moving beyond traditional accounting. Today, midcap CFOs must have a deep understanding of operations and be a part of creating overarching corporate strategies, while still spearheading the daily needs of human resources, IT oversight and risk management. It's a new age in the C-suite.
What the evolution is demanding from these executives is a new — or at least sharper — set of very particular tools: strong emotional intelligence and communication skills for employee and stakeholder relations, as well as technological acumen to leverage AI — while at the same time managing its risks. Take the stereotype of the stoic CFO and fire it into the moon. Self-awareness, self-regulation, empathy and masterful social skills — characteristics often associated with CEOs — are now part of the expected package for a finance exec. That's obviously a lot for one person to take on in the role, which has in some cases pushed many of the traditional midcap CFO duties down the line.
It's no longer enough for the typical midcap CFO to maintain a professional scope limited to cost-cutting and financial reporting. Leadership, strategic planning and greater oversight from a 10,000-foot level are now part and parcel of the job. This shift also positions many CFOs as future CEOs, which widens the pool of talent at the highest level and also incentivizes CFOs to leap into these new responsibilities with both feet. Here we offer a deeper view into a few of their most important areas of focus:
- Risk management and regulatory compliance: CFOs are no longer just implementing the strategic plans of their CEO. They are deeply involved in the creation of them. In an environment of globalization, market volatility and economic shifts, the midcap CFO is participating in more high-level game theory and decision-making that affects the entire business. More robust finance regulations demand reliable data and effective record-keeping, which theoretically puts more responsibility over IT operations on the CFO.
- Emotional intelligence: Whereas they were once prized more for their technical acumen than their soft skills, CFOs — again, especially in midcap organizations — are all but required to rate highly in emotional intelligence, or EQ. These are characteristics that can be learned and honed, traits such as chemistry, integrity, empathy, high energy, confidence and maturity. Greater and more effective communication with board members, bankers, investors, CEOs and other company stakeholders is increasingly becoming the norm — and a critical need — for chief financial officers.
- Technological acumen and AI risks. The old-guard CFOs have always been required to be a step ahead on the tech spectrum, but today the role demands a profound understanding of the latest technological tools, an ability to integrate their capabilities into the business, and the foresight to plan for an organization's tech stack of the future. A midcap CFO must be able to think holistically about AI for advanced analytics, automation and improved forecasting, and help build them into a company's operations. At the same time, they must be intimately involved at the ground level in developing and implementing AI policies that help prevent employees from inadvertently exposing confidential information through the use of ChatGPT and other AI-based tools.
On a larger scale, midcap organizations — if they aren't already — should be rethinking their job requirements and testing for preferred profiles of CFO candidates, as well as those for senior and mid-level finance professionals working under them. Changing demands have altered the talent pool, with more EQ, soft skills and higher-level thinking now required of a chief financial officer and some of the more traditional CFO duties falling to chief accounting officers, controllers and other CFO reports. Midcap organizations that understand this shift are not only re-tailoring their expectations and testing of CFO candidates, but also taking steps to create professional development paths for internal candidates that incorporate the sharpening of these critical skills.
