Human Capital & Careers

Is Finance Strategically Challenged?

In a new survey, just 19 percent of top executives believe their finance department does a good job of managing the company's overall risk.
David KatzMay 19, 2004

Despite high hopes among top managers that finance departments can buttress corporate decision-making and strategic planning, finance hasn’t been up to snuff.

That’s one key takeaway from a just-released study by Accenture that looks at corporate aspirations for their finance departments — and how well they’re fulfilled. For instance, 69 percent of the senior executives surveyed picked the ability to “enable senior management to make the best business decisions” as the most important role that finance performs, according to the study. But just 37 percent said that their own finance department does a good job of decision support; 54 percent ranked their department as average; and 9 percent said that finance performs poorly as an enabler of business decisions.

In another strategy-related area, 43 percent of respondents said that the CFO — rather than the chief risk officer, chief executive officer, or the board of directors — should take the lead in enterprise risk management. Yet just 19 percent said that their finance department does a good job of managing risk, while 21 percent gave their department a poor rating.

Strategy also loomed large among the attributes respondents valued in a finance chief; 79 percent of those surveyed chose “strategic financial thinking” as one of the top three qualities they would look for when choosing a new CFO. That figure was far higher than the responses for more-traditional finance qualities such as “champion of financial transparency” (36 percent), “zero tolerance toward accounting errors and fraud” (34 percent), and “operational experience running parts of the business” (30 percent).

When considering a “high-performing finance culture,” 55 percent selected “a strong capacity for strategic analysis” as one of the three most important attributes, while 53 percent chose “a clear link to overall company strategy.” Those qualities, however, were edged out by “a service-oriented culture,” which was cited by 59 percent.

The respondents also found finance lagging in its more routine tasks. For example, while 68 percent cited efficient cash-flow management as one of finance’s most important roles, only 45 percent said that their department was good at this task. And although 48 percent feel that preparing accurate financial forecasts is one of finance’s key tasks, a scant 21 percent said that their departments did this well; in fact, 25 percent said their department did a poor job in this regard.

A final, alarming statistic concerns compliance with Section 404 of the Sarbanes-Oxley Act, which mandates CEO and CFO certification of internal financial controls. Although 55 percent of survey respondents rated enforcement of “tight internal financial controls” as one of the most important factors in the success of their business, only 34 percent thought that finance was doing a good job of enforcing controls; 13 percent felt that their finance department was handling this poorly.

The study was based on a March survey of 182 executives at U.S. and foreign companies by the Economist Intelligence Unit (a sister business of CFO.com) on behalf of Accenture. The respondents included chief executive officers, board chairmen, department managers, vice presidents, line executives, and regional managers; about 2 percent were CFOs.