Derisking the Business: How CFOs and CIOs Work Together
In order to enable growth, support operations, and manage risk, chief financial officers (CFOs) must collaborate with other leaders, including chief information officers (CIOs). As digital transformation progresses, CFOs and CIOs must work even closer together to lead IT and finance operations more efficiently.
This requires the CFO to understand how data and technology can be used, such as cloud-based ERP, advanced analytics, and cybersecurity software. Moreover, CIOs must be familiar with an ever-changing market and operational demands.
As modern CIOs are moving away from infrastructure management, today's CIOs must develop integrated strategies, maximize ROI through innovation and cybersecurity, and find the right partners through stakeholder relationships, requiring further collaboration with CFOs.
By combining CFO and CIO forces, a company can mitigate risks related to cybersecurity, backup and disaster recovery, and growth more effectively.
Digital Transformation Causing Restructuring
A change in organizational structure is common in organizations that prioritize digital transformation. Deloitte's Who's the Boss? Trends in CIO Reporting Structure report finds that 55% of IT leaders report to the CEO in organizations with a strong digital strategy. The number drops to only 27% in organizations without a digital focus.
CFO reporting supports these numbers. For example, only 23% of IT leaders report to the CFO in organizations where digital is a priority. In organizations where digital is not a priority, that number climbs to 51%.
With CIOs taking on a more business-oriented role, they are more likely to collaborate with CFOs rather than report to them. Forming strong working relationships between the two can result in aligned business goals and a better understanding of each other’s needs.
Why CFOs and CIOs Should Work Together
Why should CFOs and CIOs work together? The answer is simple. The CFO's job is to interrelate revenue and operations, and the CIO's job is to simplify operations and create more efficient processes to drive revenue.
Furthermore, CFOs are responsible for risk mitigation, which plays a vital role in business operations. However, CIOs are responsible for supporting risk mitigation through technology due to digital transformation.
Together CFOs and CIOs can help each other achieve success. When united in their strategic vision, the CFO and CIO make a powerful team.
Benefits of a Good CFO-CIO Relationship
Good business relationships are almost always beneficial. Trusting and understanding co-workers, particularly in leadership, is vital for making sound business decisions. Along with encouraging teamwork and boosting business morale, successful partnerships between CIOs and CFOs can provide a number of benefits.
Improve Communication Policies
Successful businesses depend heavily on effective communication. When departments communicate better, they are better prepared to react to situations. They can also hold regular meetings and have conversations that can help move the business forward at all levels. Strong communication between the CIO and CFO can set an example for others in the company and contribute to a positive impact on the business.
Enhance Critical Thinking and Evaluation
In a culture of constant communication and honest dialogue, people are more likely to exchange thoughts, ideas, and constructive criticism. This promotes innovation and growth for businesses. When CIOs and CFOs work together, this form of open communication is helpful for leadership and also promotes honest communication throughout the enterprise.
Communication and collaboration between leadership are essential for effective processes and successful business practices. When CIOs and CFOs are in close collaboration and engage in proactive communication, they maximize efficiency by eliminating the need to constantly check the status of projects and confirm where people are at.
From help desks to data migration to daily IT operations, it is the CIO's responsibility to oversee everything related to information and data. CFOs, on the other hand, are responsible for managing and accounting for company finances. They supervise all budgeting, accounts payable, accounts receivable, and other financial matters, such as purchasing and identifying cost savings for the company.
When the CIO works closely with the CFO, both parties can understand each department's needs and work together to reduce operational costs.
CIO-CFO Relationship Challenges
Relationships between CIOs and CFOs are not always harmonious. Both CIOs and CFOs recognize that technology investments are less expensive than opting out of innovation and modernization. However, for some CIOs and CFOs, this is where alignment ends. Rather than constructive discussion and consensus, disagreements over where and how much to invest can result in stalemates.
Fortunately, some trends are helping to resolve these issues. Iterative development, for instance, reduces costs and produces quick wins, making it easier for the CIO and CFO to support joint initiatives.
In addition, CIOs and CFOS have become more knowledgeable about each other's specialties in recent years. Generally, CFOs today are more tech-savvy than they were in the past, while CIOs have a better understanding of business and finance.
How CFOs and CIOs Can Achieve Alignment
With technology playing a greater role in driving company growth and competitive advantage, CFOs and CIOs need to work closely and effectively together. When CFOs and CIOs strengthen their partnership, IT investment can be aligned with business growth plans and performance.
To achieve CFO-CIO alignment, three actions are essential: collaboration, strategizing, and mitigating risk with disaster recovery planning.
The first step toward ensuring a strategic alignment between the CFO and CIO is to improve collaboration. Maintaining open lines of communication that are regularly used will allow the CFO and CIO to work on specific initiatives more efficiently.
For example, the collaboration between CFOs and CIOs on IT investment strategies can help drive shareholder value through revenue growth, operating margins, asset efficiency, and market expectations. Using this approach, both executives will be able to demonstrate to shareholders what their IT investments can deliver in terms of shareholder value.
An effective digital transformation relies on a well-thought-out strategy. When it comes to introducing new technologies or removing them, CIOs and CFOs must work together to develop technology roadmaps that align with broader business objectives.
CFOs and CIOs who can align business strategy with technological possibilities and constraints are more likely to achieve mutual success. CIOs win by increasing the chances of IT projects being approved, and CFOs win by driving those projects toward profitability.
Derisking with Disaster Recovery
Having a Disaster Recovery Plan is essential to ensuring the survival of your business in the event of an interruption. As CFOs are responsible for protecting corporate assets and maintaining revenue streams, mitigating security risks and operational downtime are often a top priority.
CFOs allocate resources, and CIOs can strategically use those resources to mitigate risk. Therefore, disaster recovery programs are often shared priorities between the CFO and CIO. By ensuring adequate resources are allocated to backup and disaster recovery programming, CIOs and CFOs can collaborate to derisk a business.
Disaster Recovery: A CFO and CIO's Top Priority
Managing risk is a key responsibility for both CFOs and CIOs. While CIOs primarily focus on security-related threats, such as cyberattacks and ransomware, CFOs are concerned with more general risks, such as customer loyalty and downtime.
Therefore, disaster recovery planning is crucial to achieving both CFO and CIO goals. Without a disaster recovery plan in place, CFOs are exposed to numerous risks, some of which can have detrimental consequences for their business objectives and job duties.
As an example, imagine a company that is hit with a disruptive event causing downtime for an entire day. How will that particular event impact business? Will it affect revenue? What are the effects on suppliers, vendors, and customers?
A CFO is in charge of identifying and mitigating such risks. In the event of an emergency, disaster recovery solutions reduce the impact of damage and give the CFO a quick return on investment.
Driving Disaster Recovery Initiatives
Disaster recovery strategies are often determined by the technologies available rather than the other way around. Therefore, to develop an effective disaster recovery plan, conducting a business impact analysis is essential.
An analysis of key elements, including applications, users, physical assets, backed-up data, and how often it changes, establish clear expectations regarding the amount of data that needs to be recovered to avoid significant damage. Here, CFOs and CIOs must work together to identify the required action and its implementation.
In testing your disaster recovery strategy, the CFO should also analyze the results to determine whether more financial resources should be invested in the initiative. Remember that disaster recovery expenses are not IT expenses but rather shared expenses.
Mitigate Risk with the Right Technology Partner
IT executives can't handle everything. Since the digital transformation, IT leaders have moved away from traditional technology management roles to strategic initiatives, adding a layer of complexity that makes IT management difficult.
Prescient Solutions provides IT leaders with the expertise whenever and wherever they need it. With a top-notch team by your side, CIOs can push the envelope and achieve more. Our expertise in cybersecurity, cloud, infrastructure, and unified communications can help align CIO strategies with a CFO's and business's goals.