The only thing that’s constant is change. This applies to the role of a chief financial officer (CFO) too, in India. Not only does a CFO play a role in driving the financial performance of an organisation, but he also must look at shaping business strategies and ensuring growth is sustainable. His or her day job involves constantly managing financial risks, gauging market volatility, checking for compliance in every decision, budgeting, seeking out investment opportunities and dealing with security issues.
Says Kunal Sanghavi, CFO, HDFC Securities, “A CFO’s role is changing. A lot is happening from becoming generalists to specialists and a lot is happening where specialists are going even more deeper in depth with the kind of things you can wrap up with technology. Covid has taught us that we can leverage technology to get our plans rolling.” He adds: “A CFO is a person who is a business evangelist, but at the same time he takes a backseat and looks at things from a strategic angle rather than going into transactional business nowadays.”
Technology has given CFOs a better view on the overall business.
Kanishka Chaudhary, CFO, Suryoday Small Finance Bank says: “The principal role is that of being able to connect the dots. Given that people work in silos, and that every action will have a financial implication, the CFO will have an entire end-to-end view – monitor where things are not working, where things can be optimised, and prioritise time, resources and capital.”
Elaborating on the role of a CFO beyond just crunching the numbers, Kapish Jain, Group CFO, IIFL Finance, says: “Capital is key to a business and if you have multiple business lines you need to ensure the right allocation of capital. Eventually, you need to ease the ROI for the businesses. In a changing environment where you see NBFCs are slowly being aligned with the regulations applicable to a bank, the CFO also has a fiduciary responsibility from the regulatory perspective.”
With the advent of new technologies, CFOs can leverage digital transformation to streamline processes, enhance efficiency, and drive insights. Cloud computing and advanced data analytics enable CFOs to analyse large volumes of financial data in real time, enabling better decision-making. Of course, as is the case with every business, automation and artificial intelligence (AI) can augment tasks like budgeting and forecasting.
But what about managing risk and investing in the right human capital? Can a CFO strike a balance? Sanghavi is quick to clarify: “I strongly believe it’s about having the right business model and clarity, rather than striking a balance between risk and the business.”
Talking about managing risks, Jain says: “In any NBFC lending business, the key is to right-price your asset, have the right credit policy when selecting your customer and have measures for any delinquencies, bounce and other elements to make sure you are healthy on your balance sheet.”
A key element of managing risk is customer profiling and building a persona of the borrower. In the case of microfinance institutions (MFI) that is a challenge, and here’s where multiple data points are needed, right from group meetings to family profiling.
Says Chaudhary, “Sometimes you need to look for substitutes and surrogates. For example, for proof of address for an MFI, if there’s an individual borrower, they may not have a traditional proof of address. We realised that everyone wants to avail of the (cooking) gas subsidy. So in this case, you take a copy of the gas bill, as it shows a degree of permanence.”
All the CFOs at the event agreed that there’s still a huge opportunity in the MFI space. Only 1 in 10 borrowers get credit and there’s a huge scope for growth. Leveraging technology such as digital payment solutions, mobile banking and mobile apps, CFOs can look to enhance operational efficiencies and improve financial inclusion by reaching out to more under-served populations.