The changing environment of financial reporting and current development in finance and accounting will affect the role of CFO (Chief Financial Officers). Rapidly changing technology, rising stakeholder expectations, an increasingly competitive marketplace and the need for cost efficiency will transform the way CFOs operate.
Speaking at a seminar last week organized by the Institute of Chartered Accountants of Sri Lanka (ICASL), R. Narayanaswamy from the Indian Institute of Management in Bangalore told the audience that today, CFOs have to be visionaries, strategists, technology leaders and communicators as opposed to the traditional perception of being historians and statisticians.
In addition to having the technical skills and industry knowledge, Mr. Narayanaswamy said he feels that communication skills, problem solving abilities, confidence, personality and most importantly character, are the essential traits for a CFO to possess, particularly given the global financial crisis. He described the crisis as a 'financial tsunami' and said it came in five waves. The first wave was in February 2007 with the subprime crisis in the United States. The second wave hit in July and August 2007 when the credit crunch began. The third wave was in September and October 2007 when Merill Lynch and Citigroup announced huge write-offs and the credit crunch intensified.
The fourth wave was from January to March 2008 when bond insurers reported losses and Bear Stearns was taken over by JP Morgan. It was also during this period that the credit crunch moved beyond subprime related positions. The fifth wave hit in September 2008 when Lehman Brothers filed for bankruptcy, Merill Lynch was taken over by Bank of America, Goldman Sachs and Morgan Stanley came under federal regulation and insurance giant AIG was under pressure. Fannie Mae and Freddie Mac also came under government control during this period. The credit crunch hit countries and currency markets all around the world.
Mr. Narayanaswamy said the effect of the global crisis on the Indian economy was that the long bull run in the stock market ended. Foreign investors withdrew, the global liquidity dries up and interest rates go up. Contributing to the overall slowdown in the economy was the volatility of the rupee and that the export of goods and services were hit.
The blame game was aimed at several people including investment bankers who were given large performance bonuses, the credit rating agencies who might have been too generous with their ratings, the auditors who were not familiar with the products and the regulators for laxity. (NG)
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