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Why the CFO should talk to the CIO ... now: research suggests that in many organizations, communications between the two C-suite officers is suspect. But with so many key controls, risks and procedures at stake, a good rapport is essential.

A leading information technology (IT) advisory firm recently asked companies a deceptively simple question: How well does your CFO communicate with your chief information officer (CIO)? Just 31 percent of the companies rated their communications "good," and 17 percent replied, "Don't know."


This writer's experience in both finance and technology indicates that these results--which clearly show more than half of companies either unsatisfied with, or unaware of, the state of their CFO/CIO communications--accurately reflect a serious problem in the corporate world today.

Most CFOs understand that information technology (IT) has become a critical component of their companies' operations, at both the strategic and the tactical levels. And they know that communication is essential to sound financial management, corporate compliance, governance and risk management--all of the CFO's core responsibilities.

Yet, too many CFOs fail to make the necessary connection between these two points: that effective communication about technology is essential to their success.

The reality is that everything your company does--and everything you do--depends on technology. Extraordinary amounts of highly sensitive information pass through corporate IT systems and applications, and virtually every financially relevant transaction has an essential IT element. Any IT failure--whether it's the loss of sensitive information from a compromised spreadsheet or the breakdown of an enterprise resource planning (ERP) system--has serious bottom-line consequences.

Moreover, an IT failure that becomes public can change the way your company is viewed by your customers, your partners, regulatory agencies and the financial markets. That makes an acute understanding of technology central to the many roles you play as CFO:

* The strategist. Perhaps more than anyone in the company, you have the "big picture"--the broad strategic understanding of where everything, including technology, fits in the company's overall operations. By working closely with the CIO, you can help to deliver better-quality IT decision-making and greater accountability, to ensure that your company's huge IT investment is used effectively. You can identity situations where nontraditional solutions--like outsourcing and partnerships--may be best, and you can make those solutions happen. And you can point out occasions when technology isn't necessarily the right answer to a problem.


* The manager. Many companies, recognizing that their financial and technology operations are now permanently linked, have the CIO reporting directly to the CFO. A 2004 McKinsey & Co. survey showed that the percentage of CIOs reporting to the CFO had doubled in a single year, and anecdotal evidence suggests that this trend is actually picking up speed, especially among large companies with complex operations.

But even if you're not the CIO's direct manager, the company's technology operations are an essential component of your many functions.

You need to cultivate a strong, ongoing working relationship with the CIO, to identify staffing and training needs, ensure the optimal use of resources and the best possible return on investment (ROI) and identify and address problems before they get out of control.

* The risk and compliance specialist. Nothing is more important in business today than risk management and regulatory compliance, and those functions are ultimately your responsibility as CFO. Your signature goes on the company's financial and Sarbanes-Oxley documents--and it's a sign of the growing importance of technology that the CIO's signature frequently does, too.

If you want to see the risks that come from inadequate IT controls, you don't have to look any farther than the business section of any daily newspaper. Every day seems to bring a new horror story: material spreadsheet errors that cause misstatement of revenues, data security breaches that expose confidential customer records, weak corporate controls that allow large-scale "insider" fraud. It's only by working closely with the CIO than you can institute the company-wide processes and controls that will prevent disasters like these.

* The decision-maker. Making technology work--not just as technology in itself, but as a key enabler of business operations--takes decisive leadership. As CFO, you frequently have the high-level perspective and overall authority to make the tough decisions that the CIO can't, or won't. For example, you can keep an eye out for the "not invented here" mentality that sometimes leads IT organizations to overlook solutions that are in the shareholders' best interest.

You may be able to tell when it makes sense to acquire a company with the technology you need, instead of accruing the costs of building it yourselves. And, you may be able to help a risk-averse CIO who's too worried about a long-drawn-out ROI to recognize a worthwhile investment when he sees one.

The CIO, of course, brings an entirely different set of skills and capabilities to the table--skills you can't do without. Most CFOs today have at least a generalist's understanding of IT. But enterprise technology is now so pervasive, and so complex, that you can't be expected to have the specialized knowledge necessary to make informed decisions about technologies that can save money, increase operational efficiency and reduce corporate risk. That's the kind of knowledge that can only come from a close, ongoing working relationship with your CIO.

The IT organization has valuable insights into technologies that can keep the company operating smoothly, efficiently and cost-effectively. It's the CIO's responsibility to communicate those insights to the CFO, so that the right financial, technical and human resources can be allocated, well ahead of the annual budget process. That's extremely important, because slow, cumbersome IT decision-making limits your opportunities to leverage that massive IT investment for competitive advantage and continuous risk management.

Here's an example: Do you really want to wait up to a year to choose software or services that can identify all the technology assets and information resources on your networks? Not if you've been following the news and you've seen the staggering losses--in revenues, shareholder and regulator confidence and corporate reputation--that can be caused by "hidden" spreadsheets, undiscovered databases and other uncontrolled assets.

The in-depth, ongoing communication necessary for effective corporate governance, strong information security and overall good management isn't always easy to achieve. The IT organization may not welcome scrutiny from the CFO's office, especially if no direct reporting relationship exists, and may not know what kind of information and cooperation you're expecting. Corporate cultures that encourage competition between business units will likely find this kind of communication particularly difficult to achieve.

Whatever institutional resistance you encounter, you need to overcome it. One first step may be to create a permanent liaison between the finance and IT units, or a working committee with senior-level members from both organizations. But no matter what approach you take, don't overlook the compelling need for direct, face-to-face communications with your CIO. The two of you need to meet regularly, with a clearly defined agenda and benchmarks. The reason couldn't be simpler: Both your jobs depend on it.

JEFF KIRKLEY is Vice President of Finance and Administration for Compassoft Inc. The Scotts Valley, Calif.-based company provides financial applications for the discovery, validation and control of end-user computing (EUC) applications such as spreadsheets, databases and reports. He can be reached at 831.440.9620.


** More than half of companies in a recent survey were either unsatisfied with or unaware of the state of their CFO/CIO communications, reflecting a serious problem in the corporate world today.

** Too many CFOs fail to understand that effective communication about technology is essential to their success.

** Enterprise technology is now so pervasive, and so complex, that you can't be expected to have the specialized knowledge necessary to handle it. That's the CIO's job.

** One first step may be to create a permanent liaison between the finance and IT units, or a working committee with senior-level members from both organizations.
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Title Annotation:ORGANIZAION
Author:Kirkley, Jeff
Publication:Financial Executive
Date:Mar 1, 2007
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