Investment managers

CFOs Are the New Investment Managers

In a world where financial complexities are growing with each passing day, the responsibilities of a Chief Financial Officer (CFO) have become multi-faceted. They aren’t merely limited to the field of finance anymore. Now, they range from performing regulatory oversights and making sustainable growth strategies to stimulating organisational change and facilitating business integration.

In this era of diversified job roles, one of the primary duties which a CFO performs is that of investment management. This crucial task is entrusted to them because they are well aware of the external and internal financial realities within which an organisation has to function.

At this juncture, it is pivotal to understand what this activity truly entails.

What Is Investment Management?

In simple terms, investment management refers to the management of a company’s holdings in such a way that its liquidity is optimised and its operational and financial risks are mitigated. It primarily includes dealing with a firm’s disbursements, collections, concentration and funding activities.

For most firms, it consists of two basic functions:

  • Treasury management – Also known as treasury cash management, it involves the creation and implementation of policies which ensure that a company will be able to manage any form of financial risk successfully. In the process, it aims to establish cash equivalents of the company’s assets so that all future obligations can be met without causing any undue pressure on cash flows.
  • Portfolio management – As the name itself suggests, portfolio management includes trading in bonds, stocks, commodities, shares, currencies and other types of financial derivatives in order to bolster a company’s ability to withstand the vagaries of an ever-changing economic climate.

Investment Management

CFO’s Role in Investment Management

Though most CFOs perform the task of portfolio and treasury management with relative ease, their role specifically includes the following:

  • Administration of securities.
  • Asset allocation.
  • Financial statement analysis.
  • Stock selection.
  • Monitoring existing investments.
  • Preparing contingency plans.
  • Supervising internal audits.
  • Track fund valuations.
  • Ensuring regulatory compliance.

Apart from the aforementioned, a CFO also has the authority to analyse if the firm’s transactions are being judiciously conducted. For example, it is within the CFO’s jurisdiction to examine whether the seller has opted for supply chain finance or dynamic discounting as a mode of early payment. In the case of the former, the CFO can determine the amount of time by which the maturity date has been pushed forward. Similarly, in the case of the latter, the CFO can inspect the percentage of discount availed.

Parting Words

Be it undertaking treasury cash management or simply administering finances, the Chief Financial Officers have their task cut out for them. They have to act as both, an efficient executive and an effective leader.

After all, a CFO is not just responsible for investment management. They are essentially the conduits which course through the various branches of an organisation and enable them to act as a single functional unit.