MADISON, Wis. (9/13/12)--The chief financial officer (CFO) position at credit unions has evolved into more of a strategic partner and educator for the CEO, the board of directors and the credit union management team, according to CUNA's CFO Council's "The Transforming Role of the Credit Union CFO," a white paper that charts the quiet evolution of the position.
The CFO's role has morphed into a more complicated and demanding role befitting a financial services environment that has also become increasingly multifaceted, said the paper. In an earlier time, the job consisted of financial preparation, payroll, general ledger and accounting for fixed assets. The tools today are more complex--determining net economic value for the balance sheet, accounting for troubled debt restructures and reviewing the amount of interest-rate risk in the balance sheet under different scenarios.
"The CFO used to be the guy in the room waving hands and saying, "too much risk," while other folks saw opportunity," said Scott Waite, chief financial officer and senior vice president, Patelco CU, Pleasanton, Calif. "Today, the whole world is more aware of risk questions and chief financial officers don't feel as lonely in the risk game. The CFO is being used and viewed as a strategic adviser for the CEO and board."
The position requires a move beyond analytics--people want to know what the numbers mean and how they relate to their daily work, the paper said. The chief financial officer interprets the analytics and then provides tactics and strategies, which may mean tightening up procedures and policies.
CFOs need a thorough understanding of sophisticated financial instruments and asset-liability management to be effective. But they also must be able to explain clearly these instruments and financial management--in understandable terms--to other staff and the board.
Education is one of the best defenses against complexity risk, said the council's paper. Complexity risk is the notion that with increasing regulations, innovative technology and products, the financial services industry is becoming overly complicated for members, directors and management, which can lead to bad decisions. Employees and directors need a sense of purpose to fulfill their duties, which they lack if they are confused by the terminology, numbers and their meaning.
Serving as an educator was noted by many of those interviewed for the paper as one of the roles the CFO will play increasingly in the years to come. The CFO can help to educate members of the management team and board of directors so that each participant in the credit union system can help ensure a secure haven for their members' deposits and serve as a resource for reliable financial advice.
Educating the American public about the basics of economics and financial literacy is also a role credit unions and their CFOs can play, to help to prevent future financial calamities, the paper concluded.
The paper is available online. Use the link.