Raising the bar for what boards deliver

The traditional board-CFO dynamic has shifted, propelled by the need for foresight, agility and resilience in an era defined by interconnected risks and. Liza Tullidge at Netā argues that the expanding CFO role is a catalyst for board transformation

 

As the landscape of global business grows increasingly complex, the role of the CFO has expanded dramatically. Today’s CFOs are no longer confined to balance sheets and budget oversight; they’ve evolved into dynamic strategists at the forefront of tackling issues like sustainability, AI and cyber risks.

 

This shift highlights an interesting position: if the CFO can adapt to the demands of our time to fulfil the duties of their role, shouldn’t boards be required to do the same? 

 

In recent years, CFOs have become key players in steering companies through unprecedented turbulence. They’re leading on sustainability—an area previously relegated to niche committees—because sustainability is now fundamental to business resilience.

 

A study from the Boston Consulting Group revealed that where CFOs lead the sustainability agenda, companies scored significantly higher in sustainability performance, proving that integrating sustainability within core business functions yields tangible benefits. CFOs are facing pressures from all directions: they’re managing risks associated with climate change, guiding their companies through the complexities of AI and responding to evolving regulatory expectations.

 

The rapid transformation of the CFO’s role, now a blend of traditional finance and innovative foresight, raises the question: Why aren’t we demanding that boards keep pace?

 

Agility, innovation and the modern CFO

If boards are to remain relevant, lead effectively, and fundamentally fulfil their fiduciary duty, they must match the hunger and commitment to evolution within their role that successful CFOs are now expected to demonstrate. This evolution begins with cultivating agility and a deep understanding of a rapidly shifting landscape. 

 

Sustainability, for example, can no longer be treated as a siloed initiative or an optional competency. Instead, boards must embed a nuanced understanding of its impacts across all areas—from legal and compliance to finance and insurance- and across all board members. Boards cannot continue to take a passive, reactive stance when the issues they’re dealing with are evolving at an unprecedented rate.

 

The EY Sustainable Value Study highlights a glaring issue in today’s governance: while many boards set visions for bold commitments to sustainability, the gap between ambition and action remains significant, often due to a lack of cross-functional alignment. A board that’s siloed, slow to act, or stuck in the traditional governance mould risks making sustainability just another talking point rather than an actionable priority.

 

Boards must rise to the challenge

To close this gap, we need boards that embody the diverse skill sets and forward-thinking perspectives that today’s CFOs exemplify. Just as CFOs are re-skilling to navigate transformative new technologies and sustainability, board members must also upskill. As organisations strive to align business models with environmental imperatives, boards should be leading the charge—not merely observing from a distance. 

 

Capital markets increasingly reward companies that prioritise ESG (Environmental, Social and Governance) practices and boards must step beyond a baseline comprehension to cultivate a proactive understanding of these issues.

 

The stakes are high and according to the World Economic Forum’s latest Global Risk Report, risks associated with climate change and cyber threats are among the most severe facing businesses in the coming decade. CFOs are already responding to these threats by integrating them into their strategic agendas.

 

But for these efforts to succeed, they need a board that can provide informed oversight, challenge assumptions and bring a nuanced understanding of the risks and opportunities involved. If CFOs are expected to be catalysts for resilience and innovation, boards must evolve to be equally capable allies.

 

Building a future-ready board

To truly evolve alongside today’s CFO, boards must adopt new practices that drive resilience and long-term vision. Incremental change isn’t enough; boards must radically rethink their roles to match the speed and complexity of today’s risks in order to continue stewarding success and delivering upon their fiduciary duty.

 

Here are three critical areas where boards must push boundaries to ensure alignment with the modern CFO and secure organisational resilience:

 

1. Embrace data-driven decision making and innovation

Boards must be not only comfortable leveraging data insights and advanced analytics to drive decision-making, but also capable of critically interrogating and challenging the quality of data in analysis to not fall into the traps demonstrated in the Post Office scandal. This includes understanding AI’s role in predictive analytics, which can provide early signals of risks or market shifts.

 

According to PwC’s 2023 Global Digital Trust Insights, 91% of companies are ramping up investments in technology to improve decision-making and resilience. Board members who understand how to utilise these tools will be better positioned to ask informed questions and guide the CFO in implementing data-backed strategies.

 

2. Embed ESG as a cornerstone of financial health and strategy

Sustainability can no longer be viewed as a “soft” goal or a secondary agenda. Boards must make ESG initiatives a core pillar of business strategy, reflecting that climate risk is also financial risk. With 70% of institutional investors assessing climate policies before investing, according to S&P Global, boards have a responsibility to demand that CFOs embed ESG deeply into long-term strategy to protect, with measurable goals that reflect real accountability.

 

If boards fail to act, companies may face increased capital costs, exposure to significant risk including regulatory, reputational, physical, operational, investor divestment and more.

 

Conversely, effective integration of ESG into the Board’s operation unlocks proactive opportunities and strengthens its resilience to systemic risks, amongst other benefits, to cultivate the company’s value. 

 

3. Foster an adaptive and collaborative culture

Today’s boardrooms must encourage an environment where adaptability and collaboration are valued. Boards that regularly review strategy, challenge assumptions and foster an open dialogue with the CFO can more effectively pivot in response to new risks or opportunities.

 

A recent KPMG study found that boards prioritsing continuous learning and agility outperform their peers, showing 20% higher revenue growth. This type of culture, where change is anticipated rather than resisted, is essential to navigating today’s volatile landscape.

 

This evolution isn’t just a matter of knowledge; it’s about the very structure and expectation of governance. In the same way that CFOs have redefined what it means to lead financially, boards need to redefine what it means to govern. This may mean appointing board members with a wider range of expertise, including those with backgrounds in sustainability, digital transformation and social impact.

 

It also means creating a culture where board members are not only adept at asking the tough questions but are also prepared to understand the answers in the context of a rapidly changing world.

 

For boards to truly support companies in thriving rather than merely surviving, they must shed any remaining resistance to change and embrace a future-oriented mindset. 

 

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Liza Tullidge is CEO and co-Founder of Netā a consultancy empowering Non-Executive Directors with the knowledge, network and tools to infuse sustainability into the core of business strategy, encompassing environmental, social and governance dimensions

 

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