Roles and Responsibilities Chief Financial Officer

Question: Discuss about the Roles and Responsibilities Chief Financial Officer. Answer: Introduction The role of Chief Financial Officer (CFO) is very important in a business organisation for managing the financial resources adequately and thus ensures its long-term growth and profitability. The retail companies are facing increasing competition to sustain their growth and success with effectively meeting the challenges of external competitive environment. The roles and responsibilities of Chief Financial Officer (CFO) of retail companies are also changing with increasing competition in the external environment. In this context, the present report describes the three general areas of responsibility for a chief financial officer (CFO) of Harvey Norman Holdings Limited. Harvey Norman Holdings Limited is an Australian based multi-national retailer of furniture, computers, communication and consumer electrical products (Company Profile, 2008). The CFO is prominent governing body of the board of directors and as such holds the responsibility of providing faithful information regarding th e financial position to all the companys stakeholders (CTI Reviews, 2016). The report also analyses and examines the effect of efficient market hypothesis on creating a portfolio by the pension fund manager that yield in maximum return. Three general areas of responsibility for a chief financial officer (CFO) of Harvey Norman Holdings Limited Mr. Chris Mentis is the Chief Financial Officer of Harvey Norman Holdings Limited. Mr. Mentis is the CFO and company secretary of the company since the year 2007. As the CFO of the company, he is responsible to the board of directors for all matters related to accounting and financial issues (CTI Reviews. 2016). CFO is liable to establish and implement objectives, policies, procedures, programs and practices for assuring the maintenance of a sound financial structure in the company (CTI Reviews, 2016). The main responsibility of CFO in any organisation is to maintain financial stability by implementing proper control systems and procedures. The increase of competition in the retail sector of Australia is impacting the roles and responsibilities of CFO. CFO, in addition to the traditional roles of managing financial structure is also responsible for aligning the financial goals with the organisational strategy. The role and responsibilities of CFO of Harvey Norman as such can be descr ibed as follows: Maintaining Financial Structure: CFO of Harvey Norman possess the responsibility of controlling the cash flow position of the company by gaining a proper understanding of the different sources of funds. CFO establishes the accounting policies and procedures regarding the payment of bills, credit collections and other financial obligations. CFO roles also include gaining a proper understanding of company liabilities including legal contracts, statutory and tax obligations (Fabozzi et al., 2008). The CFO roles also involve meeting the hidden liabilities of the company such as contingencies, leases, loans and insurance. The companys financial performance is communicated to all its stakeholders through the use of appropriate channels by the CFO such as balanced scorecard and financial statement ratio analysis (Lapovskyand McKeown-Moak, 2010). The communication about the financial position is necessary for establishing good relations with investors and financial analysts. CFO also maintai ns appropriate financial structure of the company by establishing an adequate balance between debt and equity. CFO is also responsible for comparing the financial results obtained with the estimated performance and develops control process for overcoming the areas of improvement (Nolop, 2012). Strategic Alignment of Financial Position with Companys Objectives: The roles of CFO in retail sector of Australia are becoming more strategically focused. As such, CFO must possess strong leadership skills to align the companys strategic goals as per the financial performance. The CFO should ensure the creation of best strategic fit within the company for optimising its performance with effective utilisation of resources. The CFO should have appropriate understanding regarding the regulatory, environmental and operational information of the company for implementing effective strategies for gaining entry into new market segments and developing new product (Moyer, McGuigan, and Rao, 2014). The CFO should be able to properly integrate and collaborate across different cross-functional teams of the company for empowering the employees to effectively utilise the resources for enhancing productivity. The CFO should have the capabilities of long-term strategic thinking to use effectively th e financial resources and attain sustainability. The CFO should develop new ways of creating value for all the stakeholders by managing the companys budget appropriately (Bragg, 2010). CFO should also assist CEO in decision-making process regarding the companys strategies by conveying the financial position of the company. The companys strategies are developed by the CEO in accordance with the financial condition that is analysed by CFO. CFO can assist CEO in prioritising the various operational activities of the firm as per the availability of the financial resources and increasing the productivity (Brigham and Houston, 2012). Thus, it can be said that the role of CFO of Harvey Norman is becoming more strategic with the increasing competition in the external environment in comparison to the traditional role of managing financial operations only. Developing and Integrating Risk Control System: The nature of retail sector is becoming competitive and as such it is essential for Harvey Norman to develop and implement a proper risk control system for taking proactive measures to mitigate the risks identified. The financial risks of the company are increasing with the adoption of innovative approaches such as adoption of IT technologies for managing retail business. Also, compliance with legal rules and regulations in context of protecting environment and community is also the main responsibility of the CFO (Fuhrand McDonagh, 2012). It is essential for the retail companies to implement proper risk management system for overcoming the potential risks in the areas relating to logistics and sourcing. CFO is equipped with the responsibility of developing transparency and accountability in all the business operations for promoting the goodwill of the company (Sutcliff and Donnellan, 2006). Harvey Norman is operating globally and as suc h it is the main responsibility of the CFO to conduct its operations worldwide by promoting effective communication across its different business departments such as its retail stores, suppliers, logistics and local offices. Internet retailing is becoming one of the most critical challenges for retail companies to sustain in the external competitive environment. It involves huge investment by a retail company and thus leading to occurrence of huge financial risk for the companys future growth context (Company Profile, 2008). The development of an effective risk controlling system has therefore become an important necessity for retail companies such as Harvey Norman. The risk controlling system can be properly designed with the support of CFO as he possesses all the information regarding the availability of funds for managing the emerging risks in business operations (Fuhr and McDonagh, 2012). Impact of CFO responsibilities on ultimate objective of Harvey Norman Holdings Limited As analysed from the above section, the roles and responsibilities of CFO are rapidly changing for meeting the new expectations emerging in the present competitive business scenario. CFO has to identify and develop new models of execution for meeting the changing demands of the consumer (Eeden, 2014). The main objective of Harvey Norman is to sustain its position of retail icon in Australia and expanding its franchising network in the local as well as international market. In addition to this, the company also seeks to become a market leader in the core audio visual and technology segment. The role of CFO is very critical in attaining these ultimate objectives of the company. The CFO has to develop and implement innovative ways to mitigate the strategic risks identified with its expansion plans and incorporating the use of latest technologies for becoming a market leader in its business area. The CFO of the company has to adopt strategic thinking for governing and controlling its fin ancial position for effectively managing its retail business at a global level (Company Profile, 2008). The sound maintenance of financial structure by CFO would enable the company to ensure the availability of proper funds for meeting its business obligations. The creation of a strategic fit by prioritising the value creation activities by CFO would help the company to expand its market position in the global market. The implementation of a risk control system is essential for the company to identify the potential risks existing for incorporating new technologies and therefore take preventive cautions for overcoming them in advance (Karaian, 2014). If the efficient-market hypothesis is true, the pension fund manager might as well select a portfolio with a pin Efficient-market hypothesis argues that a market is efficient when the asset prices reflect all the information for the investors based on past and present events. As per the theory, if market is in efficient condition then pension funds manager can easily select a portfolio that results in maximising the profit (Brealey, Myers, Allen, and Mohanty, 2012). The role of pension fund manager is very important in selecting the stocks or bonds that yield to maximum return while creating a portfolio. Pension fund manager have to ensure that portfolio is well diversified to minimise the risk for the investors. This does not imply that pension fund manager has to select large number of stocks or bonds for diversifying the risk. The diversification of risk occurs with the selection of stocks or bonds that generates maximum return in the future context (Micocci et al., 2010). In the light of above discussion, the statement that if efficient market-hypothesis is true, the pension fund manager might as well select a portfolio with a pin can be stated to be false. This is so because if asset prices incorporate all the relevant information necessary for the investors to select a particular stock for investing then there would be no market risk. The market risk, that is systematic risk, is often classified as un-diversifiable risk and reflects to uncertainty that exist in the entire market due to fluctuations in daily process of stocks (Williams, 2011). Pension fund manager must ensure the generation of maximum rewards for the client by investing in a particular portfolio. The random section of the stocks as per their asset prices might enhance the risk as there is uncertainty in the stock prices. Thus, pension fund manager at the time of creating a portfolio need to select that particular stocks or bonds that yields in reducing the systematic risk (Micocci et al., 2010). Conclusion Thus, it can be concluded from the overall discussion held in the report that Chief Financial Officer (CFO) holds important responsibility in managing the financial structure of the company. Harvey Norman Holdings Ltd is involved in retailing business in the Australia to implement new and advanced ways for managing the business operations as per the financial position of the company. It can be achieved through strategic thinking and implementing an effective risk control mechanism in the company in order to prevent the occurrence of any emergency condition that can lead to wastage of financial resources. It has also been depicted from the report that efficient market hypothesis does not hold true for developing a portfolio by pension fund manager. 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