CFO roles are changing significantly as business executives worldwide adjust their compliance processes in response to evolving legislation and regulation.
A KPMG survey of more than 250 executives and board members found that the CFO is the most likely function to be modified in response to legislative changes. This was true both for the previous 12 months and the next 12 months at the time of the survey, which was taken in December 2011. Details of the survey are summarised in KPMG’s report, “Adapting Business Strategy to the Regulatory Outlook”.
Operating in a global environment has left companies increasingly susceptible to complexity in regulation. Close to 90% of corporate decision-makers participating in another KPMG survey, “Confronting Complexity”, said governments should work together to make the global regulatory environment less complex. In the same survey, non-tax regulation (cited by 78% of respondents) and government oversight (73%) were identified most often by respondents as leading causes of complexity.
Businesses operating in emerging markets must monitor local regulations while also taking care not to run afoul of the US Foreign Corrupt Practices Act or the UK Bribery Act. These complex layers of regulation have led to changes in strategic planning, according to respondents in the “Adapting Business Strategy” survey.
Creating an interdisciplinary process to evaluate the effects of regulatory change beyond basic compliance across business units can prevent unintended consequences to business strategies, KPMG reports.
Part of that process includes changing the roles of top executives, especially the CFO. Close to 60% of respondents said their CFO function had changed in the past 12 months as a result of legislative changes; more than half said their CFO responsibilities would change in the next 12 months in response to regulation.
US Dodd-Frank Act legislation and whistle-blower provisions have increased the need for CFOs to extend their reach beyond the finance function to address the impact on multiple functions across businesses, according to KPMG.
Ninety-one percent of survey respondents said business decisions will continue to be affected by legislative and regulatory changes. Companies are reacting by integrating analysis of legislation and regulation in a structured manner into the decision-making process, according to KPMG.
—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.