There was a time when the financial stewards of an insurer’s capital needed to do little more than make sure all moneys were accounted for and that there was enough to pay claims as they arose.
But as the insurance sector, and the business models of those within it, has become increasingly complex, the responsibilities of this key employee have evolved too.
James Insley, group chief financial officer (CFO) of Darag, has worked at companies of all sizes and persuasions in London, and has seen insurance “catch up” with other large, global industries – firstly with a change of title from finance director to CFO.
“In the Lloyd’s market, you weren't really a change innovator or particularly involved in strategy, and were more back than front office,” Insley says. “The role primarily focused on the steward and you were there to make sure the financial and regulatory reporting was undertaken.”
This has been changing, however, with the CFO now an essential part of the top table in EC3.
“The CFO role these days requires a much higher profile – very much a double act with the CEO,” says Ofir Eyal, managing director and partner at Boston Consulting Group. “We see a lot of CFOs that are later turning into CEOs in the industry.”
A glance at the people moves section of any industry publication shows this to be the case. When Topa Insurance Group CEO John Donahue said he was standing down in December 2019, Michael Day, with 12 years’ experience as CFO of CSAA Insurance, was picked as his replacement.
And in February 2019, RSA Insurance Group promoted CFO Scott Egan into a new role as chief executive of its UK & International division.
Along with completing the CFO’s responsibilities to the highest level possible, with this path to the top emerging as a distinct career prospect, getting the CFO role right from day one is vital.
Get prepped for success
Eyal identifies three circles CFOs need to get a handle on at the start of their tenure: their internal departmental circle; their internal organisational circle; and the external stakeholders.
“Firstly, do you have the right talent inside your organisation?” questions Eyal. “Is it set up in the most effective and efficient way? That’s valid at both the group level and business unit level, including the interaction between the business units and head office.”
An essential question for CFOs in 2020 is around IT. With many departments undergoing IFRS 17 finance transformation implementations, it is important to gauge whether your new one is on course to make it.
“Is it under control and likely to deliver on time, around budget? Do you have the right people around you? Are people motivated [with the] right incentives to perform?” Eyal continues. “Essentially, are you set up for success?”
The second circle to grasp is around the CFO’s place within the organisation and engagement with internal stakeholders.
“Do you have the right processes in place, the right engagement to make sure that you are able to steer the business according to your financial target?” asks Eyal.
Cost structures are another element of this, according to Eyal, with a new CFO needing to get a sense of how “fat or thin the organisation is overall”.
“If overweight, it is your role to think through where the big buckets of expenses are and start thinking about getting this under control,” he says.
The third circle is the external stakeholders, where a lot of financial accounts come into play.
“How is the relationship with shareholders, what are their expectations?” questions Eyal. “What class of shareholders do you have? A growth or an income type? And what does this mean in terms of the communication you need to do and the type of targets you’re going to put out to the public?”
Another set of stakeholders are the company auditors and regulators. Ensuring a clear line of communication, responsibility and understanding with these important partners is key.
“This is what we call ecosystem management,” says Eyal. “As a CFO you need to make sure you have a handle on all of that and understand their expectations.”
Working on the how
Weaving through all this is how the CFO operates and conducts themselves within the business.
“From day one, building credibility is incredibly important – and who you’re building it with,” says Insley. “You do this by taking ownership of finance immediately – not just grasping it, but listening to views. Credibility is about being thoughtful. How you are analysing the problem and understanding the challenges you face will determine the priorities.”
It seems that charging around like a bull in a china shop is unlikely to impress, whereas setting a tone of fairness and responsibility within your new team is.
Insley recommends setting standards around how everyone anchors, and is accountable, to a plan.
“By giving people in the organisation nowhere to hide, it gives you – and them – clear accountability and ownership,” he says. “It drives alignment to your strategy, and it is probably one of the only things in an organisation that’s a common metric to everyone. It has to be your barometer, and how you maintain discipline. It is about setting the tone and how you make decisions.”
Insley refers to consulting firm Deloitte’s Four Faces of the CFO – the steward, the operator, the catalyst and the strategist – as a good starting point for a CFO to establish themselves in a new environment.
Taking the role of the steward is a given, according to Insley, whose CV contains Brit, Swiss Re and GE Insurance. “If you’re not doing your stewardship, you have no licence within the business, you’ve got no credibility whatsoever.”
Beside all this, you have to find time to set your agenda, according to Eyal.
“There is a good balance to be struck between making sure that the business as usual functions, but also setting up some long-term investments such as making sure the IT and data are prepared for the future,” he says. “In 10 years’ time, finance departments will be run by much smaller teams, so it is the CFO’s role to start that investment now to get the right infrastructure in place.”
Finally, you still have to oversee the production of reports and numbers, and the management of the balance sheet and the P&L, which remain a big chunk of a CFO’s responsibility.
Time’s up
At the end of 100 days it is going to be extremely useful to step back and assess your progress – and which areas still need work.
“The quarterly close process, which you would go through in that first 100 days, is a great way to understand how an organisation is running, controlling and managing its business,” says Insley.
“You’re able to look at the process of how a business collates information – you can really understand the touchpoints, the hand-offs, the quality of information produced and how management use that information.”
More broadly, after 100 days in the job, a new CFO should have a clear view of where to focus their energy. This may be different from their original perception.
“You should have a pretty good view of where the business is tracking against your current year forecast and highlighting a view that you can stand behind for the next 100 days – and beyond,” Insley concludes.
