The finance industry of the modern world is beaming and soaring with success. Whether you are an entry-level junior or a skilled senior, there are multiple opportunities for people who love their way around money-related matters.
Nowadays, organizations with big goals and strategic objectives look for high-end professionals who can contribute to their long-term success. For that purpose, positions like CIO and CFO are pretty sought after.
The CIO and CFO roles are predominant in a company and are pivotal in the finance department. Let’s compare chief investment officer vs. chief financial officer and find out how they collaborate in a company.
Chief Investment Officer
Let’s learn more about a Chief Investment Officer (CIO) first.
Role Overview of a CIO
The chief investment officer or CIO is responsible for looking around the investment sector of an organization, from managing company portfolios to creating an investment strategy that yields a substantial return and promoting a low-risk investment culture for the business.
A CIO creates an investment strategy that aligns with the financial objectives of a business. For instance, if you are a factory looking to deploy new machinery, a CIO will create an investment strategy that elaborates on when, how, and what long-term assets (machinery) would be an excellent addition to the company.
You will also find a CIO mitigating investment risks by analyzing market trends, evaluating and monitoring company performance, and researching new opportunities if your business needs a decision-maker regarding investments, onboard a CIO now.
Key Responsibilities of a CIO
A CIO, being one of the most significant decision-making authorities in the business, is responsible for several different tasks.
- Asset Allocation
It means that a CIO will create a strategy that provides you with a detailed plan on the number of assets your business needs, along with the proper allocation of these resources. The CIO devises a budget (or capital) to be invested in the business to make it more productive and functional for present and future activities. Professionals collaborate with financial planners and experts to create a needs analysis that describes the need for assets and available resources to make that happen.
- Risk Management and Compliance
With solid investment decisions comes a significant amount of risk. It can be challenging for individuals with no background in finance to determine the extent of risks and mitigate them to an acceptable level. However, a CIO, due to their extensive experience and industry knowledge, cannot only determine the risks but can also find you an escape from the concern.
- Evaluation and Optimization
CIOs also monitor a company’s investment portfolio and enhance it over time. It also includes implementing modern practices that optimize performance and generate better opportunities for the future.
- Team Management
A CIO is the senior authoritative figure who oversees and manages individuals in their department. The department collaborates to generate reports, perform research, and submit the required work to the chief investment officer for a final decision.
Skills Needed to Become a CIO
A chief investment officer requires many interpersonal and technical skills to complete the job. The most common ones are:
- Critical thinking and reasoning skills
- Strong analytical abilities
- Leadership and management skills
- Teamwork and collaboration skills
- Communication and people’s skills
- Sound knowledge of business investments (relevant to the industry)
- Technologically advanced to use and integrate new devices and products in the job
- Decision-making and strategic thinking skills
Challenges Faced By the CIO
With great power comes great responsibility, and due to the nature of the role, a CIO might face the following challenges:
- Market fluctuation is a genuine concern, and investment officers must stay on track with the trends to ensure that investment risks and opportunities are adequately handled.
- CIO is a senior position. Due to their age, most professionals might need to be more comfortable with modern technology and investment options.
- Constant compliance with regulatory bodies requires being well-versed and prone to regular research and education.
- Some risks due to changes in global trends are out of hand.
Average Salary of a CIO
Due to the nature of the job, CIOs have the potential to earn good money. Salary.com claims that the average salary of a chief investment officer in America is $373,200. The base salary for the role is around $292,000 and can go up to $477,000. However, this is not the exact figure because it depends on several factors, such as industry demand, experience in the role, and the organization’s size.
Chief Financial Officer
A Chief Financial Officer, or the CFO, holds immense value in an organization.
Role Overview of a CFO
A CFO performs different functions related to the finance-related matters of the company. It is a leadership role where the CFO manages multiple positions and ensures a smooth collaboration of the finance department with all others in the company. CFOs ensure that the fiscal aspects and strategies are created for the company’s benefit to ensure the business remains profitable and liquid for a more extended period.
Key Responsibilities of a CFO
A CFO is known to take responsibility for multiple finance-related concerns of a business. The most important ones are:
- Financial Planning
The CFO will create a financial strategy and plan that involves a budget to run the operations and invest in assets. Moreover, the plan also includes historical performance and future forecasts so stakeholders can make well-informed decisions.
- Financial Analysis
They also conduct a financial analysis that helps the entire board make strategic and tactical plans. Detailed financial analysis helps businesses find better investment opportunities and methods to increase revenue and maximize profit while ensuring smooth operations in-house.
- Risk Management and Compliance
Since it’s a senior position, CFOs need to identify and evaluate the different risks that can impact the performance of a business. While observing the market and creating comprehensive reports, CFOs must comply with various corporate governance practices so that no laws are broken.
- Funding Departments
The CFO is responsible for managing the funds allocated to different departments in a company. Whether the business wants to invest in new income sources or purchase long-term assets, the CFO approves the funds. The CFO also overseen funds associated with daily operations, currency fluctuations, and banking relationships.
- Team Management
A CFO will look after an entire team of people dealing with different tasks in the finance department. From corporate finance planners to fiduciary financial planners, accountants, bookkeepers, finance officers, and executives all work under a CFO.
Skills Needed to Become a CFO
To become a CFO, you need to possess the following skills:
- Comprehensive understanding of financial principles and rules
- Proficient leadership skills to manage and oversee departments
- Strong analytical abilities and reasoning skills
- Execution of business strategies and ability to mitigate risk
- Excellent communication skills
- Familiarity with technology
- Teamwork and collaboration skills
- Communication and people’s skills
- Decision-making and strategic thinking skills
Challenges Faced by a CFO
CFOs are essential, but they can face different challenges while working. Here are a few of them:
- Market fluctuations and economic uncertainty might affect the decisions and analysis
- Cybersecurity concerns and risk of breach
- Finance-related matters can breach transparency
- Global trends can affect the initial decisions and budget of a company
- Not meeting stakeholder expectations
Average Salary of a CFO
Salary.com claims that the average salary of a chief financial officer in the United States is $434,315in 2023. It usually falls between $329,027 – $557,194,
Do the CIO and CFO Collaborate?
The CIO and CFO collaborate within an organization for the success of the business strategies and objectives. Although the primary domain of both professions is different, they need to work together and generate an investment plan with minimum risks.
Additionally, the CFO provides financial data that helps make well-informed decisions. Both departments collaborate on any upcoming purchases and allocation of capital.
Businesses function by creating different short-term and long-term objectives. With the collaboration of other professionals like the COO, the CIO and CFO, make a plan to keep the business running and liquid for the foreseeable future.
Conclusion
The CFO and CIO both play an essential role in the functioning of an organization. The CIO manages investment opportunities and allocates assets in different departments.
On the other hand, the CFO is responsible for taking care of the finance-related matters of a business and allocating money to different departments, depending on the requirement.
Although they have different domains, the CFO and CIO need to work together for the success of a business.
