Unless you work in the finance department of a company, this area of the business can be confusing. And distinguishing between the roles of those in the department may prove a challenge.
Two such perplexing positions are that of the Chief Investment Officer and the Chief Financial Officer. These roles are often misunderstood and sometimes mistaken for being identical.
Both are executive positions that require a university degree to obtain. And both play a vital role in maintaining the financial health of a company.
But the duties of the Chief Financial Officers are entirely different from those of the Chief Investment Officer. Let’s take a closer look at the specific role of each of these finance professionals.
The Role of a Chief Investment Officer (CIO)
First, it must be noted that the role of a Chief Investment Officer (CIO) might vary from one company to the next. But they’re essentially responsible for all investments related to a business.
The CIOs primary duty is to oversee the company’s investment portfolio and create an investment strategy for the business. They also play a part in recommending how funds should be allocated for investment opportunities.
Developing both long- and short-term investment plans is part and parcel of a CIO’s job. And they are trusted to identify, control, and examine current and future investments for the company.
While CIOs can advise on using company funds to invest, they don’t have the final say. They usually report to the board of directors, who will ultimately decide how the funds are used.
The board of directors would include the CEO, CFO, and the trustees of the company. And a CIO would be required to meet with the board regularly to discuss investment forecasts and recommendations.
A company’s CIO works with investments in stocks, bonds, properties, and more. And they’re also likely to liaise with analysts and investors outside the company.
If you’d like to be a Chief Investment Officer, you’ll need a post-graduate degree related to finance. This role is most often filled by chartered accountants or individuals with an MBA in finance. Some CIOs may also require specialized expertise in different industries.
Depending on the size of the company, CIOs may handle all related duties alone. Or they might manage a finance team that’ll carry out several of the required tasks.
The Role of a Chief Financial Officer (CFO)
Like a CIO, the responsibilities of a Chief Financial Officer (CFO) may not be the same at every company. In fact, some companies may require their CFO to carry out the duties of a CIO.
In essence, a CFO is one of the company directors and the most senior person in finance. They are responsible for overseeing all financial operations relating to the business.
While the CFO reports to the board of directors, including the CEO, they’re also on the board. And they work closely with the COO of the company when it comes to finances.
It should be noted that the CFO may also be referred to as the Finance Director or Chief Financial and Operation Officer. The structure of a given business influences the assigned designation, but many of the duties are the same.
Generally speaking, a CFOs priority is to develop and manage the financial department within a business. But they’ll usually have a team under them to carry out the majority of the work.
Several elements fall within a CFOs sphere of responsibilities. These include financial planning, risk management, reporting, tax, and cash flow management, to name a few.
To become a Chief Financial Officer, one would usually need an MBA or MSc degree in finance. However, chartered accountants with membership to a professional body are also often employed as CFOs.
The Differences Between CIOs and CFOs
As mentioned, the role of a CIO varies significantly from that of a CFO. Although their duties fall within the same department and may sometimes overlap.
But what are those specific duties, and how do they influence their respective scope of responsibilities? Let’s delve deeper.
Extent of Responsibilities
Each of these professionals is responsible for a different range or group of activities within the finance department. The following gives an outline of the extent of these responsibilities for each.
Chief Investment Officer (CIO)
The CIO is responsible for everything related to the company’s investments. They manage the investment portfolio for the business and any employees that deal with these investments.
Chief Financial Officer (CFO)
Everything related to the finances of the company falls within the scope of the CFOs responsibilities. This includes managing all employees in the finance department, including the CIO.
Because their responsibilities differ, it stands to reason that the duties of a CIO and CFO are also different. The following is a breakdown of core duties for each of these essential roles within the company.
Chief Investment Officer (CIO)
The primary duties of a CIO include:
- Managing the business’s investments and portfolios
- Directing a team of investment professionals
- Creating an investment strategy for the company
- Consulting third-party investment professionals
- Advising on the best use of company funds for investment
- Setting up systems to promote viable and successful investments
- Proposing investment plans and procedures to the board of directors
- Using risk analysis and forecasting to determine the best allocation of resources for investment
Chief Financial Officer (CFO)
The CFO of the company must carry out the following core tasks:
- Directing and overseeing the accounts and finance departments of the company
- Using their expertise to generate financial projections, budgets, and reports
- Proposing finance-related strategies and recommendations to the board of directors
- Overseeing both long- and short-term financial plans and objectives
- Reviewing and signing off on operational expenses, payments, salaries, and more
- Managing and maintaining cash flow for day-to-day operations
- Consult with the CIO of the company to evaluate and authorize investment activity
We’ve determined that the function of a Chief Investment Officer falls within the responsibilities of a Chief Financial Officer. And, as such, it’s easy to see how these two roles can cause some confusion.
But, given the above, it’s clear that their respective responsibilities are, in fact, not the same. And that each position requires a set of skills that is vastly different from the other.
That said, both of these finance professionals possess a great deal of skill and carry immense responsibility. And each is essential to the growth and success of any thriving business.