Directors are employees of a company that is responsible for performing executive tasks. These employees are a part of a company’s board of directors. Usually, directors are experienced individuals that relate to various fields. Based on their expertise and knowledge, they get selected by a company’s board of directors to run operations.
Every director within a company is responsible for running specific operations. Primarily, they work under and report to the board of directors. However, they have a fiduciary duty towards shareholders. Several types of directors may exist in a company. Similarly, companies also have various designations for directors based on the areas in which they work.
When it comes to financial operations, two primary roles are critical for companies. These include the Chief Financial Officer (CFO) and the Chief Investment Officer (CIO). A description of each of these roles is as below.
What is a Chief Financial Officer (CFO)?
A chief financial officer is a company director that is responsible for a company’s financial operations. It is also the term used to designate the highest authority or figure in finance. A company CFO is responsible for all financial operations that occur within a company. They also have the power to build and control the company’s financial department.
A chief financial officer is one of the most important executives within a company. Although below a chief executive officer, they have similar authority as a chief operating officer and chief information officer.
There are several responsibilities that these individuals undertake. These may include financial planning, managing financial risks, record-keeping, financial reporting, etc.
Chief financial officers may also use the designation finance director or chief financial and operating officer. They usually report directly to the CEO and the board of directors. Similarly, they may also have a seat on the board. They also directly assist the chief operating officer on all business matters that relate to finances.
Usually, chief financial officers include finance professionals with an educational background in finance. These may consist of individuals who have completed Master of Business Administration or Master of Science.
However, most companies today prefer CFOs to be chartered accountants or members of an accountancy body. Since these individuals have more experience in financial matters, they make better candidates for the post.
What do Chief Financial Officers do?
Chief financial officers are responsible for all financial duties within a company. However, that does not provide details of what their responsibilities are.
Usually, CFOs delegate most of their tasks to lower-level staff. However, they still keep some crucial duties to themselves. Some of the primary responsibilities of chief financial officers are as follows.
- Provide leadership, direction and management to the accounting and finance department.
- Manage the process of financial forecasting, budgets and all related financial tasks.
- Oversee the preparation of financial reports and associated processes.
- Provide strategic recommendations to the CEO and member of the executive management team.
- Advice on long-term business and financial planning.
- Review all formal finance, HR and IT related procedures.
- Establish and develop relations with senior management and external partners and stakeholders.
- Ensure the company can meet its financial commitments and manage cash flows efficiently.
- Advice on investments and overlook the financial aspects.
Given above are some of the primary tasks and responsibilities that chief financial officers perform. In practice, these responsibilities may differ from one company to another.
However, chief financial officers will always be responsible for all the financial tasks within a company. Although they may delegate these tasks, the responsibility will still be theirs.
What is a Chief Investment Officer?
A chief investment officer (CIO) is an executive position with companies responsible for investments. More specifically, they must set the investment style and strategy for companies.
Usually, the CIO oversees all of a company’s investments. However, they don’t have the authority to make decisions related to those investments. Nonetheless, they contribute a significant amount to the process.
A chief investment officer is similar to a chief financial officer. While the CFO oversees financial tasks, the CIO is responsible for investments. CIO is a designation used to describe high-level executives.
These executives undertake the responsibility of managing a company’s investment portfolios. Similarly, they develop and oversee short and long-term investment plans.
The primary purpose of the CIO role is to understand, manage and monitor a portfolio of investments. They report directly to a company’s board of directors or trustees.
In some companies, the CFO and CIO will be the same individual to the similarity of their work. In these cases, the individual will use the CFO designation rather than the CIO.
Like the CFO designation, CIOs must also have a background in finance. Therefore, the same criteria may apply to this role. However, some companies will prefer more specialized knowledge rather than appointing MBAs or even chartered accountants. For example, some companies hire chartered financial analysts for the job.
What do Chief Investment Officers do?
Like the CFO, chief investment officers may delegate some of their tasks to their subordinates. Usually, they are responsible for all duties related to investing and associated work. However, their responsibilities may include various specific processes, as follows.
- Oversee the management of a company’s investments.
- Manage a team of professionals that monitor investments.
- Establish an investment policy statement.
- Work with external portfolio managers, investors and analysts.
- Decide on the operating funds that will go into the investment activity.
- Create efficient and effective investment processes.
- Make investment recommendations to the CEO.
- Allocate assets based on risk management models, budgetary limits and expectations.
Like the CFO role, the responsibilities of chief investment officers may differ from one company to another. If a company does not have a CIO role, these assignments will also fall under the CFO’s duties.
Regardless of that, the CIO will assume responsibility for all tasks investment-related. However, they may also choose to delegate the subordinate tasks.
Chief Financial Officer Vs. Chief Investment Officer: What are the differences?
The differences between chief financial officers and chief investment officers are apparent from the above definitions and responsibilities. Both of these also have some similarities, which may confuse people about their roles. Some of the primary differences between the chief financial officer and chief investment officer roles are as below.
Scope
Chief financial officers primarily handle a company’s finances. Therefore, they deal with financial reporting, budgeting, forecasting and related planning.
The chief investment officer role, however, deals with investments and similar tasks. As mentioned, these tasks may fall under the CFO in the absence of a CIO.
Education
The educational background requirements also differ for both roles, although they may be similar. Most companies hire MBAs or MS as CFOs.
However, the preference has shifted to chartered accountants more recently. The same may apply to the chief investment officer role. However, most companies prefer specialists in the field, including CFAs.
Duties
Due to the scope of their work, the duties and responsibilities of CFOs and CIOs also differ. Primarily, CFOs are responsible for handling a company’s finances and related reporting processes.
The CIO does not get involved in financial operations. Instead, their duties include overseeing investments and making recommendations. Furthermore, CFOs are more hands-on, while CIOs are advisory roles.
Salaries
The salaries that CFOs and CIOs receive will include an executive factor to them. However, they are still different. Below is a table describing the salaries these designations get based on several top websites.
| Source | CFO (USD) | CIO (USD) |
| salary.com | 396,633 | 349,900 |
| glassdoor | 167,168 | 225,494 |
| payscale | 137,109 | 174,307 |
| ZipRecruiter | 142,619 | 157,469 |
| Average | 210,882 | 226,793 |
From the above comparison, it is clear the CIOs make more on average compared to CFOs.
Conclusion
Both CFO and CIO are high-level executive roles in a company. They play a crucial role in their respective areas. However, they are different in several key regards.
A CFO is an executive who is responsible for a company’s finances. In contrast, a CIO overlooks investments. They differ in their scope, education, duties, and salaries.
