The role of a financial analyst is fundamental to a company’s fiscal health, business strategy, and operations; but many professionals, CEO’s and even Boards of Directors are unaware of what functions a financial analyst performs on a daily basis. The core answer to “what do financial analysts do?” and “who do they report their work to?” This brief article describes “who they are”, “Who they report to”, their significant roles in industries and what CEO’s should expect from them.
Corporate Financial Analysts, who they are?
Corporate financial analysts are called upon to analyze business performance; they often review and compare present data to past and projected performance, as well as the performance of competitors. Their recommendations also take into account industry and internal trends that suggest the future financial path of the business.
Based on their findings, corporate financial analysts are also often counted on to provide out-of-the-box recommendations to help the company bring down costs, increase profitability, or otherwise improve financial performance.
Financial Analysts, Who do they report to?
Financial Analysts must report to both the CEO and the Finance Board of an organization.
Their major roles and reasons for reporting to the appropriate Board
For an organization to detect as early as possible whether its company is growing, declining, surviving or whether it requires revamping, the first call of contact is the desk of the Corporate Financial Analyst. Because they are the first professionals to quickly detect why a certain segment in the business is not doing well and others are doing well. They are more proactive to ascertain current and future challenges of companies. Pragmatically, companies in Europe do not joke with the work of financial analysts; they greatly rely on their input and advice as far as strategies are concerned.
A good financial analyst is not only good with numbers but actually generates insights and recommendations on how to improve the operations of a business. Examples of helpful recommendations and insights include ways to cut costs, opportunities to grow revenue, ways to increase market share, operational efficiencies, customer satisfaction and much more. This is what truly separates a world-class financial analyst from the rest. Their recommendations will be presented to the CEO, other executives and the company’s board of directors.
Because the work of Financial Analyst involves research, investigating and making useful analyses to safeguard survival of the organization as a whole, they are able to detect in advance any risk of losses, weaknesses and areas of competitiveness before even External Auditors, Internal Auditors and Accountants get to know. As we know, Internal Auditors concentrate mainly on effective controls, detecting fraud, corporate governance practices, strict adherence to professional administrative policies and other forensic audits on all operations, whereas External Auditors look at compliance, assurance, waste, inefficiency in all operations and give their recommendations.
For Accountants, they do historical recording and providing financial reports based on what actually happened per financial activities of the organization, and making comparative analysis which has nothing to do with what Corporate Financial Analysts do – such as knowing or detecting what is happening or is about to happen to the company in the present or near future.
What CEOs should expect from Financial Analysts?
As part of Corporate Governance, the Board of Directors or the Finance Board of organizations are to seek regular reports from the desk of Financial Analysts at least each month and quarterly to know the trends of business growth, decline, new business , potential business areas, emerging liquidity challenges, reasons for expenditure improvement and sensitive areas where funds can be invested to maximize revenue, cope with competition, create awareness among consumers and let non-consumers be potential consumers.
Strategically, if companies are to be able to stand tall among their competitors, the CEO and Board should do everything possible to adhere to views, reports and recommendations of financial analysts. The shareholders, CEO and board must make sure financial analysts’ work is resourced adequately if they want to witness continuity and survival of their businesses.
Regardless of the specific industry, all corporations rely on analysts’ expertise to inform business decisions. Financial analysts with the correct skill set and field experience can evaluate when funds are coming in, analyze competitive market trends, and forecast a company’s economic future. This important work gives executives and stakeholders the power to make informed decisions so as to generate the greatest return on investment. Financial analysts can also positively impact the economy at large, as smart business decisions will stimulate business growth.
However, in this modern business world, no company can do without the work of Financial Analyst; their roles are crucially significant to survival of all the company’s units.
Finance is very broad, and covers the roles of Accountants, Cost Accountants, Management Accountants, Financial Analysts and Treasury/Investment.
We should never confuse the work of Accountants with that of Financial Analyst; each of them have their own defined roles they play. And it’s time for CEOs and managers of both private and public companies, as well as corporations in manufacturing industries, Insurance, Banks, Pension, oil and other service organizations, to employ the appropriate professionals to handle each specific role based on their relevance to their company.
The writer is a Financial/Strategic Management Consultant, a Chartered Financial & Investment Analyst. He is the Director of Finance for International Human Rights Commission-Ghana Chapter. And Secretary to CIFIAG Board. He can be reached on email:[email protected] / [email protected] Tel. 0572-131601/0277756680