Andrew Jenkins, Partner in the CIO & Technology Officers Practice, at global headhunter Odgers Berndtson, explains why the scope of the CIO role in mid-tier financial services firms is in decline and how this presents both opportunities and challenges in the C-suite.
The chief information officer (CIO) role in financial services businesses is quietly being subsumed into other C-level positions. A trend far more visible in small to mid-tier financial services organisations, the CIO position is less about being a strategic leader or visionary for technology transformation, and more of a ‘head of IT in disguise’. Increasingly responsible for ‘run’ rather than ‘change’, their domain is becoming limited to managing infrastructure, IT operations and service, and vendor relationships. There are a number of key factors contributing to this erosion of responsibility and accountability.
The COO in SME financial services businesses is becoming a ‘CIO++’
As a rule of thumb, where chief operating officers (COOs) exist and sit on executive committees across financial services, CIOs are likely to report to them. This is a legacy reporting structure born from a world where operations headcount and expenditure far outweighed that of technology.
With technology at the heart of all critical business functions, including finance, operations, HR, change, security (information, cyber, and physical) and facilities, this balance has completely turned around. Regulators now demand COOs have a firm grasp of both technology and operational strategy, which is why the vast majority of newly appointed COOs in SME financial services have prior experience as CIOs.
These far more technically literate COOs are inevitably becoming accountable for technology strategy, as opposed to simply signing off on the CIOs direction of travel, and are the principal contact for all regulatory interaction. The fallout is CIOs who have no responsibility for aligning technology strategy with that of their business, making them increasingly impotent.
In large global financial services companies with multiple divisions, having a dedicated CIO is still necessary. The scale of technology teams and complexity of these organisations will continue to warrant the presence of a CIO reporting directly to the COO. However, this trend in SMEs could be an early indication of what is to come at larger scale.
Why the CTO is rising in prominence
Originally, the CIO role in financial services was established to serve as a crucial connection between the technology function and the C-suite. As the role of technology evolved into business enablement, organisations recognised the need for a dedicated position that could bridge the gap between technology and the broader business.
However, this transition continued, and technology has emerged as a vital competitive advantage for financial services firms. Specifically, enterprise and solutions architecture, software development, and engineering became significant differentiators and core elements in technology and business change in the industry. This has led to the rise in influence of chief technology officers (CTOs) who possess this deep technology skill set, as opposed to individuals who solely facilitate the C-suite’s understanding of the technology function.
Data is no longer part of technology; it is a core business function
In various industries, and notably in financial services, data has emerged as a critical business asset. Companies with more mature data organisations and standalone chief data officers (CDOs), have shifted data leadership away from being a subset of technology under a CIO’s purview, to a new sphere of influence at the executive committee level, sitting as peers or even managers of the CIO.
Consequently, there has been a decline in the number of CDOs reporting to CIOs. Instead, they increasingly report to chief commercial officers (CCOs), COOs, or directly to the CEO. This evolution has transformed the CDO role into a dedicated function that operates independently, as opposed to being housed under the CIO’s umbrella of responsibilities.
Why cyber security is no longer the CIOs responsibility
Traditionally, the CIO was responsible for overseeing technology management and its security profile. However, in the financial services sector, there is a growing concern surrounding the potential conflict of interest arising from the head of cybersecurity reporting to the CIO. Boards, executive committees, and most importantly regulators are concerned this reporting line could prevent chief information security officers (CISOs) from executing their role impartially, particularly if they need to call out vulnerabilities caused by failings in their line manager’s technology strategy.
As a result, there is an increasing trend for cyber security functions to report into COOs or chief risk officers (CROs) instead. With COOs being more technology and security literate, they are perceived to be more impartial, while CROs are more acutely aware of the necessary risks involved. Some companies are so alert to the existential threats that cyber attacks pose today that they have even elevated the CISO position to executive committee level.
Technology change is converging with business change
As technology has become a core differentiator for financial services businesses, technology change teams are increasingly sitting alongside or within merged business change teams, reporting into directors of change and transformation. Almost all CIOs want to be able to effect change directly, but many are struggling to have an impact on these areas where technology change has moved out of their remit and into the business.
Where does this leave CIOs and the CIO role in financial services?
The traditional CIO role in financial services has been cannibalised as technology’s importance and influence in a business has increased exponentially. The emergence of new C-level positions such as the CTO, CDO, CISO, and chief transformation officer points to technology’s affect on all areas of financial services companies.
With so many of these roles still sitting under group COOs in financial services, what we are really seeing is an elevation of the original CIO role into a more impactful, complex, and much larger job. This dynamic is less about the CIO role dying and more about the traditional COO’s job being consumed by technology.
It does mean many CIO roles in financial services are less attractive, and therefore more difficult for firms to fill when competition for talent is still high. That said, these roles have become the proving ground for future COOs.
For those CIOs who want to own technology strategy, change, and security, while adding more business functional leadership to their portfolio, the COO role is the obvious next step in their career. Those without that ambition will need to adjust to the new normality of a far more restricted job, or pivot to specialise as a CTO, CISO, CDO, or head of change to retain any influence in the business.
 role in financial services businesses is quietly being subsumed into other C-level positions. A trend far more visible in small to mid-tier financial services organisations, the CIO position is less about being a strategic leader or visionary for technology transformation, and more of a ‘head of IT in disguise’.){kind=link}