CFOs today are under more pressure than ever before. From external market forces, to the increased internal demands from CEOs who expect rich, forward looking insights to help them manage risks, spot new opportunities and weather shocks and volatility.
To drive business growth and lead in the increasingly digital economy, the time is now for finance leaders to focus on transforming and redefining their function.
Unfortunately, digital efforts to transform the Finance function to date have not gone far enough, with many CFOs unable to deliver insight due to difficulty integrating finance and non-finance data. Technology adoption is also lagging behind other corporate functions like HR and sales and marketing. ¬†What’s holding finance back and what can CFOs do to ensure they are prepared for the future?
Workday recently conducted a global survey, “Finance Redefined” which showed that by changing their approach to four key compass points, CFOs can become more analytical and innovative to ensure they are properly equipped to play a key role in transforming their organisation for the digital age. These compass points are resilience, intelligence, leadership and talent.
The survey results showed that to reach its true potential, finance needs to invest in the people and capabilities required to deliver strategic insight to drive decision making. It needs to invest in cultivating the right skills, push the boundaries of technology to break down data silos and outpace the competition and bridge better connections with other leaders in the business.
The need for finance to collaborate with peers, was reinforced by Workday’s Head of Finance, Lena Shishkina, during her recent visit to Australia. Her verdict: “Collaboration between the CFO and Chief Human Resources Officer (CHRO) is fundamental for success in today’s organisations. HR people need to understand about accounting methods, investment and risk strategies, while the CFO needs to better understand and recognise the importance and value of human capital.”
Key survey findings within the four compass points include:
Growing regulatory scrutiny and rapid technological change top finance leaders’ list of risks. Yet only 39%¬† of finance leaders felt highly confident about managing risks. A lack of meaningful data and systems-related issues are major barriers to improving risk management. To create more resilient finance functions, leaders must have the right systems and data management practices in place, as well as a culture that prioritises data-driven risk analysis.
In a data-driven economy, advanced analytics is critical to the finance function’s ability to inform decision making. However, only 35% of corporate finance teams are making extensive use of advanced analytics in key finance areas, such as planning, budgeting, and forecasting. The top challenge to doing more is integrating finance and non-finance data, which, because of system inefficiencies, requires teams to spend significant time aggregating and reconciling data. Molluso and Ahrens say these findings have been their experience too, stating that while most ERP systems have the ability to produce large amounts of data, their short-coming often lies with their inability to easily convert that raw data into relevant information. They say you shouldn’t underestimate the power of staff’s unique insights and knowledge. A CFO can tap into this knowledge more readily when assessing the overall risk framework with the assistance of those around them.
Only about one-third of finance leaders enjoy seamless collaboration with key C-suite peers, including chief information officers (CIOs) and chief human resource officers (CHROs). In fact, 74% of survey respondents say chief financial officers (CFOs) and CIOs need strong working relationships.¬† Yet 68% note that CIO-CFO collaboration is limited because the executives don’t speak the same language (namely, terminology, jargon, and understanding priorities). To improve collaboration, CFOs need to bring in C-suite peers early-on into programs and projects.
The face of finance talent is set to change radically, with 74% of survey respondents saying that finance roles will need to be redefined because of robotics and artificial intelligence. The need is clear to expand talent horizons beyond traditional finance roles to include data scientists and statisticians. Anticipating tomorrow’s finance talent needs means CFOs must partner with CHROs to better understand what skills will be required in the long term.
Ahrens and Molluso agree with these survey findings, saying today’s CFO is playing more of a partnership role. They shape and drive wider business strategies, creating valuable input.¬† As the keeper of the company’s data, the CFO plays a vital role in assisting the board to refine action plans and clearly articulate objectives to all stakeholders. They also agree that the CFO-HR relationship is imperative to not only ensure their skills are ripe for the digital age, but also understanding motivations of employees to shape performance management; identify skills gaps and reward and recognise.
The time is now for finance leaders to focus on redefining their function. so CFOs are equipped to drive business growth and lead in the increasingly digital economy.
For the full research findings behind the “Finance Redefined” global study, read the report here.
By James Harkin, Asia Pacific Director, Workday Financials
James Harkin is the Asia Pacific Director for Workday Financials. He has two decades of industry experience with a focus on business outcomes, digital transformation and customer satisfaction. James also has a Bachelor’s degree in Civil Engineering, a Post Graduate Diploma in Accounting and Finance and is qualified as a Chartered Management Accountant (ACMA).