How CFOs can transform Finance in the Age of Disruption

Even before COVID-19, finance leaders across a range of sectors were already in the process of evaluating their operating models in response to a broad and well-documented set of drivers and challenges. These include delivering value, managing costs, making efficient use of technology and automation, and complying with new regulations.

The arrival of the pandemic, however, has accelerated the need to transform the finance function to meet current and upcoming disruptions. With most employees working from home, businesses were forced to run operations remotely, and had to swiftly deal with unexpected challenges. Pressing issues such as client payment delays became especially problematic due to cash flow drying up and supply chains coming under pressure.

It is not anymore a question of whether organizations should adopt new and emerging technologies, but a matter of how and when. With the exponential acceleration of digital adoption, finance organizations are no longer simply seeking an increase in efficiency and productivity. They are now looking for ways to adapt to shifting marketplace pressures as well as to expand and compete in new markets. The question on the minds of executives now is how quickly these technologies can be adopted so that their organizations do not lose their competitive advantage.

THE ROLE OF CFOS IN TRANSFORMATION
With the pandemic dictating the new normal and pushing organizations to reconsider their business continuity, chief financial officers (CFOs) play a significant role in supporting business during these uncertain times. Finance leaders must aid the business while keeping finance operations running, supporting the workforce, planning for possible scenarios, and managing cash and liquidity while focusing on stability and revival.

The finance function is gaining further importance while changing and expanding in scope. Historic reporting activity will continue to be vital but take less time, thanks to improved efficiency brought about by end-to-end reporting systems, consistent data and automation. Capacity will be available for more future-focused insights and analysis to support business units and decisions that drive increased stakeholder value. On the other hand, the need to satisfy regulatory information demands will continue and regulators may ask for more and possibly even real-time data, requiring finance teams to shape up their finance and business processes and leverage more advanced technology as an enabler.

The reality of unrelenting disruptive change brought about by the pandemic has placed CFOs at the forefront, balancing competing demands and driving future growth. CFOs who will build long-term value will have to cultivate a transformational mindset — one that starts from the future and defines where an organization wants to be, working its way back to where the organization is today. This is indicative of how transformation is designed and brought to life, guided by three key transformation drivers — technology at speed, humans at center, and innovating at scale.

TECHNOLOGY AT SPEED
According to an EY and Forbes Insights survey covering 564 executives in large global enterprises, 57% of CFOs believe that it will be critical for the finance function to deliver data and advanced analytics for business intelligence and management. Despite this, many organizations still struggle to apply the promise of data analytics into improved performance. Moreover, most admit they still do not have an effective strategy in place to compete in a digital world and struggle with getting business users to adopt analytics insights. Two-thirds of adoption leaders, comprising the top 10% of all enterprises, rate this change management as a vital component of their data and analytics objectives; yet only one-third of the broader cross-section of respondents see it this way.

As a role that spans across organizational silos, the CFO can extend the use of analytics from the traditional finance functions of budgeting and forecasting to the operational needs of the wider business. CFOs need to be the champions and drivers for the use of analytics in all current core financial processes under their responsibility, as financial data is one of the key inputs to many business decisions — whether in supply chain, procurement, operations or risk management.

By viewing data from the perspective of a data and money-conscious CFO, organizations will be able to act on the opportunities and insights that analytics can reveal as they occur before it’s too late. Without necessarily owning the area of analytics application, CFOs can act as a catalyst to help encourage and drive the use of analytics in business processes outside core finance.

HUMANS AT CENTER
Harnessing new and emerging technologies allows companies to more readily respond to or even anticipate changing customer behaviors and expectations. According to a recent EY study, Digital Deal Economy, 90% of companies are prioritizing an increase in capital allocation toward digital transformation, with a majority of global finance leaders saying artificial intelligence will be vital to the finance function of the future, while other finance leaders see blockchain as the most important technology in the function.

However, the pandemic has revealed that people aren’t merely anonymous elements of the many layers in an organization — they embody the organization and are its most critical asset. While it is undoubtedly a massive global crisis, the pandemic also serves as a live demonstration of how human resourcefulness, ingenuity, and diversity of experience can combine with the technology of today to create solutions and business models for the future, changing industries overnight and solving issues at scale.

The skills and expertise required from teams will change in a remodeled finance function. CFOs will need to build a finance function consisting of the right people with the right skills to complement and get the most of new technologies, playing an important role in the overall people strategy of the organization. Qualified accountants will still be needed within the central core to implement and understand the implications of evolving accounting standards and other legal and regulatory requirements, but alongside them will be a new breed of data scientists and business analysts. These individuals will understand how to use data, the IT systems that generate it and the questions that business units will want help in answering. It will be a complex blend of skills gained partly through education, training and certainly, through frontline experience across the organization.

Success will depend on combining the intelligence of smart technologies with the emotional intelligence and interpersonal skills of talented people. Companies that leverage technology and enable innovation at scale while placing humans at the center will be capable of accelerating long-term value.

INNOVATION AT SCALE
Though the world continues to evolve at an increasingly fast pace, many organizational structures and operating models remain unchanged. Digital initiatives are too often conducted within outdated frameworks — and superimposing 21st century technologies over 20th century structures and processes will likely result in suboptimal results, or even failure.

In addition, the resulting economic fallout from the impact of COVID-19 will likely worsen before it can improve, with possible recovery only seen well into 2022. CFOs will be expected to save costs wherever possible and as soon as possible, with significant economic disruption in the interim, all while balancing financial resilience and business continuity.

The finance function will need to become more agile in order to drive innovation with as little resistance as possible and be in a better position to create long-term value. It, like the rest of the organization, needs to become flatter, leaner, more fluid and globally integrated to become truly transformative.

REFRAMING FINANCE FOR THE FUTURE
The CFO will be one of the C-Suite’s most critical roles in reframing the future of the organization beyond the pandemic, according to the 2020 EY DNA of the CFO survey, with more than 800 senior finance executives and global CFOs as respondents.

How organizations create value in this increasingly hyperconnected world will shift from within company walls to out into network space. The finance function needs to become more open and work as part of an extended ecosystem, collaborating deeper within as well as beyond the organization. This poses the opportunity for CFOs not just to adapt to the new normal, but to reframe finance for this new reality.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Evert De Bock is a Consulting Principal from SGV & Co.