Two fascinating reports from EY surveyed CFOs to explore the forces that are reshaping the finance function.
The first report concluded that digital technologies, data, risk, and uncertainty, as well as stakeholder scrutiny and regulation, are dramatically impacting the role of the CFO. Part two of the research – which has recently been released – explores the technologies and skills finance will need to be successful in the future. The results are telling, with 47% of CFOs responding that their current function does not have the right mix of capabilities to meet its future priorities.
“We believe many senior executives are underestimating the changes on the horizon for the finance function,” commented Tony Klimas, global finance consulting leader at EY, when I asked him about it.
Wait and see is not an option
In a world where technology is changing rapidly, there is a tendency for people to sit back and see what happens before making a decision. But adopting such an approach could be bad news.
“The problem is that the change is so significant, and the new technologies so advantageous, that if you take a wait-and-see approach, you run the risk of being put at a severe competitive disadvantage,” Tony explained.
What are these new technologies that are so revolutionary? The report identifies advanced data analytics and forecasting, robotic process automation, cloud and software as a service, artificial intelligence, and blockchain.
But even though it is clear that these developments have the power to transform the finance function, here’s the key takeaway. In Tony’s view, “finance leaders need to understand the key emerging technologies and make pragmatic decisions about the optimum time to invest.”
Diving into new investments without due diligence will not deliver the needed results. Plus, CFOs must remember that successful technology transformation is dependent on the people using it having the right skills.
Time to abandon traditional ideas about talent
“The next evolution for the finance function will be to become a data-driven decision center,” Tony pointed out. But what does he mean by this?
As technology enables the automation of transactional finance processes and generation of reports and information, finance teams will reduce their headcount and become more forward looking, combining financial data with external data to help model and predict business opportunities.
“The new finance function will be more closely aligned and engaged with the business, challenging their strategic plans, and assessing the potential of different business scenarios,” explained Tony.
The future finance function will also be more focused on uncertainty through risk management, using analytics to investigate the implications of strategic decisions. Indeed, 57% of the CFOs surveyed indicated that strategic risk management, including reputational, regulatory, and cyber-risk management capabilities, will be critical for meeting the demands of the organization in five years’ time.
In this new world of finance, there will be two types of people: those who are concerned with running the business and those who are more concerned with changing it. To make the model work, CFOs will need to make sure both types of people have the right skills for their roles.
For example, the leader of a finance factory running automated transactional processes will need to have skills and experience in driving process excellence through lean techniques and state-of-the-art technologies.
On the other hand, experts who are helping the business analyze and model opportunities – such as the introduction of new digital services and products – will need completely different skills. And it is not inconceivable that these skills will come from people who don’t have a traditional finance background – statisticians, data scientists, and economists, for example. Certainly, existing finance staff will need to become more literate in technologies such as blockchain and artificial intelligence.
“To realize the promise of the future operating model, CFOs will not only need to rethink how they develop, measure, and reward people with very different skills. They will also need to abandon traditional ideas about the talents and knowledge finance team members bring to the table,” Tony concluded.