How is technology changing the role of a CFO?

How is technology changing the role of a CFO?

Accountancy Age interviews Cheik Daddah from Kyriba about the changing role of the CFO and how future technologies like AI and Blockchain will impact the position

How is technology changing the role of a CFO?

What key technical skills do CFOs and partners need to succeed in their roles right now and in future?

Technology is revolutionizing and enabling the transition of the CFO from custodian of past transactions to enabler of future growth opportunities. The top priority, 85% of the CEO and CFO agenda, for most organizations is to uncover new sources of revenues to fuel growth, according to The Hackett Group. As companies are better able to manage their cash and more rapidly make decisions to expand through acquisitions, CFOs should beware of the legacy systems they inherit, which create risk exposures. Additionally, losses from fraud, poor foreign currency management, and supply chain management can erode shareholder value.

CFOs need to improve their ability to manage large data sets in order to understand the business risks and impact of new ventures for their organization. One way that CFOs are able to see their total cash exposure in real-time is through their cash management teams, who have full view of company cash holdings worldwide. The new finance skillset will be anchored on data science, predictive and prescriptive analytics, and business partnering. Right now, this means becoming fluent in digital transformation and in the future this means employing AI or robots to work along side your finace teams.

Security has to be primary to CFOs today and will be an important skillset in the future. Any strategy to reduce risk must include reducing losses from cybercrime. This industry is rapidly evolving and the vulnerabilities are in email impersonations or BEC scams as well as in third party solutions. The CFO should have a working knowledge of systems and solution security, and also engage often with the CISO to help shape company security training and finance security policy.

How is technology set to change the role of the CFO in the future? Will this mean people with slightly different skillsets will take on CFO roles? 

Modern CFO’s are more focused on shaping a more robust financial future than on accounting for what happened  yesterday. Historically, the role of the CFO was predominantly about ensuring accounting and reporting of past activities and transactions were booked appropriately so they can report on what had transpired last month, quarter or year. Finance process standardization and automation driven by innovations in finance technology enables CFOs to shift their operating paradigm. Instead of looking backwards, real-time analysis of historical data allows CFOs to better shape, predict and optimize  business outcomes.

The modern CFO will embrace data science as the board of directors expects them to be more analytical, predictive and prescriptive about the future of their organization. The tools they need will connect to data sources from across the organization and generate a dash board of actionable insights, and the ability to dynamically drill down into key performance indicators. CFOs will need to partner with a new breed of finance executives who have deep industry relevant business experience, and more technical expertise such as data science, advanced statistics and modeling.

In fact, technology advancement is enabling be-spoke finance solutions to help large organizations through fast growth stages such as merger and acquisition or regional expansion. CFOs can rethink organizational layouts, from centralized finance, to embedded or virtual finance teams in order to streamline help them succeed in their roles.

Will technology change the route to CFO and how?

Yes. Absolutely.

Digital transformation is enabling the CFO and the finance function as a whole to be more strategic and add-value to the organization as a whole, specifically around driving growth objectives. While FP&A is the background many CFOs have today, the CFO of tomorrow will likely be from treasury. Here’s why: treasury is the key to cash and risk management, working capital optimization and investments. As technology in these areas continues to improve, treasury-led finance transformation will become the cornerstone to new growth for the organization. Currently, treasury is among the primary advisors to the CFO, providing real-time decision support, and is well aligned to changing the route to CFO.

Technology is advancing at a more rapid pace, and creating opportunity to drive new growth for the organization. Historically, organizations seeking to automate processes have focused on identifying their requirements, evaluating potential technology partners, identifying gaps between what they need and what the selected vendor offers, and customizing what is missing from the chosen technology. This approach is commonly known as “fit-to-gap” and requires years to be fully implemented. In contrast, in the SaaS world, industry best practices are offered by vendors and follow a “fit-to-standard” methodology, in which customization is no longer offered. Instead, organizations can configure the SaaS applications to fit their intended use, and dramatically accelerate the benefits they gain from digital transformation.

How will new technology improve productivity of CFOs and their teams?

With new technology comes a productivity revolution, especially when it comes to digital, multi-tenet SaaS architectures. It is not uncommon to see finance organizations spend 60% to 80% of their time assembling data and creating reports. With SaaS based industry best practices, shared across a large pool of best of breed organizations, productivity can be boosted by as much as 80 percent. In other words, the standardization, automation and streamlining of core finance processes, using SaaS technology, can reverse that equation: now finance organizations can get 80% of their time back to spend on analysis, insight gathering and better partnering with key stakeholders (e.g., Sales, Marketing, R&D….) to identify, shape and deliver new value (e.g., revenue growth, operational efficiencies, new business model deployments….) The operating paradigm is radical with new technology when it comes to productivity. Organizations move away from traditional efficiency mandates to an effectiveness objective (e.g., making better decisions).

In what ways will technology help CFOs coordinate more growth and expansion into new markets?

  1. Establish tighter standardization of core business processes, adhering to industry best practices and ensuring past transactions are captured and reported accurately. This functionality is critical for simplifying and automating compliance.
  2. Free up time from administrative tasks to further focus on analysis and insight generation to shape future desired outcomes.
  3. Eliminate the need for reliance on IT to deploy modern technology to enable finance staff to better partner with the business.
  4. Ultimately, the goal is to give the CFO and the finance staff a seat at the table to drive topline growth, which is the main focus of the CEO and Board of Directors. Thus, the evolution of the role of the CFO’s role is Chief Growth Officer (CGO). The CGO will deliver real-time advice and recommendations for creating new and agile business models, how to fund them, address emerging risks and regulatory compliance requirements, pursuing and accelerating time-to-value for mergers and acquisitions, instituting new performance management standards to reward and retain talent, finding creative ways to change the way innovation and growth are funded, better and more sustainable ways to reward shareholders, becoming a steward for change in the organization, and adopting sensitive and progressive ways to supporting sensible environmental policies.
  5. Growth is the key driver. Growth requires innovation and agility. Growth requires new insights, internally and externally, to ensure it is profitable. The CFO is the custodian of past and future value. The CFO’s role is to help navigate growth opportunities so that they are pursued efficiently, profitably and with minimal risks.

Will blockchain likely feature in technology CFOs will be utilising in the future and if so how?

84% of respondents to a recent PwC research survey (Blockchain is here, what’s your next move, 2018) are actively involved with Blockchain. Whether it is tokenization, initial coin offerings (ICO), or market exchanges, Blockchain, the back-end architecture (or distributed ledger) that enables transactions of cryptocurrencies, is being explored as an alternative to classical debt and capital funding mechanisms because it may offer better security, increased efficiency and reduced costs. CFOs of the future will want to have a firm understanding of blockchain functionality and applications of blockchain to maintain a competitive edge.

Enabling both back-end and front-end finance systems to integrate with blockchain technology is becoming a must.  According to the PwC study, “Using blockchain in concert with enterprise resource planning platforms will enable companies to streamline processes, facilitate data sharing and improve data integrity”. Whether it is an ERP, FP&A or Treasury Management System, accounting for and modeling the impact of blockchain based payments transactions, security authorizations or supply chain management should be on the career map of aspiring CFOs.

How will AI and automation continue to improve and assist CFOs in their roles?

AI and Machine Learning are the new boundaries of automation. Touchless processes, especially for repeatable tasks, will be a must in the digital era. Having staff reconcile bills, track customers for errors resulting from manual processes, eat-up at productivity and limit staff’s ability to focus on analysis, insight generation and business partnering. Adopting cutting edge technology with pattern recognition, learning capabilities, recommendation engine based on large data samples, and end-to-end process integration and coordination can deliver unprecedented levels of productivity and accuracy. As a result, finance staff will get out of the business of administration, and focus on partnering with the business to uncover, advise and execute profitable growth objectives. For that to occur, finance staff will need real-time trustworthy data, and time to conduct proper analysis to capitalize on the opportunity. This new frontier in automation provides that vehicle.

 

This guest article was written by Cheik Daddah, Global Vice President of Value Engineering at Kyriba

 

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