The CFO’s Changing Role in a Digital World
As the digital era reshapes business, the transforming CFO role presents unprecedented opportunity to create deeper value. Advancements in technologies like process automation, contextual actionable analytics, and flexible deployment options offer high potential gains in data quality, timeliness, and efficiency for operations and finance, while also improving compliance from the ground up.
CFOs have always faced intense time constraints, with a continual push to increase productivity rather than add staff. At least latest process technologies for digital enablement are enabling the CFO to focus on more tightly integrating both operational and backend business processes more efficiently, while also being able to allocate more time to compliance, against a chaotic backdrop of economic turbulence.
Current focus points for compliance include the evolving regulatory needs surrounding cybersecurity, a broad spectrum of privacy-related challenges, including data governance in-country and cross border data transfers, and sustainability.
This fundamental shift away from being viewed as a cost centre to proactive business partner is going to streamline end to end operations to release value, while enabling stronger levels of compliance. At a deeper level, it marks the start of a major structural shift that will challenge existing business dynamics.
Evolving Skillset for Modern CFOs:
Modern CFOs must possess a diverse set of skills to adapt to the digital era and harness the combined power of data and technology, as well as bridging and leveraging the digital gap that exists across workforce generations. While financial expertise remains essential, strategic thinking becomes critical in identifying risks and guiding short, medium and long term strategies.
Strong leadership skills are necessary to motivate teams during uncertain times, while effective communication and storytelling enable CFOs to contextualize complex data and influence stakeholders.
Additionally, technical skills such as analytics, enhancing data literacy, and digital acumen are vital for extracting actionable insights and evaluating emerging solutions, while ensuring compliance. Change management skills, agility, continuous learning, and a risk-aware mindset round out the skillset required for the modern CFO. To drive forward, however, one must have a vision of where to lead the organisation.
Overcoming Key Challenges:
Several challenges arise as CFOs transition into their ever evolving role:
Acquiring Technical Appreciation and Skills: CFOs often face difficulties in developing new technical competencies on top of their existing financial ones. At a minimum they must have a strong grounding in what technology can achieve for the company, as well as an appreciation of the challenges likely to be faced in the foreseeable future. This will include how the latest technologies can be incorporated into existing processes, plus understanding risks associated with the lifecycle of all software and hardware components, including their inter-dependencies.
Overcoming this challenge requires investing time and resources into upskilling, proactively participating in relevant domain networks, and seeking external partnership expertise for training and implementation support.
Integrating New Solutions: Implementing automation, cloud computing, and other emerging technologies often necessitates reimagining finance related processes in their entirety. This transformation can be complex and requires managing both the technological aspects and change management perspectives effectively to ensure a smooth transition from legacy systems.
An important aspect of this is setting realistic goals. Many projects of this nature fail due to not having relevant change management representation from all impacted domain areas of the company. Additionally, many underestimate the complexities associated with systems integration as it touches both new and older systems, each with its own technical peculiarities.
Cybersecurity Risks: With increased reliance on technology, as well as ever increasing data interconnections within and across ecosystems, CFOs must be knowledgeable about cybersecurity, and be aware of how threat actors might try for example to divert funds to bank accounts under their control. Such incidents happen frequently and are typically referred to as Business Process Compromise.
The lack of cybersecurity expertise anywhere in the company can leave organizations vulnerable to broader threats, such as ransomware, phishing attacks, and other direct data breaches. This means that it is important to have an ongoing strategy for training and re-training all staff members on best practices, as any one person could unintentionally let threat actors into corporate systems. Once they gain access they will move across your software assets to find valuable data files for theft or disruption.
In any software deployment, comprehensive security related checklists should be created and proactively managed on an ongoing basis to avoid simple errors that might have far reaching impacts. An example of such an error is setting up public access to data files, rather than keeping them private.
Furthermore, digital ecosystems reached through APIs, such as Open Banking, further expand the risk vectors if no mitigations are put into place to prove the authenticity of a transaction. As a sign of the times, both cyber and privacy risks are increasingly motivating companies to expand insurance cover to protect more internal roles eg those roles described as CIO, CISO, CSO and CTO etc
Privacy Risks: There are multiple dimensional factors at play here, and so developing cultural mindsets that have privacy and cybersecurity as core considerations is critical. Data management regulations are constantly tightening and are becoming ever more granular (eg personal information and sensitive personal information in PRC), meaning that one has to know where data is being processed & stored at each stage of processing, as well as understanding the legal ramifications associated with non-compliance.
In various global jurisdictions this increasingly (albeit slowly) involves personal criminal liability, hence the comment about insurance above. As highlighted, particular attention should be taken around using APIs to connect to third party systems to understand where data is processed and whether anything is being stored cross border.
As a topical current example, consider artificial intelligence (AI). As many start experimenting with it, one should immediately ensure that your own corporate data is not being used within public AI systems to train their models. Open systems diverge from enterprise deployments and fail to maintain data privacy, since uploaded information could be utilized as an instance by the AI in other responses to additional corporate users.
Balancing Innovation and Pragmatism: CFOs need to strike a delicate balance between embracing cutting-edge technologies and maintaining financial controls and data integrity. Prudent governance remains crucial to mitigate risks associated with rapid technological advancements. This is a conundrum for corporations, because large bold changes can streamline operations more quickly, but large projects greatly amplify pitfalls in the change management process.
Managing Older Solutions / Protection of Investment / Shadow IT: Earnings calls related to software vendors concentrate on SAAS revenue, because external stakeholders see it as a leading indicator of their future performance. It is seen as being more profitable than the more traditional on-premise systems, so some larger vendors are now moving away from selling new on-premise solutions and are discouraging their existing use through large maintenance price hikes, as well as freezing development. In other words new functions just go into the cloud variant. Users need to be constantly looking forwards to avoid sudden “supply shocks” that would impact operations, as well as carefully managing all SAAS spend, particularly around shadow IT, to avoid budget creep.
Strategies for Success:
Successful CFOs who embrace the digital era to leverage data and technology typically employ a number of strategies, so they:-
Embrace Continuous Learning: Actively develop skills and learning about new technologies, cybersecurity, and privacy through conferences, classes, and peer groups. This helps CFOs remain at the forefront of innovation.
Build Partnerships: Collaborating closely with Chief Information Officers (CIOs), Chief Technology Officers (CTOs), and Chief Data Officers (CDOs) to drive technology initiatives. Engage third-party experts for training and / or system implementations. Some major corporate’s in high risk sectors work with their local C.E.R.T. (Computer Emergency Response Team) and /or other specialist groups eg FS-ISAC to appraise their board of risks (this is also an example, in some cases, of bridging the generational gaps that were mentioned above).
Communicate an Inspiring Vision: Energizing finance teams by aligning technology roadmaps with clear business outcomes and emphasizing the competitive advantages of digital transformation. This is particularly significant for regional roles, where many processes are duplicated to a high degree in every entity, save for local regulatory variations. Think of reporting cycles here as an example.
Involve Stakeholders Early: Including key stakeholders, such as business leaders, IT professionals, and end-users in the selection and design of new systems to foster smooth adoption and gain valuable insights. Numerous projects falter, fail to realize their intended result, or neglect to expand to domains where current efforts could avert duplicated actions elsewhere eg financial reporting processes.
Start Small, Scale Strategically: Pinpointing real pain points. For example, extensive use of spreadsheets across teams typically points to data transformation issues that rise due to relevant data being in different sub-systems, but the key issue is that this data needs transformation to be useful. Removing them improves efficiency.
Maintain Rigorous Governance: Establishing data policies and controls prior to implementing new systems. Conduct regular audits and risk assessments to ensure compliance and data integrity. One effectively needs to break a vicious cycle of knocking out transactional friction to release time for other activities, especially for compliance where regulatory fines, director liability, and reputational risk could have a devastating financial impact.
Foster a Collaborative and Innovative Culture: Encourage prudent experimentation and data sharing between finance and other functions to drive innovation and enhance decision-making capabilities. Prioritise bottlenecks and their business impact. Some organisations build extensive scoring metrics with a weighting based priority.
Worthy of mention, is that if your ROI evaluations are too rigorous, then in many business cases they will not be tangible or recognised as worthwhile, despite a change making perfect sense. Corporate cultures historically have not required benchmarking of specific processes ie cost per transaction, resources required to achieve end points etc, so there are a lot of variables that come into play. In some ways, this suggests that value will be recognised within functional domain areas, but not across them.
Finance Innovation Powered by Technology:
By leveraging emerging technologies, CFOs can transform finance functions to unlock new possibilities, so they look at a number of options:
Automation: Streamline transaction processing and reporting, reducing errors and costs. Chatbots are something that many have not yet considered, but are suddenly in the limelight with generative AI, as they are able to handle routine queries across applications and ecosystems, and can suggest process improvements to eradicate future questions, all freeing up professionals’ time. They can augment the work of other professionals by ranking entity or consolidated variances with commentary and actionable contextual supporting information, proactively speeding up the end to end reporting process for all areas of operations and finance.
Advanced Analytics: Extract deeper insights from operational and financial data using scenario analysis, empowering strategic decision-making and enhancing forecasting accuracy. Reporting should not be at the end of the process but within it, enabling key information to reach decision makers. In essence, contextual actionable reporting that is accompanied by smart supporting facts.
Cloud-based Financial Platforms: Embrace flexible and agile systems that enable seamless integration with other enterprise systems, particularly ecosystems through APIs, thereby promoting efficiency and collaboration. However, when evaluating deployment models, maintain an open perspective to satisfy comprehensive necessities, especially regarding cybersecurity and data privacy across platforms like cloud, multi-cloud, private cloud, or hybrid cloud implementations.
Artificial Intelligence: Plan ahead to leverage AI-powered solutions to automate tasks such as invoice matching, anomaly detection, and financial analysis. Today, many corporates are extremely limited by having reports that are not timely. In fact, they are typically very unwieldly meaning that recipients have to wade through a lot of information. Many reports, as a result, are not read. Thinking more broadly, Digital Assistants should be evaluated. They employ natural language processing and voice recognition (typically with text output) to facilitate authorised inquiries eg bank balances. As a slight tangent, one can automate / augment note-taking during meetings etc.
Conclusion:
Keep an open mind. The CFO’s role in the digital era is undergoing a significant transformation, requiring a blend of financial expertise, technical know-how, leadership abilities, and adaptability. By embracing continuous learning, building partnerships, and balancing innovation with pragmatism, CFOs can navigate the challenges and harness the power of data and technology to drive finance innovation. Finance functions can be revolutionized, enabling CFOs to make data-driven decisions to propel their organizations forward. Despite the challenges, the opportunities presented by the digital era make it an exciting time for forward-thinking CFOs who are willing to embrace change and lead their organizations into the future of finance.
FlexSystem Limited 