Digital economy redefining CFO roles


The world has gone digital. Music is now digital, and books are trending toward eBooks. GPS devices are disappearing—owing to the smartphone; newspapers are now “old news”; and smartphones are now cameras. Businesses and societies on a whole are interacting in ways never before imagined. This hyperconnectivity is reinventing the world economy, leading to a new Digital Economy. This new economy is more collaborative, intelligent, responsive, and efficient with dramatic increases in productivity and value for those ready to embrace it.

With a shift as fundamental as this, organizations must remain agile and innovative to remain relevant. Specifically, what does this mean to the CFO?

To better understand how CFOs are managing their ever-expanding horizons and challenges they will face in the years ahead, CFO Research, in collaboration with SAP, recently conducted a global survey of 331 senior finance executives at companies with more than US$500 million in revenue in 2013. These finance executives, representing a broad range of industries, were based in Asia/Australia, Europe, Latin America, and North America and reported interesting new scenarios highlighting how CFOs could drive profitable growth through better planning and predictive analysis with Big Data Analytics and Finance’s new role in driving growth and providing business leadership.

Research as the one above denote how CEOs are looking more than ever to their CFOs to guide them through these uneasy times, to act as a catalyst and an agent of change. Within this context, the role of the CFO is evolving.

According to a study by the Ateneo Graduate School of Business, the role of today’s chief financial officers (CFOs) have gone beyond just scorekeepers or number crunchers. These executives have evolved to become strategists and catalysts, influencing the company’s direction and even driving innovation. Today’s CFO in the Philippines is no longer confined to just maintain and control the organization’s various assets and run financial operations. CFOs are now expected to take a more proactive role in shaping the direction and performance of the company. CEOs need to recognize and accept the CFOs as a valuable partner in the development of the organization’s business strategy and policy.

At a conference held by The Corporate Treasurer in Jakarta in February 2014, the CFO panelists all agreed that “the ability to network and lobby key political decision makers was an essential ingredient for the role of CFO.” This was due to the strong government presence in the private sector, especially within industries.

Simply put, a strong CFO is vital and he needs to provide: first—a single source of truth; second—real-time finance processes underpinned with strong compliance; and third—unmatched insight and foresight.

To add on, there has been a long deliberation over how CFOs are moving from being a Steward towards becoming a Strategist. The discussion has further developed in recent years—the CFO has to become a strong business partner as well.

How will all these 3 roles come into play today, given the new digital world, new waves of technological innovations and other evolving elements?

CFO as a steward

Being a steward involves CFOs being responsible for the day-to-day accounting, treasury, finance, risk management and internal-control function. Essentially, it is about safeguarding the assets of the organization by minimizing risk, and running a tight finance operation that is efficient and effective.

With the ever-changing requirements both on CFOs and on the business, SAP is a German multinational software corporation that makes enterprise software to manage business operations and customer relations recently undertook a transformative migration for its finance operations, to new finance systems based on HANA, SAP’s own in-memory data platform. Since implementing SAP HANA internally, the SAP overall finance organization have managed to reduce the close process by five business days, which also positively impacted reconciliation time, from 26 hours to a mere four hours, giving back the organization much more time for analytical validation.

CFO as a strategist

Being a strategist involves contributing to the overall business strategy. This means going beyond delivering numbers and information, to delivering strategic insights which drive performance as well as the factors affecting it. As a strategist, the CFO must involve acquiring relevant resources for the organization, and delivering organizational goals sustainably.

This was clearly seen during SAP’s own financial transformational migration. As in-memory technology allows data to be available in real-time for instant analysis, the foundation for new collaborative processes between finance and the business was created.

For example, in managing working capital, SAP can now generate real-time insight into cash collection patterns that may pose a risk, and select account executives can then use this insight to make different payment arrangements with customers. Such real-time action means SAP is now able to proactively track the performance of receivables to detect risks early, which the company can then mitigate through the tightening of payment terms or revenue cycles and sometimes even through delivery blocks of certain customers if they go above certain overdue levels. This would not have been possible before due to the siloed nature of work.

This transformation journey at SAP has also enabled the FP&A cycle to become much more proactive and predictive, as opposed to reactive and data entry-oriented as it was in the past. With the real-time data gathering and analytical capabilities, systems can apply built-in logic to simulate possible outcomes and detect potential issues at an early stage.

With this information, finance can provide predictive insights and recommendations to the business, which are immensely valuable to their decision-making, thus effectively changing how the role of finance is perceived by the business: from being accountants to serving as key partners and co-navigators to the business.

CFO as a business partner

In terms of the CFO being a Business Partner, it has typically portrayed the CFO as a business catalyst, or value integrator. Ernst & Young describes the core of business partnering as the successful combination of “practical economic theory and the effective allocation of scarce resources to achieve financial objectives”.

The firm also emphasizes a number of factors which they believe makes a CFO a good business partner. One of the most important factors underscored, in my opinion, is the ability to manage the Finance function in operating from an efficient base, allowing the best resources to focus on analysis to support strategic and commercial operations which adds value.

Fundamentally, it must be about the CFO’s ability to contribute to business decision-making to seize the right market opportunities.

With the ongoing financial transformation migration to SAP HANA at SAP, our business enjoys better and quicker insights a result of a faster close and earlier start to the next forecast. Hence, our finance function is now positioned as a valued business partner to the company. This new ability to produce simplified real-time reporting has enabled the transfer of many reporting duties in a self-service manner back to the lines of business, eliminating time-wasting data gathering for offline reports. By reducing the time Financial Planning & Analysis (FP&A) staff have to spend producing reports, they are now able to more quickly analyze the data and advise the businesses on ways to improve their performance, again validating the new role they play as a ‘business partner’ to the business.

Striking the right balance

Ultimately, striking the right balance among the three roles – is key for the CFO to bring true value to the business as well as for his or her own personal development. This doesn’t mean an even split across all three aspects, but rather, what makes the most sense for the business.

For example, the shift towards the CFO being a business partner is translating into CFOs allocating more time meeting with business executives, and less time on pure financial and operational matters.

However, achieving a balance requires effort, dedication and commitment (by for example creating measurable metrics for the core aspects of each role) so that results of the tripartite-CFO role can be achieved.

With CFOs taking a more business-oriented role, it is likely that they will be increasingly handed change management roles and responsibilities. This could include aspects such as technology-driven transformation, the makeover of legacy Enterprise Resource Planning (ERP) systems to new technology innovations that will streamline processes, drive collaboration, and become an overall value creator to the business.

With such additional responsibilities, striking a balance will be challenging, and vital to success.

Leveraging the right innovations

Earlier, I shared that in today’s volatile world, we need strong CFOs who are able to provide: a single source of truth, real-time finance processes coupled with strong compliance, and unmatched insight and foresight.

Today, this has been made possible by a perfect storm of technology innovations – the convergence of cloud, mobile, social and big data that is reshaping the future of business, and acting as a catalyst to empower forward-looking CFOs to achieve the three key aspects of a strong CFO.

Indeed, after striving for decades to standardize processes and improve efficiency, organizations around the world are now entering a new era of business transformation.
For the first time, the same set of technology innovations can be harnessed to help make everything smarter, faster and simpler not only for businesses as a whole but also for individuals. Today’s transformational technologies will drive tomorrow’s business innovation.


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