Where should CFOs focus their attention in 2018?
In my conversations with customers across Europe, the Middle East, and Africa, a few key patterns and themes have become clear. Chief financial officers (CFOs) recognise that the role of corporate finance needs to change to keep pace with the world around them. Rapid changes in consumer technologies, new regulations, and a flood of millennials entering the workforce are forcing the world of business to adapt. Those companies that cannot keep pace run the risk of becoming extinct.
In extensive talks with customers, partners, researchers, and subject-matter experts, we have identified five things that global CFOs should focus on in the year ahead.
1. Start building tomorrow’s finance today
Emerging technologies—such as artificial intelligence, machine learning, blockchain, the Internet of Things and more—are poised to revolutionise the world of work. Think about how many of us (especially Millennials) use these technologies already in our personal lives. We ask questions of Siri or Alexa, and they get smarter and more responsive to us the more we use them. This is where finance is heading.
As my colleague Steve Cox said recently, “there will be pre-AI computing and post-AI computing. It is that revolutionary.”
Even if you’re not going to be doing anything in particular around artificial intelligence or machine learning in the next year, you should be planning for it—because your competitors already are. Deloitte forecasts that businesses are likely to double their use of machine learning technology by the end of this year.
Tomorrow’s finance function will achieve much higher levels of automation using these emerging technologies—for example, using intelligent process automation to perform most of the manual tasks associated with the financial close. AI-enabled finance applications will report exceptions as they occur, learn from those exceptions, and then make recommendations to resolve similar issues in the future—eliminating delays and continually speeding the close process.
The goal is not to replace finance with emerging technologies. The goal is to offload the tasks that they spend too much time on today. Finance professionals have excellent analytical and critical thinking skills, and every CFO could benefit from putting those skills to better use.
CFOs must also consider the implications of blockchain, both for its potential to disintermediate certain transactional processes and to reduce costs. And they can optimise their supply chains using the Internet of Things, augmented reality and embedded AI processes like automated demand sensing.
All of these emerging technologies are enabled by the cloud, because the cloud provides the sheer scalability of computing power necessary. If the pace of change forced you to look at replacing your on-premises enterprise resource planning (ERP) systems last year, the pressure will only become greater in 2018.
2. Deliver meaningful insights
The average business is doubling the amount of data it manages every year. Yet even with reams of data, organisations are often still in the dark. The goal of finance technology projects should be to turn a flood of information and reports into meaningful insights—to board members, senior executives, and other stakeholders.
The average finance function might be able to run thousands of reports, but they spend an inordinate amount of time analysing those reports, reconciling the numbers, and ensuring that they are getting consistent results across lines of business. A critical focus of CFOs needs to be knocking down data silos in their organisation so there is a single source of truth. When finance teams trust their data, they spend less time reconciling it and more time turning it into meaningful insights.
This also means providing modern, easy-to-use, and easy-to-understand reports that finance teams can access quickly—whether that is on their laptop, tablet, mobile phone, or other device. Millennials, in particular, want apps that improve personal productivity and effectiveness—similar to the tools they use in their personal lives.
3. Close security gaps
Not a day goes by without a report of a business dealing with a cyberattack or security breach. Large or small, any organisation is a potential target, whether the hacker’s goal is to steal confidential company financial data or demand a ransom. CFOs are realising that the security safeguards in their current finance systems are not enough.
The maintenance of on-premises software (and hardware) is dependent upon implementing the next release or patch—and, as we saw in the Equifax breach, such patches are often not made in a timely fashion.
With finance applications in the cloud, none of this is an issue; the systems are always up-to-date with the latest security measures. Organisations already using the public cloud consider heightened security to be one of the main benefits.
But in an environment with multiple cloud solutions, security depends on multiple providers, making it only as safe as its weakest link. Thus, CFOs looking at a move to the cloud need to look at potential providers and ensure that they can provide security across all layers of the stack, from applications to infrastructure.
4. Comply with global data protection regulations
My colleague Paul Flannery recently wrote about the impact of the European Union’s General Data Protection Regulation (GDPR). The cost of non-compliance has brought GDPR to the attention of boardrooms not just in the EU, but globally. The potential magnitude of fines is significant: 4% of an organisation’s global revenue, or €20m, whichever is greater. There’s also the potential damage to the reputation of any company that fails to comply with breach notification requirements.
Recently, the International Data Corporation (IDC) gathered executives from organisations across Europe, the Middle East, and Africa (EMEA), to gain insight into how they are approaching GDPR. The resulting report, “Does Cloud Help or Hinder GDPR Compliance?” summarises discussions from events in France, Italy, Morocco, Spain, South Africa, Sweden, and Switzerland. It flags the many potential benefits of compliance and recommends a framework to focus on particular GDPR requirements and select the right technology for the job.
GDPR compliance is a long-term commitment, and investment in implementing a cost-effective supporting infrastructure will prove to be valuable in the years ahead. It might even represent one of the biggest opportunities to accelerate digital transformation in recent years.
Which brings us to the final item on our CFO to-do list:
5. Be ready to transform—and grow
The engine of any company’s business is its financial systems. But if those systems make it difficult to shift gears into new business models or expand into new regions, your company will find itself further and further behind competitors.
For example, many manufacturers are starting to sell their products as subscription services; banks are partnering with fintech startups; automakers are becoming information-service and entertainment companies. All of this requires more than the right technology. It also requires the right people and skill sets, access to the right data, the right culture, and the right processes in place.
While it is fairly easy to change your IT infrastructure, it i much more challenging to try to change the culture of a company. That’s where a CFO’s leadership is critical.
Adjusting to an accelerated pace of change is not a one-time thing. CFOs and their finance organisations need to become agents of continuous change—so that their organisations are agile, adaptable, and ready to shift gears to compete with any challenges the future holds.
Arun Khehar is Oracle’s senior vice president for the applications business across the Eastern Central Europe-Middle East-Africa region