How digitisation is changing a CFO's role

Updated: Oct 12, 2017 10:13:55 AM UTC

In today's day and age, the job and responsibilities of a chief financial officer aren't limited to the finance sector. They are now taking a strategic role in the organisation.

A CFO is now expected to develop skills beyond traditional responsibilities, like business planning and address the challenges faced by the organisation during crisis. Companies need to steps to ensure that CFOs have a more diversified background, in terms of experience in varied environments. They are also required to constantly develop new skills to support the strategic goals. CFOs now have a very challenging goal ahead of them, with expectations they will take the lead in much more than just what was earlier expected of them.

The challenging nature of the business and the dynamic industry make it essential to develop new alternatives. Transforming the organisation and taking accountability for new challenges and roles are necessary since the social or political risks from the outside will always be present for a company.

Data Management Generating a pipeline of data management processes to assess and decipher the information for its correct use is essential. The ability to make sense of the data, realising its potential and classifying it as important or noise can be done by identifying patterns or using a predictive system.

Modern organisations are gravitating away from legacy systems that had kept such customer-focused data on the back burner and are driving various initiatives that align with the customers’ true interests. This push is top-driven, with finance heads generally marshaling such changes.

Reforming the Role of CFO/ Amalgamation of CFO & CIO
There is a huge gap between reporting the financial data and analysing it. The increasing automation of the roles of the CFO & chief investment officer (CIO) is disrupting the traditional route. Taking the lead in ownership of both roles adds to a disadvantage in the long run. The firms yet to take such a bold step are advised to bring in data experts or a Chief Data Officer. While there may be a preponderance of existing data, the CDO will invariably know exactly what questions to ask, thus extracting the best value from the available data sets.

Emergence of the Cloud
Differentiating data into what stays and what goes to the cloud is tricky. CFOs are on the path of deciphering which of these functions should be on premises and what can be moved to the cloud. Companies are now carrying out expensive on-premises licenses and software contracts are being scrutinised thoroughly with a cost-benefit analysis in tow, to make sure the right decisions are taken. Cloud has its limitations too. While it is less expensive and offers a quicker speed-to-market, customisations are tricky and at best, avoidable. It is incumbent for the CFO to clearly distill the functions that can be outsourced to a cloud solution provider, while retaining the critical ones in-house. Cyber security threats are omnipresent, both on and off the premises. It is the nature of information that may be at risk and the degree of that risk, which needs to be evaluated individually.

Amenable off-premises functions
Decades-old legacy systems are a nuisance for companies that are looking for wholesale changes. Many organisations have their hands tied because disrupting a single system can easily have a domino effect on others expensive and time consuming to control. A high degree of customisation in existing processes further complicates the situation and companies are tempted to brush the issue under the carpet. Accounts Payable and Payrolls Management are two classic examples of functions that can be pushed to the cloud. It frees up the bandwidth for important business analyses and will be a win-win situation for the company and the employees. Such digitisation is also seen to improve overall employee morale.

The Digital Landscape
This is about advocating the use of a landscape to harness the power of the digital world. An inter-departmental system can help the CFO use all the information on and off the premises efficiently.

An FMCG major, for example, could provide a quick snapshot of its logistics function in key areas to the finance head on demand. It is a tremendous idea on paper and it can solve multiple issues. Implementing it though, is no mean feat and would require a phenomenally high order of inter-departmental alignment.

An Indian Perspective
With Prime Minister Narendra Modi government’s focus on demonetisation and the ever-growing on digitisation in the country, doors are opening for companies to transform completely into digital.

Currently digital adoption is appallingly low compared to the West. While an opportunity has been provided, there must be checks and balances to ensure cyber threats and breaches are avoided. This requires robust back end processes and well-tested systems.

The Future

Rebuilding an organisation’s roles and adopting new technology requires heavy investment. Coordination on every level is necessary to carry this out. Digitisation is the future and most CFOs are aware of it. The current state of their legacy systems will define the pace of its adoption.

- By Ajay Kumar as Senior Director, Sales Consulting for ERP & EPM (India)

The thoughts and opinions shared here are of the author.

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