As we emerge from the turbulence of the global pandemic, most of us are diving straight into a world of economic uncertainties, supply chain disruptions, retention wars, digital transformation, and ESG amongst others. This evolving landscape is also contributing to a disruption in the roles of business leaders. In fact, even before the pandemic, a 2017 McKinsey study had found that on average, five functions other than finance report to the CFO. This included not just functions such as risk, regulatory compliance, investor relations, or M&A transactions, but also in many instances, cybersecurity, IT, and digitization. Essentially, the role of a CFO has moved from Accounting to Accountability, with a clear expectation of driving and delivering ROI.
The CFO in me ponders over a few key themes that seem to be evolving as critical factors for the performance and success of a CFO’s role in the future.
Technology and Technology Adoption
CFOs play a vital role in driving technological innovation and the need for digital adoption is higher than ever before. Legacy systems need to make way for unified operations with digital business models, insight-driven analytics, and hyper-automation. However, one of the big hurdles in embracing this new role as a digitization leader is creating the right mindset for acceptance and adoption of new technologies amongst the employees. As CFOs and drivers of digital transformation, we ourselves need to become digitally-savvy, in order to make quick decisions, adapt to changing environments, and remain resilient in the face of business continuity challenges.
Converting Profits to Cashflows
There is no doubt that a company with a top-driven cash culture could solidify supplier relationships, improve underlying systems and mindsets, and strengthen its competitive position in the market. Until the demand and supply chain disturbances come under control, most of our businesses, even with reasonable cash reserves may be challenged in generating cash flows from the profits. Revisiting our supplier management processes and systems, payment terms, and procure-to-pay efficiencies, along with a consciously established cash culture through the people processes and governance structures will help us make the shift from cash preservation to a cash excellence scenario.
Business Partnering with the CEO and Business Heads
Today, CFOs need to step outside the finance silo and have a sense of how macro trends affect micro decisions. Our comprehensive understanding of where individuals fit within teams, where teams fit within the company, where the company fits within its industry, and where the industry fits within a national and global context will enable us to truly partner with our CEOs and business heads, and make us long-term value architects for the businesses we serve. Simply put, we need to consistently provide informed insights upfront into the business decisions, in place of reports and analysis at the end of the process.
With the ever-expanding global regulations and ever-increasing stakeholder expectations, most of our businesses are facing a greater extent of compliance risk than ever before. Mandates around data privacy, data security, and financial reporting continue to be tightened across industries. This is where I see the use of advanced analytical techniques, such as forensic analytics, audit and recovery analytics, cash flow forecasting, working capital analytics, and journal entry analytics becoming imperative aids for ensuring a high level of regulatory compliance.
Governance and Board Management
From excessive executive compensation and increased cybersecurity risks to insufficient ESG oversight/disclosures and complex digital transformations, CFOs are seeing many challenges in corporate governance and board management. Relying on modern technology and embracing advanced analytical capabilities could help with better governance and management of stakeholder expectations.
Amidst the Great Resignation, significant talent shortages, and fierce war for quality talent, investing in upskilling talent, raising wages, and increasing rewards and benefits may be imperative. As CFOs, we may face the complex task of prioritizing and balancing the spending on the above areas, as well as on technology that fills the talent gaps and enables a remote-first/hybrid work environment.
There is an urgent need to consolidate our business positions, prepare well for the changes ahead, tell a compelling story, and support it with strong data points. The CFOs who can put this story in the hands of the right people at the right time, even before they know they needed it, will be the ones that will stand out amongst the rest.
Besides the complex cyber risks, evolving regulatory mandates, and digitization and talent challenges, the possibility of future pandemics and related shutdowns will continue to pose challenges for CFOs around the world. Improving our impact and strategic value to our organizations would need us to refocus on our agendas with a fresh lens, be proactive in business impacts, and rely on advanced analytics tools to build an agile, resilient and digital-enabled, future-ready organization.