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Finance teams take on wider roles but lack resources

Finance teams take on wider roles but lack resources

Finance departments will have more responsibilities coming out of the COVID recession yet they lack the resources to do what really needs to be done, a KPMG survey of over 70 leading finance executives has found.

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The report, Finance Evolution, by KPMG’s CFO Advisory practice, finds that while finance departments have played a pivotal role during the shutdown and are now looking to support new business strategies, they will be expected to lead by example on managing costs and rationalisation of operations.

The study shows that while CFOs are focusing on simplification of finance systems and increased automation and digitisation, already-stretched teams may lack the capacity to get full business benefits from new technologies while also fulfilling roles which have widened during the pandemic. Sharp focus on costs has been combined in recent months with future-oriented activities such as scenario planning, and increased management and board reporting.

Almost 40 percent of finance leaders said they were not prepared for a transformed ‘headcount-lite’ environment.

Peter Trace, Partner, KPMG CFO Advisory practice, said: “CFOs and their teams have stood up well to the difficult challenges of the Covid crisis but the short-term future does not look like being any easier. Finance leaders’ roles were already evolving before the global pandemic but the crisis has accelerated the pace of this change with significantly more strategic responsibilities being taken on, while still covering all the BAU work.

“Companies are now looking to finance teams to drive new initiatives to manage operating costs; and CFOs themselves, are looking to lead the way through implementation of new finance technologies. Senior finance staff will need enhanced inter-personal and new digital and data analytical skills to optimise the benefits from these new technologies and to provide the broader business support required.

“It is not surprising, given all this, that most CFOs say one of their top priorities has been, and will remain, the health and well-being of their own staff. Finance leaders have been required to divert more time and energy onto team engagement and check-in activities than ever before; and they acknowledge that managing the mental health of their teams will continue to require much of their attention.”

The report found that the COVID crisis has accelerated underlying trends that were emerging in finance and has revealed several growing challenges facing finance teams:

  • The more strategic and forward-looking role played during the pandemic is expected to continue, including modelling future risks and opportunities to support decisions coming out of the crisis, yet nearly one-quarter (23 percent) do not feel prepared for this.
  • Business partnering is highly valued and requires increased EQ and communication skills in finance teams but just 16 percent of those surveyed feel very prepared and have the right skills in place. 
  • Almost 80 percent of CFOs agree that Finance operations are moving to be ‘asset-lite’ through adoption of new technology, digitisation and cloud-based solutions. But preparedness varies – almost 20 percent of respondents are not ready for this move and only 16 percent are ‘very prepared’.
  • Finance leaders accept they are now responsible for the effectiveness of controls over all business data and performance – not just financial – but almost one-third are not yet in a position to take on this role.
  • They also accept responsibility for supporting those responsible for managing and reporting ESG and other non-financial information, ensuring it is underpinned by the same rigour and disciplines as financial information. Yet 45 percent say they are not ready for this new step. 
  • Finance leaders regard the move towards ‘digital everything’ in finance as inevitable and many see it as a strong enabler to provide more strategic and timely financial advice and support throughout the business. However, some noted the challenges of obtaining investment funding, exacerbated by the current crisis.

The report describes how during the crisis, the key initial task of finance was to support staff to work remotely while protecting cashflow and funding. Even though teams were dispersed, daily finance operations had to continue so new ways to ensure internal controls were still operating effectively had to be implemented. On top of this, boards and management required daily and real-time business forecast updates and scenario analysis.

To meet these challenges, Finance’s role and responsibilities began to extend far beyond their company’s financial matters to focus on strategic support, risk mitigation and resilience across all facets of the business. As the crisis unfolded, Finance leaders focus was more on cost reduction and cash management across the business but with a responsibility to provide more forward-oriented insights and analysis for internal decision support and external reporting.

Peter Trace said: ‘As we have moved through the crisis and as finance leaders look forward, there is widespread acceptance that the broader and pivotal role of Finance will continue. Ensuring tight fiscal management is accompanied by responsibility for assessing the impact of risks and opportunities on business strategy; driving M&A activity; and finding ways to increase business efficiency and support business growth.

“But nearly a quarter of Finance leaders do not currently feel ready to perform these roles on an on-going basis and this is largely due to concerns over having the right technology and tools in place, with many still working with legacy systems.”

He concluded: “Finance teams have played a critical role throughout the crisis and this will continue. But the demands on Finance leaders and their teams are not reducing; therefore, unless something changes – whether that be by managing stakeholder expectations, adjusting resource models or investing in new technologies to improve productivity – managing the health and wellbeing of Finance teams will be increasingly challenging.”

For further information

Ian Welch
KPMG Communications
0400 818 891
iwelch@kpmg.com.au
 

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