As we edge towards the third decade of the century, business-as-usual methodologies no longer keep pace with the tides of innovation and unprecedented change. According to KPMG LLP’s (KPMG) U.S. CEO Outlook 2017, one in three CEOs believe that their sector will see a major disruption in the coming three years as a result of technological advances.
The dynamic nature of contemporary business urgently calls for a new breed of finance functions. The reality, however, is that most finance teams are not prepared to meet these wider demands. “The finance function is, by nature, very conservative, detail-oriented, rule-oriented, and structured,” says Jim Carroll, a futurist and trends and innovation expert. “To make the transition to a more forward-looking model requires a lot of innovative thinking. Unfortunately many finance functions are not structured to support that.” Yet, over the next decade, finance will have to disrupt itself to meet the demands of its customers, including regulators, corporate boards, sales and marketing departments, suppliers, and internal and external auditors. These stakeholders increasingly expect finance to serve as a true business partner, not a back-office department focused on transactional processing and historical reporting.
Today’s rapidly changing business environment requires finance to address disruption head-on or risk being left behind more nimble competitors. Leading CFOs are focusing on leveraging disruption into opportunities for competitive advantage and growth while also improving their delivery of products and services to their stakeholders. Experience shows that CFOs are deriving specific benefits for their companies by focusing on these key areas:
CFOs need to maintain a firm grip on the numbers while preserving a focus on market opportunities, threats, sector disruptions, and customer retention. That means serving as creative strategists while continuing to oversee capital allocation and, ultimately, playing a key role in enabling innovation across the enterprise. In essence, CFOs need to think like venture capitalists. They must first understand the trends and economics that are driving market disruption in their sectors. They can then manage innovation investments as a portfolio, using metrics aligned with the organization’s overall strategic objectives and governance program.
Finance professionals must embrace technology disruptors to transform their operating models and unlock the benefits of extreme automation. Leading finance organizations are already reaping the rewards of cloud enterprise resource planning (ERP) and robotic process automation (RPA)—from reduced costs and risks to heightened efficiencies and improved cybersecurity. With a baseline technology infrastructure in place, these organizations can look to future investments in more advanced technologies. Successful finance functions will make good use of blockchain, data analytics and other enabling technologies, while emerging technologies will change the nature of shared services centers. Furthermore, businesses can exploit artificial intelligence for sharper predictive insights and better deployment of capital.
As the only person in the enterprise with both the permission and the duty to integrate strategy, finance, and analytics, the CFO is uniquely positioned to define the analytics agenda. As traditional, historical analysis becomes fully automated, analytics capabilities will shift from descriptive and diagnostic to predictive and prescriptive. A powerful technology toolbox also strengthens finance’s ability to identify and make investments in the right projects to drive innovation.
The renewed groundswell of digital transformation will turn finance into a business support function that combines strong analytical and strategic capabilities with traditional accounting skills. By redefining the skills, roles, and structure of its workforce, finance will be able to attract, retain and develop talent to match its evolving needs. In the future, it will require both strategy and finance skills, process and control leaders, and the ability to collaborate and build relationships across formerly siloed departments.
Extreme automation will dramatically change the size, structure, and delivery model for finance, separating human expertise from automated execution and simplifying the organization’s operations. Finance organizations must assess what new work needs to be done, how those demands translate to the skill sets of their workforce and how to manage processes. They will need fewer people with higher skills, less hierarchy, and fewer offshore locations. A smaller finance team will represent a diverse range of highly-skilled employees who are freed up by intelligent automation to work on tasks that add real value across the enterprise.
An estimated 60 to 70 percent of manual controls performed today will be automated over the next five to ten years. And it is no wonder—extreme automation promises to improve controls while reducing internal and external compliance costs. This can be achieved by maintaining a flexible control environment that supports innovation, automation, and other organizational changes. Despite the potential benefits, disruptive technologies also pose significant challenges. From process integration and system compatibility issues to data protection and privacy concerns, risks must be proactively managed and continuously monitored.
As the process of preparing compulsory reporting becomes increasingly automated, finance functions have more time to solidify their position as valued business partners, using advanced analytics to model future scenarios and map the best outcomes for the enterprise. To drive this process, CFOs need to take steps to disrupt their finance functions or face a talent drain as well as an inability to grow revenue or deploy capital effectively. The key to success is to create a blueprint for how the finance function can turn disruptors into opportunities.
Read the full report to learn which steps you can start taking today.