The Australian CFO Forum 2016 White Paper. How CFOs are redefining performance in the age of disruption

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1 The Australian CFO Forum 2016 White Paper How CFOs are redefining performance in the age of disruption Produced by: Sponsored by:

2 2 Overview The speed of change, driven by technology, is shaping the continued evolution of the role of the CFO. In 2015, IBM surveyed 5,247 business leaders from 21 industries in more than 70 countries for the Global C-Suite Study (2) This comprised of over 600 CFOs and the report found the most effective CFOs, or the performance accelerators as they are referred to in Redefining Performance: Insights from the Global C-suite Study The CFO perspective (1), are those who are contributing to the agility and responsiveness of their organisations through their focus on technology, data and innovation. To understand the extent to which these global trends are impacting Australasian CFOs, in June 2016 more than 20 senior and board-level finance executives participated in IBM s CFO Forum at the Shared Services & Outsourcing Week Australasia. The forum provided a closed door networking opportunity for the CFOs to discuss their current challenges and opportunities, as well as those on the near horizon.

3 3 Key findings from the Australian CFO Forum The speed of market change is forcing CFOs to play more of an active role in the strategic direction of the business. CFOs acknowledge that the potential value of unprecedented volumes of data being generated is immense, but the ability to realise its true value is still inhibited by factors including the quality of the data source, as well as the enterprises ability to interrogate the data effectively by asking the right questions. Robotic Process Automation (RPA) is not a silver bullet, but it can dramatically alter the way CFOs do business in the future, and should be seen as one of multiple levers for an organisation to enhance or improve an existing process.

4 4 The Evolving Role of the CFO in the Age of Disruption Digital disruption is affecting businesses across all industries, as the boundaries of competition are becoming more ambiguous and new market entrants can often post more of a threat than traditional competitors. In this context, the most effective CFOs are more likely to be involved in assessing market conditions, analysing competitor s strengths, weaknesses, opportunities and threats, and bring these insights into boardroom discussions. The threat of the unknown competitor an organisation or entity that has potentially not even been incorporated yet, or a company that diversifies under a new business model means CFOs are asked to continually model new scenarios where costs are built bottom up, as well as looking for efficiencies within existing financial models. With this in mind, Paul Sidhu, Associate Partner of IBM Global Business Services, kicked off the discussion focused on how the participants were addressing disruption within their business. It was immediately clear that the definition of disruption differed greatly depending on the industry in question.

5 5 CFO participants from the public sector highlighted that for them a key disruption they need to plan for is likely to be the fact that continuing to operate business as usual will not enable them to deliver the services required in the future changing demographics, uncertain funding models, having to do more with less. Instead, they need a drastically different operating model to be successful. This means that options that were previously unheard of, such as outsourcing, have to be considered as part of their strategy moving forward. Another challenge for government was increasing the focus on innovation - trying to get their staff to develop cutting edge solutions, when traditionally they have not seen innovation as part of their role. The real value a CFO can offer the business is to provide test cases of what is possible. In the private sector, it was very much a case of the CFO being able to assist their business to analyse, model and respond to rapidly changing market environments, both in terms of being able to provide strategic advice, but also in reducing operating costs. An airline representative pointed to the volatility of fuel prices and foreign exchange, and the CFOs role in managing a business which has a strong reliance on cost drivers that it is unable to control or influence, while another from a university pointed to the fact that their business is under threat from non-traditional providers of education solutions, including globalisation of the education sector. Finally, a representative from an industry which is facing a particularly negative outlook with the current downswing in resource prices, suggested that the real value a CFO can offer the business is to provide test cases of what is possible what opportunities should be embraced, and which should be thrown to the wayside.

6 6 Data as a Source of Competitive Advantage CFOs who focus on analytics tend to excel. According to Insights from the Global C-Suite Study - The CFO Perspective, a key differentiating factor was that the best performing CFOs are exceeding through using both internal and external data for scenario planning. (1) The need to make sense of all the data available is only set to increase. Attendees broadly agreed that a key business goal was to use financial information to drive non-financial outcomes, and that to achieve this goal successfully it will involve integrating data from across the business to create a single source of truth. Many agreed that they could make better use of their data assets through deeper analytics, and unlock additional value for their organisation by doing so. Furthermore, accessing external data sources to develop an even richer assessment of their respective business current and future requirements. The private sector representatives in the room immediately acknowledged the importance of data to guard against poor decision-making, with the key factor being the ability to access the right data at the right time. However, they also pointed to the fact that data coming from multiple silos within an organisation and passing through multiple hands could be equally troublesome.

7 7 In a government context, a public sector representative stressed the immense potential of the data at their finger tips, as their organisations become better equipped to utilise that data. Government departments interact with people on so many levels, but at the moment all of that data is held in silos. If these silos could be overcome, it would unlock immense, real time understanding of what is happening within society, as well as which aspects of government policy are driving the biggest outcomes, and allow them to make better decisions around where to focus their funding. There was then broad agreement that data integration could be enhanced. It was also agreed that there is no one quick fix, given that there are multiple factors impacting data consolidation and quality, such as standardisation of processes and controls. Equally, as the group pointed out, often it isn t the quality of the data that is the problem, but instead asking the right questions that uncover the most meaningful relationships within the data set, instead of bringing inbuilt biases into the assessment of data. Putting in place processes that enable the CFO, and their organisation to integrate more data faster, and testing multiple hypotheses will drive better, more informed decision making. The need to make sense of all the data available is only set to increase, with projections of 1.7mb of data of new information will be created every minute for every human being on the planet by (3)

8 8 Future of Cognitive Technology and Automation It wasn t that long ago that artificial intelligence and automation was the stuff of science fiction. While cognitive computing is still in its infancy, a comprehensive suite of technologies now offers CFOs a genuine strategy lever for improving the effectiveness of the finance function, and generating competitive advantage for their organisation. While the ability to automate processes has been around for a very long time, it has evolved to enable cognitive automation through autonomous decision making, providing new insights through data discovery and personalised support. RPA is an area of automation CFOs can leverage to improve processes, with robots being able to work 24/7 and at a third of the price of an offshore FTE (4), handling lower value high volume processes which ultimately enables the workforce to focus more on strategic objectives. The automation and removal of bottom-line costs in this manner may ultimately enable the organisation to focus more effectively on revenue generating activities, customer service, and keeping pace with disruptive trends that may emerge. Given this, Michael Wolfe, IBM Client Solution Executive, asked the group to outline what those in the room considered the term RPA to actually mean, and what its potential was to transform their business. First to respond was a CFO from a Health provider who suggested that they don t actually talk about robots, because at the moment all that does is generate fear. Instead they stress that it is just another piece of software, much like they have been using for years. Saying that, she acknowledged that robotics represented

9 9 RPA can be integrated into any industry where highly repetitive, rule based processes are performed on a high frequency basis, even in highly regulated industries. a big jump in capability that will dramatically alter the way they do things. A key to unlocking its potential was to give the power to make decisions on what to automate to the shop floor, rather than a top down approach. Broadly agreeing with her sentiment, Michael then followed up with the fact that if you think deploying some robots will fix your broader issues you are wrong. Instead, robotic process automation is a way of looking at those problems through a slightly different lens. RPA can deliver benefits in functional areas including human resources, finance and accounting. Specific industries such as telecommunications, utilities, mining, travel, retail and healthcare and financial services can also utilise RPA. It can be integrated into any industry where highly repetitive, rule based processes are performed on a high frequency basis, even in highly regulated industries. What was clear from the remainder of the discussion was that in spite of the fact that deployments of RPA were thin on the ground in Australia and New Zealand, nearly all of the participants in the room were aware of the vast potential of the technology, and looking at developing a business case or running a pilot in the short to medium term. It was agreed that RPA should not be seen as an off the shelf silver bullet and that each organisation would likely have a very different use case for this technology, potentially spanning multiple parts of their business.

10 Conclusion: CFOs need to integrate, analyse and adapt 10 In conclusion, it was apparent that Australasian CFOs are seeing a similar evolution in the scope of their role to that being experienced by their international peers. Markets are shifting much more quickly, and the CFO is increasingly playing a key role in helping their business respond to these threats, as the boundaries of competition become more ambiguous. According to the Insights from the Global C-suite Study 2015 The CFO perspective, CFOs need to establish enterprise-wide standard finance processes and invest in technologies that will enable them to integrate data from different sources in order to adequately adapt in the age of disruption. (1) Saying that, and perhaps most interestingly, the area where Australian CFOs are lagging is in regards to realising the potential of all the data they have at their disposal, and advancing the use of the latest technologies. To learn about IBM, please visit: ibm.com/bpoutsourcing/au Or for more information, please call: Sources: 1. IBM Institute for Business Value. Redefining Performance: Insights from the Global C-suite Study The CFO perspective IBM Corporation. services/c-suite/study/studies/cfo-study/ 2. IBM Institute for Business Value. Redefining Boundaries: Insights from the Global C-suite Study IBM Corporation Robotic Process Automation: Driving The Next Wave Of Cost Rationalisation IBM and the IBM Logo, are trademarks of IBM Corp registered in many jurisdictions worldwide. A current list of IBM trademarks is available on the Web at Copyright and trademark information at