The CFO Agenda 2020: Demands f are increasing with the changing role of the CFO

Transcription

1 Spotlight Analysis The CFO Agenda 2020: Demands f are increasing with the changing role of the CFO November 2014

2 This Spotlight Analysis is based on the results of a global trend study, The CFO Agenda 2020: Getting ready for the digital age. For this trend study, PAC commissioned by HP interviewed 301 CFOs in mid-sized and large enterprises of all industry sectors across three regions and 12 countries during April and May Further results will be published over the next weeks. Published by: Hewlett-Packard 3000 Hanover St Palo Alto, CA Pierre Audoin Consultants (PAC) GmbH Holzstr München Contacts: Tim Castelli ( , tim.castelli@hp.com) Dr. Katharina Grimme ( , k.grimme@pac-online.com) PAC & HP

3 Analysis This Spotlight Analysis looks at key aspects in which the role of the CFO is changing. It draws on results from PAC's global CFO survey, in which 301 CFOs in mid-sized and large enterprises were interviewed during spring But it also includes findings from ongoing PAC research and analyses of global business and technology trends. The CFO in 2020 will be primarily a strategist and key support for the CEO Over the past years, the role of the CFO has changed significantly. It has emerged and evolved from being a controller and gatekeeper of inbound and outbound payments towards a strategic partner and key advisor to the CEO. The financial crisis of 2008/09 has accelerated this change. Global markets have since become more uncertain and volatile, and regulation and compliance are increasingly complex and subject to change. These macroeconomic trends impact all types of organizations (both in the public and private sectors) in terms of strategies, business models and operations. Greater flexibility, faster time-to-market, effective risk management and management of financial volatilities as well as a reliable response to regulatory requirements are therefore primary requirements for organizations. For a successful business performance, this means a need for better planning, based on improved knowledge and information for strategic decision-making, for example, based on forecasting and scenario planning, profitability analyses and adequate risk management. It increasingly falls to the CFO to provide the necessary data and information to enable this and to act as a key advisor and decision support for the CEO and board of directors. Consequently, the CFO is assuming a much more strategic role, with the responsibility to identify opportunities and detect risks and to then be able to adopt and implement adequate measures to react to those and steer the business to success. The PAC survey illustrates that a significant number of CFOs are recognizing this fundamental change to their role and responsibilities. 53 percent of CFOs perceive business risk management as a key priority, as shown in figure 1. Similarly, more than half of the respondents see the provision of financial information for strategic decision support as a top priority for the finance function. Further high priorities are control and transparency of finance processes as well as the fulfillment of compliance requirements. PAC & HP

4 Which are the key priorities for the finance function in the coming year? High#priority# Some#priority# Provision of financial information for strategic decision-support 51% 36%# Measurement / surveillance of business performance 44% 40%# Cost reduction within the finance function 47% 37%# Management (and reduction) of business risk Achieving greater control and transparency across finance processes 53% 50% 30%# 32%# #PAC#2014# More efficient handling of operative processes and transactions 48% 34%# Fulfilment of Compliance requirements 49% 30%# Support for business activities (growth) in new geographies or new markets 39% 33%# Share#in#percentage#of#all#companies,#n#=#301# 0%# 20%# 40%# 60%# 80%# 100%# Figure 1: Current top priorities for the finance function It is even more interesting to look at how CFOs expect the importance of their key priorities to change over the coming years. As shown in figure 2, a significant share of CFOs (over 40 percent) see all of the key aspects as becoming increasingly important and only a very small share see a decrease in any of the areas listed. This illustrates that CFOs see the demands on the finance function generally rise, thus putting greater pressure on the CFO and the finance function in future years. Furthermore, it is notable that the CFOs surveyed see both the provision of financial information for decision support as well as operational efficiency and cost reduction in finance processes as increasingly important topics over the next 2-3 years. These areas are certainly related, as operational efficiency is an important prerequisite for the provision of reliable, detailed and up-to-date financial information. But it also indicates that CFOs face a basic dilemma: they have to master the balancing act between necessary cost efficiency and rising demands from the business to support their strategic business activities. PAC & HP

5 How do you expect the importance of these key priorities to change over the next 5 years? Rising$in$importance$ Same$as$before$ Decreasing$in$importance$ More$efficient$handling$of$opera;ve$processes$ and$transac;ons$ 51%$ 44%$ 5%$ Provision$of$financial$informa;on$for$strategic$ decisionosupport$$ 51%$ 44%$ 5%$ Cost$reduc;on$within$the$finance$func;on$ 46%$ 49%$ 6%$ Management$(and$reduc;on)$of$business$risk$ 45%$ 50%$ 5%$ Achieving$greater$control$and$transparency$ across$finance$processes$ 44%$ 50%$ 6%$ Measurement$/$surveillance$of$business$ performance$ 43%$ 50%$ 7%$ Fulfilment$of$Compliance$requirements$$ 41%$ 51%$ 8%$ Support$for$business$ac;vi;es$(growth)$in$new$ geographies$or$new$markets$ 40%$ 51%$ 9%$ Share$in$percentage$of$all$companies,$n$=$301$ 0%$ 20%$ 40%$ 60%$ 80%$ 100%$ Figure 2: Future priorities for the finance function In fact, it is typically the case that the finance function like other back-office functions is required to reduce the overall cost of operations or at least maintain a strict cost control. This often means that no investments in new projects, skills or resources are available to adequately prepare for the rising demands from the business. This means that the CFO is challenged to 'do more with less'. PAC & HP

6 Technology becomes an increasingly critical enabler for the CFO CFOs largely acknowledge the changes brought about by a stronger focus on business-oriented responsibilities. As shown in figure 3, the large majority of CFOs agree that their role is changing in a way that requires them to focus more strongly on profitable revenue growth for the business and the management of enterprise risk. To be able to do that, they will increasingly need to deploy technology to help gain the necessary insights. To what extent do you agree to the following statements regarding the changing role of the CFO? Fully#agree# Agree# Do#not#agree#at#all# Do#not#agree# The CFO has an ever greater role in supporting and enabling sustainable, profitable revenue growth for the enterprise. 2%# 14%# 58% 33% #PAC#2014# Managing and mitigating risk for the enterprise is becoming an increasingly important task for the CFO. 3%# 6%# 57% 34% Share#in#percentage#of#all#companies,#n#=#301# Figure 3: CFOs increasingly have to support revenue growth and risk management The proliferation of data available in a variety of places and systems within the organization provides challenges as well as opportunities for the CFO. However, it is often the case that data is not readily available and does not reflect reporting structures. Business intelligence and analytics, in particular, can help to collect, standardize and analyze data in a timely ideally real-time fashion. Today, analytics is sometimes used within the finance function to gain insights on operational efficiency and the effectiveness of processing tasks. But the real opportunity and future requirement is to deploy analytics across the organization to mitigate potential risks to the business, better survey business performance (e.g. cash flow developments) and identify optimization potential. Predictive analytics can be deployed to forecast future performance, for example, to develop forecasts for product sales in specific locations or for specific products, thus facilitating business planning but also supporting the optimization of the supply chain (e.g. improvement of inventory turns). PAC & HP

7 The deployment of technology, and analytics in particular, will increasingly span the entire organization. It will go hand in hand with systems consolidation and harmonization, systems integration and data management. At the same time, it can be deployed within the finance function to automate processes, thus improving service quality and efficiency, and reducing cost. With the increasing deployment of technology especially when a seamless integration is required across systems and business units the CIO will be involved as well. For that reason, a much closer collaboration between the CFO and the CIO will be necessary to align requirements and take the appropriate technology decisions. The majority of CFOs recognize this. 85 percent acknowledge that they will have to collaborate more closely with the CIO on technology investment decisions as technology becomes increasingly critical for the finance function (see figure 4). Similarly, nearly 90 percent of CFOs agree that the use of analytics to effectively support business decisions and enable business performance is becoming more important for their role than focusing on transaction processing. To what extent do you agree to the following statements regarding the changing role of the CFO? Fully#agree# Agree# Do#not#agree#at#all# Do#not#agree# The CFO has to focus more on analytics for effective decision-support than on transaction processing (so as to support business performance) 2%# 14%# 51% 38% #PAC#2014# The CFO has to collaborate more closely with the CIO on technology investment 3%# decisions (because technology is increasingly critical for the finance function). 6%# 46% 39% Share#in#percentage#of#all#companies,#n#=#301# Figure 4: CFOs will increasingly need to leverage technology and collaborate with the CIO on that PAC & HP

8 Concluding summary As a result of increasingly volatile markets and greater uncertainty for businesses, the role of the CFO is becoming an increasingly strategic one, with a focus on providing intelligence and advice on business decisions for the CEO and the board of directors. At the same time, CFOs are required to ensure operational efficiency and cost control. Consequently, they see themselves in the increasingly difficult position to master the balancing act between necessary cost efficiency and the rising demands from the business to support strategic business activities. CFOs largely recognize this and see the pressure on their responsibilities rising over time. Technology acts as an enabler for the finance function to be able to 'do more with less'. In particular, business intelligence and analytics can be deployed to gain relevant business insights as well as identify optimization potential for greater efficiency and effectiveness. The deployment of technology increasingly applied across the entire organization - requires the CFO to collaborate more closely with the CIO on technology investment decisions. Those CFOs who not only recognize, but fully embrace their new role and the implications it brings with it will be able to become key drivers for success in their organizations. But this requires an adaptation of the necessary skills. In our next Spotlight Analysis, we will look at how external service providers are used to support the finance function today and how this is expected to change in the future. PAC & HP

9 About HP Business Process Services Finance & Administration Services: HP F&A Services can improve your business outcomes and increase enterprise agility. These services range from high-resource, low-complexity transaction processing activities to complex decision-making and analytics support. Our services help you decrease operational costs, achieve operational excellence, improve information for decision-making, and increase cash flow. Through our leading technologies and process expertise, we have helped clients improve cash flow by more than 50 percent. HP Finance and Administration Services address four key areas for CFO organizations: Source-to-pay Strategic sourcing, procurement operations, supplier invoice processing, and payment recovery services Order-to-cash Sales and credit management, billing, collections management, cash application Record-to-report General accounting, financial planning, analysis and reporting Business analytics Management dashboard, performance and trend analysis, and predictive modeling The services are delivered through our global industrialized delivery network an integrated group of off-shore, near-shore, and on-shore leveraged centers. We work collaboratively with clients to develop a transformation roadmap that meets their business objectives and timelines. Our offering drives improvements across client organizations and provides the business insights required to deliver better business results. About Pierre Audoin Consultants From strategy to execution, PAC delivers focused and objective responses to the growth challenges of Information and Communication Technology (ICT) players. PAC helps ICT vendors to optimize their strategies by providing quantitative and qualitative market analysis as well as operational and strategic consulting. We advise CIOs and financial investors in evaluating ICT vendors and solutions and support their investment decisions. Public institutions and organizations also rely on our key analyses to develop and shape their ICT policies. Founded in 1976 and headquartered in Paris, France, PAC is part of the CXP Group, the leading European research & advisory firm in the field of software and IT services. For more information, please visit: