5 key aspects to cope with financial transformation through technology.

The executives in charge of the financial area need to drive the company’s strategic ambitions. To achieve greater impact on the business, it may be necessary to reimagine some financial functions from these 5 perspectives: strategy, leadership, operating model, talent, and/or technology.

69% of financial transformation programs progress slower than expected, and 30% fail to achieve the expected benefits. What’s the solution? A strategic and iterative financial transformation roadmap that includes the following:

• Define objectives and vision for the transformation.
• Establish a baseline of the current state of financial capabilities.
• Design the future state.
• Communicate plans, priorities, and dependencies.

Strategy

Whether clear or not, many institutions in the finance sector are embarking on a multi-year journey towards a futuristic but inevitable autonomous financial function. The reality is that governance and guidance processes are significantly enhanced by artificial intelligence (AI) and automated through blockchain and robotics. Most day-to-day financial activities are location-independent and carried out through shared delivery models with little or no human intervention.

How to proceed and what strategy to take? CFOs should redefine their financial strategy in terms of value-added opportunities as autonomous finance becomes table stakes. Strategic plans for the financial function should incorporate significant technology adoption in areas of weakness (analysis and reporting) and redistribute the team towards activities requiring portfolio-level insight (balance sheet and cash flow analysis).

One crucial must: to stay ahead, everyone will need to acquire more knowledge about data.

Leadership

Only 20% of CFOs are personally effective, meaning they achieve short-term financial results and also promote behaviors for profitable long-term growth.

What makes them effective? Their customer orientation, creating constructive tension with senior management, the board, and administration, being more involved in the business, and allocating time – like capital – rigorously. They also understand that financial technologies are rapidly evolving from automated processes to autonomous capabilities and must change their mindset to experiment widely, trust in the results of autonomous capabilities, and set an example in the transition.

What do they need to overcome? Digital conservatism when it comes to tight budgets, skills shortages, change fatigue, adoption of new technologies, and preferences for legacy ways of working, especially in compliance, financial planning and analysis (FP&A), and among finance business partners.

Operating Model

CFOs struggle against inherited departmental structures and complex function designs that inhibit the quality of analysis and the scope of activities, preventing scalable management and governance of financial technology. Additionally, economic volatility, digital acceleration, and the rapid evolution of financial technology and outsourcing markets are radically changing finance’s opportunities for creating unique value.

As a result, financial organization designs are increasingly outdated in relation to how financial organizations actually function to provide support and knowledge to internal and external stakeholders. Organizational design is the process of creating structures that align functions, workflows, networks, and procedures with the objectives of an organization.

A well-applied organizational design is crucial for achieving autonomous finance, as it increases transparency and representation in the financial function, aligns functions with digital changes, and improves communication between finance, all of which allow digital investments to have a greater impact.

Talent

By 2025, finance teams are expected to be much more equipped to advise business partners and serve stakeholders in a digital world. The skills they will need include strong business acumen and digital skills in robotic process automation (RPA), machine learning (ML), and natural language processing (NLP), as well as complex problem-solving skills.

These capabilities will also ensure that finance team members can handle ambiguous and judgment-based work that will become a focus for finance as transactional tasks become automated.

Digital talent often feels out of place in the current financial function, where overall digital competence can be low.

Consider this:

• 64% of CFOs believe their teams are not effective in using digital financial technologies.
• 23% of financial leaders rate their teams as competent in digital skills.
• Nearly 19% of financial talents with digital competencies are actively seeking new job opportunities, compared to 11% of financial talents without digital competencies.
• CFOs who can retain their digital financial talent and develop basic digital competencies within their teams have a clear advantage in ensuring that their finance teams drive efficiency, generate high-quality insights quickly, and support digital transformation and enterprise optimization initiatives.

Technology

80% of financial executives agree that finance must significantly accelerate its implementation of digital financial technology to effectively support the business by 2025. If they fail to do so, they anticipate a series of adverse effects, such as loss of prestige with decision-makers, business forecasting accuracy, and finance operational efficiency.

However, accelerating digital transformation in finance is easier said than done. In fact, only 37% of financial executives agree that their functions have a clearly defined digital technology investment strategy two to three years out.

It is imperative that they deploy, pilot, and explore cutting-edge technologies, such as digital twins, Internet of Things (IoT), and blockchain. These technologies are more frequently associated with revenue generation than technologies classified under the data and advanced analytics category.

Keep in mind that the number and type of technologies used to drive efficiency, agility, and productivity are increasing. CFOs are beginning to understand that there are other types of decision, process, and task automation tools that enable hyperautomation alongside robotic process automation (RPA), machine learning (ML), workflow automation, and intelligent document processing (IDP).

Publicado originalmente el 27 de March de 2024, modificado 10 de April de 2024