The outlook for the global economy in the short- to medium-term is tainted with increased uncertainty. The sources of this uncertainty include the effects of supply/demand disruptions (higher energy prices, currency upheavals, commodity price increases), public government debt and deficits, geopolitical instability, and environmental challenges. All this is taking place against the backdrop of an unrelenting longer-term gravitational shift of power from developed economies into emerging economies -This includes the continued growth of the BRIC countries (Brazil, Russia, India and China) made popular in the early part of the century, but these economies face their own growth challenges with the rise of new and emerging economies in Central Europe, Asia and Africa.
These macro-economic trends have a significant impact on the way in which businesses operate, the challenges they face, and the strategies they develop to be successful on a global platform. This is the environment in which today’s CFOs must operate, while also positioning their organizations for the future. Certainly, turbulent conditions present challenges that CFOs must face, but importantly, those same conditions present opportunities they must embrace if they are to remain relevant, and lead within the new breed of CFOs.
One who has a Global Perspective
The relationships of tomorrow’s CFOs will be global and often virtual, therefore more formal than pre-pandemic days, where Off-the-record conversations in the corridor are no longer a primary form of communication. In addition, all types of organizations are rethinking their business models and location strategies, and importantly, global experience on CVs of tomorrow’s CFOs will not just be a nice to have, but a baseline expectation. The basic building blocks will be awareness and understanding of how different business models play out in particular regions or countries together with the different strategic challenges and opportunities faced in each context.
With finance responsibilities increasingly crossing borders, the CFO needs to navigate through, and embrace a vision for, a finance function that cuts across cultures, working practices, beliefs, languages, and time zones. Global leadership will be the cornerstone of the future CFO’s role.
While finance functions will always have the responsibility to ensure the proper recording and reporting of business events, and ensuring the control processes for organizations, this only represents the baseline of responsibilities in the finance of the future. Tomorrow’s CFO will need to leverage finance as a catalyst for change across the business — That means driving outcomes that affect long-term business performance, not only ensuring short-term finance outcomes or implementing one-off cost reductions. In this respect, there is much more that can be done.
An “Analytical” Mind
While the proliferation of large and complex data provides the finance function with some challenges, it also presents significant opportunities for analytical insight into the business. Amongst the various functions within a business, we expect the finance function, and the CFO in particular, to be at the heart of this data revolution with better tools set to facilitate predictive insight at their fingertips. Advances in the sophistication of technology are not just driving a revolution in our business environment, but also in our personal ecosystems where they are transforming how we engage with data, be it on our mobile devices, tablets, or computers.
Having said this, there is a caveat;currently, data systems and their hierarchies often do not reflect business structures or reporting needs, and are often too inflexible to address rapidly changing market conditions.So, while the business continues to change, technology ends up playing catch up as finance spends significant time reworking data in spreadsheets.
However, technological developments will continue to serve while helping to gather, organize, standardize and make data timelier. This will drive more effective business intelligence for identifying new market and profit opportunities, running simulations, bringing customer and market insights, and measuring and managing business performance. Tomorrow’s CFOs and their finance functions will need to be very adept in leveraging this technology. In practice, this means automating or eliminating work hours required to record and verify transactions, and to spending more time making data connections to understanding implications to the business model and applying these insights to the decision making process using a strategic finance lens.
Now, analytics are taking business intelligence one step further. They involve not just querying data and reporting on required information, but regressing, correlating, forecasting, and predicting future business scenarios through connecting the data points. For example, when analyzing customer profitability, business intelligence will identify which customers are the most profitable, while analytics will answer why they are so.
Predictive analytics, forecasting future performance based on past results,will be a key enabler for tomorrow’s CFOs and their finance operations. But in the current age of turbulence in which businesses operate, scenario planning and stress testing will be increasing priorities for the finance function. Questions will undoubtedly arise, including ownership of the responsibility for analytics and the economics of excessive analysis. Business intelligence and its successor, analytics, were initially developed in the domains of computer science, information systems and marketing, and CFOs must partner with and involve their CIO and CMO counterparts as full partners in the analytics process. Increasingly however, finance professionals are becoming business’s natural analysts, and we expect analytics to fall within the remit and ownership of the CFO, enabled by technology teams.
A Progressive Mentor
Aside from making progress in business intelligence and analytics, the issue dominating the thinking of CFOs today, is having access to, and keeping hold of, the right finance talent. The increasing involvement and interest of the CFO in talent development is testimony to the changing nature of their role. Once the domain of HR or personnel, the practices and processes businesses put in place to develop the best people in finance for the future are now firmly placed on the CFO’s radar. They are also typically cited as a key priority. Finance leaders also claim that access to good talent is a significant challenge.
At the simplest level, the CFO can act as a role model for future finance leaders in the organisation. However, today’s CFOs are often required to have a more hands-on role in developing future finance stars. Typically, they may be seen to sponsor talent development programs or learning interventions put in place to support finance career development (for example, finance academies). They are also becoming personally involved in mentoring or coaching activities to develop specific individuals.
Development of organizational capability is a persistent pursuit, and there will be a number of critical finance talent challenges that future CFOs will need to address. Developing talent through a global finance function across geographic, language, and cultural differences creates some obvious complications. The rise of virtual teams will make people development strategies more complex. There will be a need for new skills and finance leaders will increasingly have to strike the right balance between specialist resource and broader finance capabilities that has concerned finance leaders of the past.In times of disruptions in the workforce and our academic settings, recruitment and retention will become more difficult. The ever-changing geographic footprint of global finance functions will continue to evolve thus engagement will need to be managed more carefully. The new generation coming into the world of finance and accounting will have very different expectations about careers in the profession as practices and career paths continue to transform. CFOs whose organizations are focused on traditional job descriptions and hierarchies will be driven to adapt and address working models which continue to evolve.
Even more uncertainty lies ahead as the rules of the game become more dynamic in a global economic environment that is compounded by an extraordinary rate of technological change. As challenging as this may sound, finance leaders who use their anticipatory skills to prepare their organizations for the next chapter can add tremendous value to the businesses they serve. By maintaining this pre-emptive perspective and building the right capabilities within their teams, they will earn their place amid the CFOs of tomorrow.
(Russ Porter, CFO and SVP, Strategy, Technology and Analytics at IMA (Institute of Management Accountants) and the views expressed in this article are his own)
