3 tactics to become an agile CFO

Business leaders worldwide have grown more concerned about the global economy in the past year and are increasingly trying to be agile — to act quickly and easily — as they deal with an environment going through rapid changes, research suggests.

Two-thirds (67%) of about 1,300 CEOs polled by KPMG in 2019 said that “acting with agility is the new currency of business; if we’re too slow, we will be bankrupt”. That’s up from 59% in 2018.

Fuelled by challenges such as climate change, digital technologies that put pressure on business models, and a return to territorialism, confidence levels amongst business leaders declined compared with the previous year in seven of the 11 countries KPMG surveyed.

Respondents’ confidence in the global economy’s three-year growth prospects dropped 36 percentage points in India (to 53%, from 89% in 2018) and Australia (to 38%, from 74% in 2018), 34 percentage points in the UK (to 43%, from 77% in 2018), and 28 percentage points in China (to 48%, from 76% in 2018). Amongst US respondents, confidence increased by 35 percentage points (to 87%, from 52% in 2018).

CEOs who want to become more agile are changing their leadership teams and workforces, their expectations from the executive team, and their companies’ cultures, according to the KPMG survey.

CEO and CFO should be partners in an agile leadership team, said Jacek Kaczmarek, FCMA, CGMA. “The CFO is the company’s goalkeeper, who protects the company from seeing its assets decrease or disappear,” said Kaczmarek, who heads the finance function at the Polish Development Fund and who was head of controlling at AXA company in Poland until 2018.

An agile CFO focuses on turning a potential risk into more profits and protects the company from losing revenue because of changing customer behaviours, he said. An agile CFO oversees an agile finance function as it transforms along with technological advances — automating financial planning and analysis, for example, to free the finance team from a focus on preparation of data to forward-looking, higher-value-creating activities.

3 tactics to become agile

As agile business leaders, CFOs need to be part of an organisation-wide digital reinvention that includes a fundamental reboot of skills amongst the entire workforce. Here are three tactics for CFOs to consider in this transformation:

1. Respond to change

CFOs going through the digital reinvention of their businesses report that their responsibilities have increased, according to a 2018 McKinsey survey. Survey respondents reported that the number of functional areas reporting to them increased to an average 6.2, from 4.5 in 2016. Areas most affected were board engagement, digital activities, and corporate strategy.

For Samir Jaipati, an EY partner and the Americas agile finance leader, overseeing an agile finance function in such an environment means for CFOs to:

• Become more responsive to changing market dynamics, enabling new business models, and proactively manage risk and compliance.
• Become more insightful and provide accurate, timely, and actionable information to stakeholders.
• Become more efficient by delivering finance services at a competitive cost while being flexible to demand.

There have been pockets of success, Jaipati said. For example, one Fortune 200 client transitioned from a wholesaler to an omni-channel retailer and redesigned a broad set of its financial processes, from planning and capital allocation to inventory management. Another client introduced machine learning to improve forecasting.

2. Embrace key technologies

Many of the technology shifts in recent years could dramatically alter the finance function. Consequently, the CFO should be amongst the driving forces behind adaptation.

“As CFO, I have to know how to properly steer a business, and then I need to pick the technology that will help me move faster to reach my destination,” Kaczmarek said.

But just 14% of CFOs polled in another 2018 McKinsey survey said their finance organisations are using automation technologies like robotic process automation (RPA) or artificial intelligence. A 2019 Protiviti survey found that among 450 companies polled worldwide, 30% of the technologically leading respondents were using RPA in their finance function, and 11% of the intermediate respondents were using them.

EY’s Jaipati pinpoints seven technologies CFOs should already be embracing:

• Cloud computing.
• Intelligent automation, such as machine learning and RPA.
• Internet of things.
• Blockchain.
• Big data and analytics.
• Digital process and cybersecurity.
• Next-generation enterprise resource planning software, which features up-to-date user interfaces and database and cloud computing.

3. Be proactive

The finance function has long been concerned with historical data, poring over numbers and transactions, but technology is allowing CFOs to become not only more forward thinking but also more proactive, taking a more direct role in steering the company’s strategy.

For example, Kaczmarek said, CFOs should follow technological trends to make sure new software and equipment purchased are necessary and useful.

To foster a mindset of continued learning, he added, CFOs need to regularly meet with business managers to discuss new technology, trends, or anything new and interesting even if it’s not directly connected to finance but could affect the competitive advantage and financial results at the end in long term.

“You don’t know what you don’t know,” Kaczmarek said. “That’s where the most risk is.”

— Richard N. Williams is a freelance writer based in the UK. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.