Finance’s transformation into a value partner

In-depth understanding of the business is the first step the finance function can take to move beyond a support and compliance role and into one of strategic value partner.

That deeper understanding includes the ability to analyse risks and identify the value of an organisation's intangibles, said Darren Snellgrove, chief finance and operations officer and vice-president of finance at Janssen Global R&D, the pharmaceutical research-and-development group for Johnson & Johnson.

"It starts with having a deep understanding of what creates value in your organisation, not just a superficial or purely financial definition of value," Snellgrove said. "If you understand the value-creation levers of your business first and foremost, then you can partner with the business to maximise that value — pulling levers appropriately, allocating capital appropriately, looking at efficiency and effectiveness."

Accelerating digital transformation and the rising impact of intangibles are challenging the status quo of the finance organisation, several finance leaders say. New tools and new ways of thinking can elevate finance, increasing its relevance and value.

How finance continues that transformation is one imperative of a group of finance executives formed recently through the Association of International Certified Professional Accountants, representing AICPA & CIMA. The Future of Finance Leadership Advisory Group is a globally focused collection of CFOs and other finance leaders, including Snellgrove. The group had a hybrid meeting, with 12 people on-site and others joining by Zoom, at the recently completed AICPA & CIMA ENGAGE 2021 in Las Vegas.

Snellgrove presented with Ash Noah, CPA, FCMA, CGMA, the Association's managing director–Learning, Education, and Development. That presentation focused on value partnering and the importance of grasping an organisation's intangible, or nonphysical, assets and their associated value. Near-term performance and projections are critical and certainly affect stock-price performance, but a huge component of any company's valuation relates to longer-term expectations. It's one thing to look at a company's near-term stock performance or its annual revenue. It's another to be able to project growth amidst all the disruptive risks businesses face.

"A big component in a number of industries is expectation of future value creation through your pipeline and optimism about your ability to generate sustainable long-term income," Snellgrove said. "It's those intangible things. It might be new platforms or new technologies or the role of data science going forward.

"Some of those things can be hard to quantify, or if you can quantify them, it's hard to be accurate with them because there's so much uncertainty."

To understand how the business works and how value can be created long term, finance must design processes to allow for that deeper analysis to occur.

"The process piece of it is the importance of orienting your finance organisation and allowing them the bandwidth to do those types of analyses," Snellgrove said. "It's too easy to get caught up in the day-to-day, near-term budgets and compliance. You have to make sure you're setting up your processes that cover the basics but enable you to be able to work on those higher-level challenges."

The group — which includes representatives from companies such as Amazon, Randstad USA, and Yelp — intends to produce thought leadership and idea sharing. Its members have expressed the need to "transform the profession in its broadest context and re-imagine the finance function of the future".

The group is addressing several themes, including these identified as the most pressing:

• How the operating model for finance will change in the future.
• The tools used by the profession to measure value creation and new platforms and technologies.
• How finance and finance leaders are being asked to create value.
• Creating a robust pipeline of entry-level talent for the future.
• How finance can participate in and lead the accountability of initiatives such as diversity, equity, and inclusion, and environmental, social, and governance (ESG) programmes.
• How data analytics will affect the finance function's future role.

Finding and keeping talented workers is critical, along with identifying new tools to help that talent succeed, said the group's founder, Tom Hood, CPA/CITP, CGMA, executive vice-president of business engagement and growth for the Association.

"Some of the questions are 'How do we become value partners in our business?'" Hood said. "'How do we keep finance with a seat at the strategy table? How do we begin to address the skills?' And they're different skills. This idea that emerged from the group is that the old tools aren't serving as well anymore, so we're going to need new tools and new concepts."

Hood said the group hopes to meet in person in December at the Digital CPA Conference 2021 in Nashville, Tennessee, in the US.

— Neil Amato (Neil.Amato@aicpa-cima.com) is an FM magazine senior editor.