To reap big rewards in an increasingly unpredictable era, finance leaders must move fast to optimise the finance function and be at the centre of digital transformation.
CFOs are best positioned to drive innovation in their companies, according to a new report from the IBM Institute for Business Value, by integrating and aligning business strategy and digital transformation.
The report, 6 Power Moves CFOs Must Make, called digital transformation an essential part of the CFO role, as “72% of leading CFOs identify their [chief technology officer] as highly important or critical to their success.”
However, digital transformation is restricted by limited internal collaboration and insufficient planning, as “35% of finance organisations engage in early IT planning with tech leaders to set expectations on how technology advances enterprise strategy”, the report said.
To drive innovation in their organisations, according to the report, finance leaders should avoid using technology as a problem-solving means and instead use it as a tool to create new opportunities.
Leading CFOs recognise that, when pursuing enterprise success, the most important relationships are technology-related, the report noted.
Top-performing CFOs have a “keen eye” for digital transformation in common, the report acknowledged. These leading CFOs’ ability to connect tech investments to quantifiable business outcomes has helped them to outperform the competition. The group of leading CFOs made up 9% of IBM’s global dataset of 2,000 CFOs.
“[Finance leaders] need to evolve from evaluating tech investments via traditional business cases to using a holistic value assessment that includes strategic, operational, customer, and financial impacts,” the report said. To propel value creation across their companies, working with tech leaders at the beginning of technology planning processes is imperative to strategic decision-making.
Other timely questions and areas CFOs need to consider for optimised business performance include:
Are we responsive to change? Less than half (46%) of CFOs say their finance functions are effective at strategy planning and execution, the report said. Strategies for long-term success consider metrics that inform a broader outlook and shorter planning cycles and insights to adapt to changing geopolitical trends and market conditions.
Do we derail long-term strategy for short-term wins? Fifty-seven per cent of finance leaders prioritise short-term targets over long-term investments, the report said. In contrast, leading CFOs do not sacrifice growth for short-term gains, and investing in initiatives that align with long-term goals is crucial for sustainable growth in the future.
Do we have the risk clarity to make bold choices? More than half (57%) of CFOs have a clear understanding of risk appetite, as well as the risks their organisation faces, the report said. Continuous risk monitoring is required to quickly identify potential issues, adjust strategies as needed, and develop a detailed view of enterprise business drivers.
Is our AI foundation effective? Artificial intelligence can transform the finance function, but only 34% and 11% of finance operations are operating or optimising traditional AI and generative AI, respectively. Establishing an AI-informed data ecosystem will further articulate investment requirements, the report said, as well as cost reduction, risk mitigation, and insights.
Are we investing in talent? “Through 2025, 40% of finance roles will be either new or significantly reshaped due to finance technology,” the report said. Analysing workforce data to identify skill gaps, promoting the best talent to business partnering roles, and spending more time to recruit staff with a combination of analytics and soft skills will be key for long-term success.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.
