- 44% of respondents are very concerned about information and cyber security;
- 38% of respondents CFOs should also be responsible for the safekeeping of information.
Evolution of the role of CFO. Trends of 20172 August, 2017
That said, the gap between expectation and reality is all too great. 30% of KPMG survey respondents consider that their CFO do not fully understand the strategic objectives of their company and are not involved in their implementation. In most companies, the link between budget and strategy is basically tenuous: it is short-term and very rarely includes the targets and proposals from strategic planning.
Why is that?
Vision of CFO role: 47% are concerned that their responsibilities and authority do not allow them to duly influence the strategic issues of their companies.
Delegation: 52% claim that they are not ready to delegate the supervision of operational processes because their colleagues do not have the necessary skills to fulfill this function properly.
Workload: 51% note that they cannot focus on strategic objectives because of their already great operational workload.
What is to be done?Although CFOs need to handle global tasks, most are still involved in routine processes.
Obviously, what needs to be learned is to delegate. There is a lot of literature, training and courses on the art of delegation so everything is pretty simple as far as the theory is concerned. First, it is necessary to sort out tasks and determine which ones should, may and must not be delegated. Then, it is important to set tasks correctly, choose and put the right person in charge of their fulfillment, and monitor their timing and implementation. Although these are quite simple rules, known to every manager, they are often very difficult to apply.
Despite the fact that most CFOs still face challenges to delegate, today’s business and scope of financial risks doesn’t allow focusing only on operational tasks. This means that delegating issues should be solved primarily by hiring qualified team members, expanding role functions and taking responsibility to following modern trends.
78% of respondents said that one of the main reasons for outsourcing non-core functions is that outsourcing free them to focus on strategic issues.
We have selected some trends, which CFOs should, in our opinion, consider, as they would help them transforming their role.
Rolling forecasts differ from traditional budgeting insofar as they are not tied to the budget and focus on business drivers evaluated using key indicators.
According to Kaufman Hall, rolling forecasts should become more and more popular as in 2016 38% of respondents already used them compared with 33% in 2015 and only 25% in 2014.
One of the solutions is to fix several high-level indicators (company’s revenue growth by %%, profitability level, etc.) at managers’ bonus system and make sure that they are focused on key financial targets rather than following budget in details. Such targets will become key marks for rolling budgets and will help managers choose the best scenario to achieve key indicators.
This method allows not only reducing costs, but also focusing resources on key goals and activities which are really profitable.
This budgeting method is currently used by international companies such as Unilever, Coca-Cola, Mondelez International and KraftHeinz, and the officially published statements of these companies show significant cost optimization and increase in operating margin.
Zero-based method enables companies find additional ways to improve profitability by carefully considering each business activity and each role while budgeting.
As we know, zero-based budget method requires to form budget from the scratch, and background of previous periods is almost ignored. It is correct to calculate revenues dynamics in relation to previous year in order to limit expenditure of zero-based budget.
Fixed costs shouldn’t be changing faster than inflation, while variable costs shouldn’t be growing faster than revenues. Such method of limitations will allow growing companies increase profitability, and companies with decreasing revenues will not lose more.
CybersecurityInformation and cyber security remains a relevant issue for many companies. The intensity and complexity of cyber-attacks are constantly growing and have become a threat not only to individual companies and internet resources, but also to state agencies.
According to Kaspersky Lab, in 2016, 52% of Russian companies lost access to crucial information as a result of a cyber-incident so today cybersecurity is also a pressing matter for CFOs as they are responsible for the most important and confidential information in their company.
Given the changing demands on CFOs, which include a great understanding of business, industry, market and risks, and the fact that the role of CFO is becoming more and more business-oriented, it is extremely important for CFOs to be the drivers of prevention of possible cyber-attacks and threats to data security.
Grant Thornton recently surveyed 912 CFOs and found the following:
AI technologyFinance Departments work with a lot of information, and as the volume of information is constantly growing, data processing speed needs to be increased. The IT component thus plays an important role in the work of CFOs. Many CFOs struggle with obsolete programs and methods still used in certain companies. This is one of the challenges encountered by CFOs in 2017.
We work with a great amount of client data. To stay competitive and increase our performance, we invest a lot in the development of the IT component of our services. Before offering a new solution to clients, we test it by applying it internally first, as we did, for instance, with our ECM system (electronic archives of primary financial documents), portal services for employees, etc.
Artificial Intelligence (AI) should be singled out from among the world trends in technology.
CFOs should not fear change. They should keep up with the times and welcome the technologies that fully automate operational tasks and help with strategic matters as they support the work of CFOs.