Challenges and Priorities: What are CFOs Really Focused on Today?

By Krishnan Raghunathan, Head, Finance & Accounting Services, WNS

The pandemic, supply chain issues and rising inflation – CFOs have been hit with a stream of challenges over recent years. However, working on the principle that no business leader should let a good crisis go to waste, they’re re-defining their priorities and re-thinking their business models. 

Since 2020, when COVID-19 struck, CFOs have been doubling down on their efforts to support their organizations’ short-term survival. However, they’ve also been taking advantage of large-scale disruptions to drive through the necessary changes to future-proof their businesses and gain long-term competitive advantage.

CFOs: Ignore the Chatter, Hear the Facts

There is much discussion about the changing roles and priorities of CFOs. However, in many cases, “the chatter” is not the current reality. For example, the business priorities during the pandemic have now been replaced by newer concerns, while widely discussed technologies are of less interest to CFOs than their prominence might suggest. Despite the chatter around blockchain, it is enjoying limited traction due to the significant upfront investment and change management required.

However, the 2022 Global CFO Survey of 300 CFOs and their direct reports reveals that the overall investment appetite has increased, despite concerns about the global economy, with around 70% of organizations willing to invest in 2022 compared to just 47% in 2020. But again, although it’s widely assumed that organizations allocate funding for transformation at regular intervals through self-funding, the reality is that they do so on a short-term, case-by-case basis, with long-term funding still being a challenge.

About 65% of CFOs consider access to stable funding extremely important in driving a successful change initiative. This pragmatic approach could be influenced by concerns about cash flow. A step-by-step approach to investing in transformation initiatives is increasingly popular among the businesses that we spoke to.

Increasing Cloud Migration

Cloud migration is a key trend, with more than 65% of CFOs identifying the adoption of cloud infrastructure and a hybrid model as essential building blocks to create a more agile and resilient Finance & Accounting (F&A) organization, as per the survey. However, while many organizations are investing in ERP-related upgrades and transformations such as migration from on-premise to cloud, upgrading their business intelligence layer and enhancing user interface, large-scale ERP-based transformation initiatives are still not immediate priority for many organizations.

Transformation in Transactional Processes: Reality or Chatter

When it comes to the key elements of the finance function, the “chatter” might be that digital transformation is primarily applicable to transactional F&A processes rather than judgment-intensive areas. However, the reality is also different here, with complex and judgment-intensive areas attracting an equal share of the transformation investment pot compared with other transactional areas such as Accounts Payable (AP) and Accounts Receivable (AR).

The transformation of Financial Planning & Analysis (FP&A) has been featured on the agendas of CFOs for the last couple of years. However, it is seeing the greatest number of active investments only recently. Many BFSI, life sciences and manufacturing organizations, for instance, are actively investing in transforming their FP&A operations.

Other judgment-intensive processes, such as regulatory reporting and compliance, treasury and risk management, and taxation are also going through transformation journeys. The driver here could be an increasing determination among organizations to transform the end-to-end F&A function by looking beyond transactional processes, with greater openness to leveraging third-party support across areas such as budgeting and forecasting, scenario modeling and working capital optimization.

Finally, the “chatter” today often suggests that there is large-scale adoption of AI / ML based predictive and prescriptive analytics solutions. In reality, most of the organizations are at an early stage of leveraging predictive Analytics and AI, where there is significant potential. Also, while there is a chatter around deployment of centralized data lakes, in reality, bulk of the investments are at a functional data lake level and investment in full centralized data lake are still in the nascent stage.

The Evolving Contours of Digital Adoption

Over the past two years, most organizations across industries have significantly increased the adoption of digital technologies. More than 70% of CFOs acknowledge “implementing digital technologies to improve efficiency, effectiveness, and stakeholder experience” as their top priority. Almost 80% of organizations employ a function or organization-wide transformation approach. Additionally, many organizations are also pursuing an integrated finance operations transformation approach driven by digital enablement.

While most CFOs agree that improving data management drives the highest Return on Investment, organizations’ investments in this area are restricted to data consolidation and dynamic dashboards. However, organizations are heavily investing in the function-level data consolidation layer, leveraging multiple tools for data extraction, cleansing, and classification to add more transparency into organization-level data and enhance overall data quality.

Across the board, cutting through the chatter, it’s clear that in this post-pandemic world, finance has moved from the back office. CFOs are now taking a more strategic role as they help future-proof their organizations, preparing them to manage the shocks and risks, and leverage the opportunities that lie ahead.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.