The role of chief financial officer is beset by challenges, from handling new accounting standards to wider regulation and evolution of corporate treasury in the face of risk-averse banks. So top finance chiefs are reaching out to technology partners to handle these increased demands and limit the growth of associated costs.
In the 2015 Financial Executives International CFO Technology Study, analysts at Gartner found that business intelligence (BI), analytics and performance management were the top areas for CFO IT interest.
According to analysts John Van Decker and Christopher Iervolino: “Most technology constraints concern the lack of business insight or BI availability, and the inability to use business applications for process efficiency.”
Here are six key issues chief financial officers face and the technology that can help them.
Getting valuable business intelligence
Data warehousing is a technology that lets firms store and retrieve huge data sets, allowing the user to get valuable insights from an enormous scale of information. Typically employed by very large businesses, this lends itself to complex analysis of business intelligence and even real-time BI.
“With BI there is still a high degree of manual operation that tends to cover basic reporting requirements,” says Irfan Khan at SAP. “If it is providing analysis into specific areas of market risk, credit risk or other nitty-gritty risk associations within the business, there is often a long tail of legacy technology that you have to deal with.”
Rather than using multiple data bases for business silos, a data warehouse operates at a scale that can work across the whole enterprise.
Balancing financial and risk management
Chief financial officers increasingly need to balance financial and risk data to show a single set of figures. In finance this is often the case to support stress tests that regulators use to assess a company’s strength. In these circumstances, the ability to crunch massive data sets is of real value. Big data systems have something of a misnomer as they not only handle large chunks of data, they can also handle high-speed data processing and in some cases tackle processing of unstructured data, such written documents rather than purely structured numerical data.
Mark Sykes, chief operating officer at high-performance computing specialist Kx, says: “The open source movement has made the cost of entry of this type of technology much lower than it would have been historically. If you just roll back ten years you would have needed very expensive mainframe or big-iron technology to be able to run this, unless you were using a database like Kx.”
Understanding organisational complexity
Knowing your business inside out is no simple matter. For a chief financial officer, who wants to get to grips with the assets, costs and processes involved in an enterprise of any size, they will need business modelling tools that can create a whole enterprise model, from strategy over business processes to information architectures, application landscapes and services.
Tools such as Software AG’s ARIS and IBM’s Blueworks Live can be used to model processes within a firm and, combined with other analytics, they can then be used to establish the technology assets underpinning the organisation. In Gartner’s CFO study, business process management tools were ranked as a top-three investment priority over the next three years by 21 per cent of respondents.
Cyber risk
The loss of financial information, customer information or actual assets weighs heavily upon the finance team. According to the Gartner CFO study, IT security was the top investment for larger organisations.
Yet defending against cyber attacks is notoriously difficult. In the UK, 22 per cent of firms have suffered a data loss in the last 12 months, according to the 2016 Dell EMC Global Data Protection Index, yet the UK is the seventh highest country for having businesses ahead of the curve in cyber security.
To get ahead of the cyber criminals, firms are turning to systems powered by artificial intelligence that are able to learn to spot new attacks rather than relying upon the pattern of previous attacks, either as specific deployments of general machine-learning systems, such as IBM’s Watson, or dedicated systems like Cylance.
Cross-border growth and compliance
As businesses grow they are exposed to the rules and accounting standards of different countries, and of the finances for companies they acquire or merge with. Using the point solutions that are already in place at acquired firms or buying local point solutions and trying to integrate them can be a major challenge.
“Using the same set of financial data, using the same chartered accountants, what we call a financial data model assists in the rest of the organisation,” says Mark Nittler, vice president at on-demand financial management solution provider Workday. “So things like an aggregate view of revenue can happen automatically. That whole process of supporting a regional operation as it is getting going, as well as how that regional operation or new acquisition folds into the existing model, means cloud can be a huge advantage.”
Performance management
Real-time analytics can allow a business to keep track of performance in an environment that is seeing volatility in currencies, commodities and in political risk. The finance department is undergoing transformation just as much as any other part of the business to streamline processes, to improve operational control and to provide a better level of information for senior business managers to make strategic decisions. Understanding performance is both challenging and dynamic.
“Without proper documentation and insight, organisations risk failing to deliver the anticipated business value,” says Charlie Platt, sales director for financial services at Software AG.
In an increasingly complex situation, the ability to capture the current operating model – the end-to-end processes, systems, technologies and the people that use them – and determine a future model is critical to understanding where efficiencies can be made, analysing the impact and cost implications of change, and assuring successful implementation.
“Utilising real-time and in-memory analytics can provide more timely insights without many of the limitations of traditional business intelligence tools and data mining,” says Mr Platt.
