The 3 main challenges digital companies pose to CFOs

Posted by media on September 1, 2016 at 9:00 AM

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Before the advent of the digital economy, the role of the Chief Financial Officer (CFO) was much more focused on managing administrative and financial controlling tasks than mapping out the business strategy.

Although the CFO is still very much in control of the allocation of resources in traditional companies and sectors, this role is rapidly evolving due to digital disruption. The CFO is now increasingly a key figure in effecting digital transformation in a company, and the growing prominence of the job title within the company’s rank and file poses several challenges.

What strategic role should the CFO assume in a digital company?

This post is also available in Spanish.

A recent survey by consulting firm EY of 769 finance leaders worldwide has revealed that 58% of respondents express a need to improve their understanding of the digital world, while 57% agree that advanced data analysis will be key in the development of their job functions in the coming years.

Another study by CFO, a publication specialized in stories for finance executives offers an even more surprising conclusion: 93% of the 267 finance leaders polled said that their work will require far greater technological capabilities in the future.

Given this emerging situation, this post addresses some of the main challenges that digital companies pose to Chief Financial Officers (CFOs), with the aim to define the new parameters of their jurisdiction and responsibility.

Challenge #1: knowing how to use new technologies

Although the need to become familiar with new technologies and the growing importance of the mobile environment is affecting all departments of any company, there are two specific disruptions affecting financial departments: blockchain and robotics process automation (RPA).

  • Blockchain - the technology that underlies bitcoin - is a distributed database, a data network of transactions in which each of its members (nodes) is linked with all the others and each of them has the full database, because it is replicated across each node. The original copy of the database does not exist. block of information (or nodes) is linked with all the others and replicated across the histories of all members in the network.

    This is a complex system, still in its embryonic phase and as yet unregulated, but many authoritative voices in the finance sector have already suggested that it will streamline transactions of all types, reducing costs and reinforcing security, and therefore can be expected to become an obligatory resource for CFOs.
  • Meanwhile, the RPAs are exponentially reducing the staffing requirements for so-called back-office tasks, including those currently being managed by finance departments. These software robots can perform many administrative tasks in seconds and are incredibly accurate.

Challenge #2: knowing what digital indicators are relevant for strategic decisions

In pre-digital times, the CFO’s evaluation of a possible acquisition or the choice of strategic businesses for the company was often based on tangible assets. But with the advent of the digital era, strategy and the majority of mergers and acquisitions (M&A) are now based on the correct weighting of intangible assets, ranging from intellectual property to user data to brand reputation, to name just three examples.

This intangibility requires CFOs to have an in-depth knowledge of those intangible assets, what is their value and to which key performance indicators (KPIs) are they correlated; without this knowledge it is literally impossible to make strategic high-risk decisions.

Challenge #3: introducing advanced data analysis and translating results into a concrete action plan

The intensive use of data to make strategic and informed decisions is essential in any business. The sophisticated analysis of large volumes of financial information provides CFOs a unique opportunity to make accurate data-evidenced predictions and determine future priorities and opportunities with a minimum margin of error.

But using data in this way to generate predictive analytics is only a first step, and brings with it three related challenges:

  1. CFOs have to acquire and process a large volume of information and the strategic guidance it provides should be appropriately used to create a concrete action plan.

  2. In order for data to be shared with other departments, training must be given by the finance management team to ensure the rest of the company is on the same page and can be part of the decision-making process.

  3. And finally, handling large volumes of sensitive financial data means that the CFO should never neglect any issues of security and confidentiality.

Challenge #4: knowing how to lead digital transformation across the finance department

Another area where CFOs can and should be early adopters is in the digitization of procedures within their own department.

Common tasks such as applying for loans, current or foreign exchange, and other even simpler ones such as expense management or the requesting and management of signatures can be streamlined using technologies such as Signaturit.

Signaturit assists finance departments from organizations of diverse sizes and sectors to ensure that signatures do not hold a company back while it undergoes digital transformation. Our advanced electronic signature tool also stores signed documents in the cloud, enabling simplified remote access to them at all times.

If you want to know how we can benefit your finance department, start testing Signaturit today and try out the features on offer. The trial is completely free of charge and valid for 14 days. 

This post is also available in Spanish.

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