Why the role of the modern CFO in digital finance is critical for driving the digital transformation of the finance function
In today's business world, digitalization has become a buzzword, with companies across all sectors realizing the benefits of digital technology for improving business operations, increasing productivity, and driving growth.
The finance function is no exception, and digital finance is now a key priority for many organizations. As a consequence, the role of the Chief Financial Officer (CFO) has evolved to become more focused on digital finance. Indeed, according to a PwC 2022 Global Digital CFO Survey, 73% of CFOs agree that digitalization of the finance function is a high priority and already, 18.5% of the CFO’s time is devoted to digitalization.
What are digital business and digitalization?
To understand the role of the CFO in digital finance, it is important to first define digital business and digitalization. Digital business refers to the use of digital technology to transform the way businesses operate and deliver value to customers. This includes the use of data analytics, artificial intelligence, automation, and other digital tools to streamline processes, increase efficiency, and enhance customer experiences.
Digitalization, on the other hand, refers to the process of adopting digital technology to enable digital business. This includes the integration of digital tools and technologies into existing business processes, culture and operations, as well as the development of new digital business models.
In the context of finance, digitalization involves the use of digital tools and technologies to specifically automate and streamline financial processes, improve data accuracy and consistency, and enhance financial analysis and reporting capabilities. This includes the use of software such as ERP and CPM (Corporate Performance Management) for accounting, the financial close, financial planning and analysis (FP&A), financial reporting, and risk management.
CFO leading digital financeThe role of the CFO in digital finance is multifaceted. Firstly, most CFOs would see themselves as responsible for driving the digital transformation of the finance function. This involves identifying opportunities to digitize financial processes and implementing digital tools and technologies to improve efficiency and accuracy. For example, the CFO may lead the implementation of a CPM platform such as the CCH Tagetik Corporate Performance Management expert solution from Wolters Kluwer, to streamline the financial close process, make it faster, more dependable and accurate.
Ensuring digital skillsSecondly, it is CFOs who now assume responsibility for ensuring that the finance function is equipped with the necessary digital skills and capabilities. This includes identifying areas where the finance team may need additional training in digital tools and technologies and investing in the development of these skills. These skills are typically in short supply and therefore smart CFOs will endeavor to work closely with functional leaders across the business to collaborate and share digital skills wherever possible, rather than duplicating effort and capabilities. It’s challenging because the Office of Finance is not always seen as a ‘hot bed’ on innovation, so it can be difficult for the CFO to attract and retain top digital talent. According to a 2022 Central Europe CFO Survey, 51% of the CFOs report that in the next six months their organizations will invest in reskilling or training their teams to align their skillsets with the need to implement new technologies.
Modern CFOs would almost certainly consider themselves as responsible for leveraging digital tools and technologies to improve financial analysis and reporting. This includes using data analytics and business intelligence tools to gain insights into financial performance and identify opportunities for improvement. For example, the CFO may use data analytics tools to harness CRM (Customer Relationship Management) and pull it through to a CPM system to identify trends in customer behavior that could inform pricing, revenue strategies and growth.
Leveraging digital analytics
Finally, CFOs would encourage the organization to have a strong digital risk management framework in place, for example, identifying potential digital and cyber risks and developing strategies to mitigate them.
In summary, the role of the modern CFO in digital finance is critical for driving the digital transformation of the finance function, equipping the finance team with necessary digital skills and capabilities, leveraging digital tools and technologies to improve financial analysis and reporting, and managing digital risks. According to a 2023 Gartner Survey of the Top 10 Priorities of CFOs, 83% of CFOs are significantly involved or leading transformation activities.
For enlightened CFOs, investing in digital transformation is doubly rewarding. Few business initiatives have the potential to enhance business growth and reduce business costs at the same time. But digital transformation puts both ‘levers’ in the hands of Chief Financial Officers. How far and how fast they pull them is a judgement that only humans can make, not digital assistants.
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