A new study by EY conducted with 800 CFOs globally sheds light on the key trends, concerns, and opportunities facing the financial function.
The study is set against the backdrop of Covid-19 and its far-reaching impact on business. Uncertainty is the direct upshot, although the pandemic has also served to accelerate some of the key trends that have been a business reality in recent years – digitalization, a focus on people, and higher customer-centricity.
Chief financial officers (CFOs) find themselves in the thick of this transformation. Once limited to the numbers side of a business, today’s CFOs have more on their plate than ever. EY’s report presents some of the issues that have impacted the CFO function in recent years, and are doing so even more in the wake of the pandemic.
Volatility is one. Markets were far from stable before 2020, with fluctuating oil prices, trade wars, and political conflict in key markets. As they upped digital investments to stay competitive, businesses were suddenly in possession of large data pools, subject to both cyberattacks and regulatory stipulations.
With all this in mind, CFOs were already putting business continuity, resilience, and agility top of their agenda. With Covid-19, this has shifted from a future-proofing strategy to an urgent survival plan. That being said, CFOs cannot simply shift their focus to the here and now, without considering what’s around the corner.
Future risks such as climate change are not going anywhere, nor are the increasingly stringent set of environmental, social, and corporate governance (ESG) regulations being put on financial reporting. To top this off, consumer needs, business models, and supply chain structures might well have changed for good this year, and most companies need to position themselves to stay relevant in the new normal.
Tasked with managing this plethora of competing demands, CFOs are seeking balance. For one, they need to strike the balance between the immediate survival needs of a business and its future growth. Also on their mind is a balance within their role as CFO, between traditional, finance-related functions and the host of new responsibilities that have fallen in their lap.
“Successful CFOs are likely to be those who can balance traditional mandates with new ones, protect value today while driving future growth, and combine the potential of talented people with the capabilities of smart machines,” explained Myles Corson, EY global leader for financial accounting advisory services.
For EY’s respondents, the most effective way of finding this balance is to get involved with a variety of business functions. The survey revealed that CFO interaction with other C-suite members is currently at minimum, amounting to the necessary collaboration with operations teams and the IT department.
Outside of this, few CFOs report having a strong working relationship with a chief human resources officer (CHRO), for instance, or a chief marketing officer (CMO). In the current business environment, experts have stressed that people lie at the heart of success for an organization, while all operations must be geared towards better serving the customer.
CHROs and CMOs take center stage in this scenario, and the lack of collaboration with these functions is far from sustainable for CFOs. This is set to change per EY’s survey results. Nearly 70% of CFOs expect to be centrally involved in customer experience transformation going forth, while a similar number are focusing on innovation, new product development, and revenue opportunities.
Also on the agenda for 60% to 80% of CFOs is strategy development & execution, ecosystem development, and merger & acquisition strategies particularly in the tech investment space. As challenging as this expanded focus may seem, Corson believes that a multifaceted CFO is a ticket for future business success.
“The role of the CFO is unrecognizable from a decade ago, but the pace of change in this key leadership position continues to accelerate. existing markets and competitive assumptions are potentially being swept aside, and finance leaders are likely having to grapple with a new emerging reality,” Corson said.
“CFOs should think beyond the constraints of today and reimagine a vision of the future to understand how they and their teams should change. To thrive today, CFOs should set their sights on the future.”