Post 19 October

Steel CFOs’ Toughest Challenges

The chief financial officers are quite busy. The majority of CFOs are overworked as a result of the role’s expansion beyond financial tasks to include strategic responsibility across the firm. CFOs have faced some of their most difficult tests to date after closing the books on the exceptional year that was 2020. The following list of the Top 10 CFO issues facing modern CFOs was produced using data from several polls, research, and interviews with CFOs from businesses of all sizes.

The Traditional and the New CFO Duties
Today’s CFOs have a large range of strategic duties, report directly to CEOs and boards of directors, and are active members of the C-suites of their organisations. In fact, a Brainyard survey of executives from 21 different businesses revealed that the majority of CFOs oversee duties unrelated to finance. 1 CFOs are expected to be strategic catalysts of company success, not merely the head of the financial organisation, whether by concentrating on strategic partnerships, reviewing technology, or trying to fulfil revenue and profits goals.

Very few of these executives are now solely focused on finance as a result of the evolution of the CFO function.

This is not to mean that CFOs are no longer responsible for managing cash flow, taking ownership of financial processes, certifying the accuracy of financial accounts, and dealing with investors, auditors, and tax authorities. CFOs continue to hold the metaphorical “buck” when it comes to the organization’s overall financial health. With their primary duties and their additional responsibilities, CFOs put in some of the most long hours in the majority of organisations.

A issue that may be more pressing in smaller businesses that may not have employed controllers or financial directors is that they will be effective in new strategic responsibilities. The contrast between the strategic role CFOs are expected to play and the muck of gatekeeper tedium that consumes a disproportionate amount of their daily time is obvious in practically every poll, where CFOs identify various manifestations of an expectation gap.

It is anticipated that both traditional and contemporary responsibilities will continue to evolve. According to research from Brainyard, CFOs are already focusing on a wide range of topics, including information technology, human resources, and operations and facilities.

The Top 10 Difficulties CFOs Face Today
The severe issues that have kept CFOs up at night in 2021 come from all facets of their work. Ten of the most difficult problems are listed below.

Acquiring and retaining talent
For CFOs, finding qualified individuals to staff their divisions is a major concern. The talents CFOs need from their team have evolved along with their own positions and requirements. Due to the pandemic and widespread trends towards working from home, 43% of APAC executives stated that they are open to attracting people who are not constrained by the company’s operational location when it comes to hiring plans for the upcoming years.

For the CFO’s team, some believe that hiring data scientists and teaching them financial principles may be more effective than getting financial folks up to speed on data skills — the additional costs of hiring workers with technical prowess makes it critical to focus on retaining employees with these skills. Given the role that technology plays in finance, this is a concern. According to a PwC survey, 85% of APAC respondents said they would be increasing budgets to increase automation and hasten the development of digital skills. CFOs are placing a priority on automation and upskilling.

Although 82% of CFOs surveyed by Deloitte intend to acquire or train personnel with skill sets that differ from those already held by their employees, hiring may still be necessary to meet the needs of future workforces.

The need of excellent communication skills among CFOs and their personnel is also rising. The entire financial department is driven by the need to establish consensus and communicate policies using many channels, including email, text, in-person meetings, and online forums. As a result, CFOs are educating current employees and emphasising it for prospective hires since they believe there is significant space for development in this area.

For CFOs, cultural change is a top goal.
CFOs will eventually have to deal with the problems caused by legacy data in 2021 by unifying different data. Poor data is currently one of the main problems that may destroy boards and management in the future, according to Rachel Grimes of CPA Australia. 6 Gartner emphasises that CFOs should move proactively to innovate and rebuild their data and analytics strategies since they cannot afford to wait for data trends to materialise.

Businesses in 2020 were expected to be more agile, which increased the requirement for up-to-date, reliable data to support decision-making. It is no longer necessary to extract data from disjointed databases and spreadsheets in order to conduct analysis. A single source of data also speeds up reporting and lessens the inefficiency and mistakes that come with manual operations.

The necessity for CFOs to ensure that firm financial statements are accurate and auditable is another crucial aspect of the disparate data dilemma. This is a persistent problem for publicly traded corporations that will have an impact on all sizes of public and private businesses, such as when requesting for loans. Unified data has the added benefit of facilitating audit engagements and lowering professional services and overtime costs.

Accept huge data
The issue facing CFOs today is to follow their data to find patterns and insights that enable future-focused business planning. When big data analysis is done correctly, it improves forecasting accuracy for CFOs and increases organisational agility overall.

Therefore, it is expected of CFOs and their team to go beyond financial facts. Companies face difficulties in incorporating data from operations, markets, social media, and marketing, as well as in turning that data into useful intelligence.

Contrarily, studies reveal that many CFOs rely more on intuition and experience than on data, despite the fact that data analytics tools have grown more widely accessible and efficient. For CFOs who have always depended on historical data, it can be challenging to accept predictive analytics.

But, where big data is efficiently exploited, CFOs will inevitably have more time to address other problems. According to Gillian Larkin, CFO of ASX, big data enables CFOs to shift their focus from more time-consuming areas to other concerns, especially those that call for more intuitive, human-driven solutions. The usage of big data and analytics by CFOs will have a positive knock-on effect that will promote business expansion.

Combining automation and technology
In 2020, numerous companies used technology in novel ways, which helped them increase sales while maintaining distant employee connectivity. A major problem for CFOs in 2021 and probably beyond has been the continued use of technology to drive automation. Automation, according to more than a third of APAC corporate executives, is a strategic C-suite priority. 9 Yet, according to a global poll by Accenture, over 2 in 3 CFOs claim they lack the knowledge necessary to fully utilise technology, which worries them given the majority of CFOs hold the valid belief that financial management software boosts productivity.

Adoption may be hampered by a staff that is resistant to change, which is one underlying cause of this divide. CFOs need to emphasise that automating repetitive processes frees up finance staff members to engage on more imaginative projects and that the organisation can benefit from the insights provided by automated intelligence.

While the majority of CFOs anticipate finance will be cloud-native in a few years, some CFOs are conflicted about automation against their capacity to manually or directly manage risk. Notwithstanding these challenges, strategic CFOs have said that one of the most crucial objectives for 2021 is to invest in innovative financial management technology.

Less backward-looking To increase business value and efficiency, CFOs are taking into account cutting-edge technology like blockchain, robotic process automation, and financial forecasting with machine learning. They are searching for cost savings across the organisation as they perform their return-on-investment calculations, and they are creating goals to gauge the success of those investments.

Avoid fraud and spend money on cybersecurity.
These executives frequently handle risk management tasks like detecting and preventing fraud and investing in cybersecurity as part of their duties as the company’s economic guardian.

Financial leaders acknowledge that they are now accountable for the effectiveness of controls over all business data and performance, not just financial data, according to KMPG

Australia, but roughly one-third are not currently in a position to assume this role.

Risk management has been one of CFOs’ hardest challenges in 2021 – EY has found that the percentage rises with the size of the organisation. CFOs must protect sensitive data and minimise the possible expenses that cyberattacks might create. With 70% of APAC business leaders saying that legislation is essential to boosting public trust in cybersecurity, AI, and data privacy, CFOs are now expected to play a larger role in cyber security. 10 Because the CFO is now crucial to both the preventative and reactive management of cyberattacks, cybersecurity will continue to be difficult over the coming ten years.

Additionally, given the security advantages of cloud, the predicted permanence of remote workforces provides a new layer for CFOs controlling potential fraud and cybersecurity threats.

Encourage remote workers
CFOs today face both opportunities and challenges as a result of the migration to a remote workforce. In order to handle the new arrangements, teams had to quickly roll out the required tools as finance functions had not previously been remotely based. In order to enable teams to work remotely, 39% of Chinese respondents to Deloitte’s CFO survey stated they made investments in work enablement measures the previous year. 11 In Australia, 67% of employees worked occasionally or constantly from home, up from 42% in the five years before 2020. 12 In Singapore, 38% more employees work from home more frequently now than they did before to the COVID-19 outbreak. 13

Businesses that have successfully made the transition to remote work are reevaluating their investments in real estate for offices. Work-from-home or hybrid solutions should continue to be an option because of the possible cost savings, returns on technology investments, and advantages for employees.

Employee burnout risk and the requirement to recreate culture are the problems that CFOs with remote workforces most frequently mention. According to data by the Federal Reserve Bank of Richmond, the average CFO in Asia works 73% of their waking hours. 14 The blurring of the barriers between work and family life makes this strain even more stressful. For CFOs, especially as business is starting to pick up again, the potential long-term detrimental effect on finance team culture is a major concern.

In the post-pandemic environment, a Grant Thornton report advises CFOs to “select their new normal.” The optimum working style for an organization’s organisational structure and goals will determine how that organisation operates moving forward. 15

Assure adherence
The year 2021 will provide new difficulties for CFOs who are in charge of making sure that their organisations comply with regulations.

Companies operating in places like Australia, India, or Hong Kong, for instance, need to pay special attention to revisions to IFRS standards suggested by the Board in February 2021.

16 Moreover, increased compliance projects are probably necessary due to growing disclosures on environmental, socioeconomic, and governance ESG aspects. External auditors will probably be used by CFOs as part of the implementation process.

Using AI-based analytics solutions is becoming more crucial for CFOs as reporting and compliance criteria continue to change.

17 When human error and compliance are automated, CFOs have more time to devote to developing other lucrative areas of the organisation.

Accept innovation
How well CFOs can drive innovation within their organisations will have a big impact on how they carry out their increased tasks. Today’s top challenge for CFOs is to maintain the rate of innovation and change that helped their businesses survive the challenging economic environments of 2020 and 2021 so they can seize new possibilities.

Nicholas Hawkins, CFO of Insurance Australia Group, spoke on this matter to the Australian Financial Review, stating that “they are corporate leaders who just happen to be in control of finance.” 18 CFOs must collaborate with the C-suite executives and use their in-depth understanding of business performance to adopt financial innovation in a way that promotes growth. Predictive analytics, dashboards, and key performance indicators are just a few of the tools that will be crucial in assisting CFOs in early opportunity identification so they can quickly change operations.

Accelerate the recovery from the epidemic
CFOs have high hopes for the second half of 2021, particularly the prospects for 2022. With estimates for growth in the APAC area hovering around 7%, the outlook for growth appears positive through the end of 2021 and into 2022. 19

94% of C-suite executives in the APAC region have growth objectives that include new foreign expansion, spurred on by encouraging economic trends.

20 Making ensuring their businesses are positioned to benefit from that expansion is the problem. Strategic CFOs are aware that companies must make intentional investments in order to expand rather than cutting costs. They value the harmony between funding essential operations and investing in attracting new clients. Many CFOs are focused on finding ways to boost revenue through client expansion, the introduction of new goods, and mergers and acquisitions.

According to Richard Gregg, chief financial officer of New Horizon, CFOs are essential for seeing unmet needs and early shifts in demand and supply that can catapult growth through the pandemic and beyond because of their access to data within organisations.

21 As a result, CFOs have been concentrating more on gathering and exploiting this data in ways that outperform rivals and put their businesses ahead of the competition.

Control taxes and rules
The finance teams in APAC’s finance departments are largely in charge of tax-related tasks.

22 Furthermore, 46% of tax executives answer to APAC CFOs. Internationally, adjustments to international trade policy as well as changes to value-added tax VAT and goods and services tax GST laws may have a substantial impact on business operations. Understanding how these developments may impact firms in the future and using scenario-planning exercises to help minimise them will be a challenge for CFOs.

The Financial Services Legislation Amendment Act Code of Conduct/Disclosures was introduced in New Zealand in 2020. It modifies licencing requirements, establishes industry-wide standards for competence and conduct, and addresses the abuse of financial service providers registered by offshore entities.

In order to reclassify financial products and sales channels so that the same regulations apply and tougher consumer protection standards are enforced, The Financial Consumer Protection Act Customer Protection more generally across Financial Services was introduced in South Korea in 2021.

Just two of the many provisions established in the APAC region during the past few years were these two. Many APAC nations have strict financial regulations, therefore CFOs must be aware of the local ramifications of their own and their teams’ actions in order to maintain compliance wherever they do business.

ERP Can Make Your Work Easier
It’s obvious that CFOs of today have a lot on their plates. Several of the most difficult problems facing CFOs can be handled by modern technological solutions. ERP systems, for instance, provide numerous integrated modules that support order administration, production management, supply chain management, warehouse and fulfilment, and procurement in addition to financial management and planning. In addition, consistent, robust data combined with real-time speed and potent analytic tools help CFOs and their teams deliver the right information at the right time for strategic decision-making. A modern ERP system with financial management capabilities can go a long way towards helping CFOs close the technology gap.

CFOs are in a position to guide new corporate initiatives in the future. Building the proper teams, supported by the appropriate technology and data, to ensure they manage risks, accomplish compliance, and drive their organisations towards innovative growth, is one of their most difficult problems. Even for those used to juggling several, demanding obligations, it’s no easy undertaking.