The data-driven CFO
In today’s era, data and technology are increasingly central to the daily operations, and growth strategies, of businesses. Artificial intelligence, machine learning and big data can all facilitate financial reporting and compliance, monitor market movements, track supply chain inefficiencies, enable smarter outsourcing, support workforce and talent management efforts, and predict future trends. When they fail, modern technologies can destroy entire businesses and their reputations: most notable are the hacks and privacy breaches that are increasingly a top worry about executives across the C-suite.
Moreover, more data do not always mean better data. Flawed information can lead to catastrophic decisions or faulty models. For instance, Google’s flu tracker project was once heralded as a new era in big data, but it turned out to be seriously flawed in its disease tracking abilities compared with slower, but more accurate, data from the Centers for Disease Control and Prevention, according to the Financial Times. “The difference today,” says Curtis Brown, CTO at New Jersey-based risk management firm Dunn & Bradstreet, “is that every modern business is not just using technology but increasingly realizing that technology is central to their strategy and future growth.”
Cloud and mobile tools, along with algorithm-based analytics, have driven a process of technological deepening, says Zorawar Biri Singh, the CTO of Cisco. “Everything is going digital and if you are not digital you are basically not competitive,” he says. “If you are a tire manufacturer or you sell coffee or you are an entertainment business you are essentially a technology company first and foremost,” Singh says. “That impacts how CEOs and CFOs should be thinking about their business.”
It is a view shared by Edmond Mesrobian, the CTO at Tesco, a global grocer. “More and more companies are realizing that they are data-driven. Without world class data systems analytics, you’re actually flying the business blind.” Little wonder that, worldwide, one in five CIOs now report directly to CFOs, according to research firm Gartner, and CFOs are responsible for authorizing one quarter of IT investments. It means CFOs must develop greater understanding of both emerging technologies and of their C-suite counterparts – the CIO and CTOs.
The most obvious impact of new technologies on the CFO is on ‘closing the books’, or finishing the quarterly accounts, for which speed and getting right is a virtue for companies of all different sizes, in terms of revenue or staff numbers. Companies that report first shape the message and the narrative, says Michael Golz, CIO, Americas at SAP America. Business units at GE have set the bar high by using a suite of advanced technologies to close their quarterly books in a single day in some departments, says Jim Fowler, the firm’s CIO. “We’re trying to change from this old vast architecture where everything happens at the end of the month or end of the quarter to a real time culture, where transactions are posted in real time and transfers are done in real time so that you get a better view of what is happening in the industry,” he says. Data and technology are also telling CFOs more about the company’s production, supply chains and efficiencies. “As we start to see more data coming off the machines that we sell to our customers, like aircraft engines and locomotives, we are starting to understand how that data isn’t a back room activity.
It’s actually at the core of our commercial strategy for growth,” says Jim Fowler. GE, for instance, committed to remove US$1 billion from IT costs by 2020. This does not focus on cost-slashing, says Fowler. It relies instead on extracting knowledge from enterprise data, supply chain data and customer data to generate high-quality sales leads, raise productivity and trim production time.
A third impact of technology on the CFO relates to decisions about organizational structures and the workforce. Data can help CFOs gain a rounded perspective on the costs, benefits and overall structure of the workforce, and human resource reporting and tracking is increasingly detailed in annual reporting documents. Data can also shape decisions about the balance between what to keep in-house and what to outsource. CFOs have prominent voices, and often deciding ones, about such questions as the staff size. They need to make outsourcing decisions in which available technologies are a fundamental consideration: what types of functions can now be farmed out, which are best kept in house? “The CFO is central to what we call ‘right sourcing’,” says Mr. Brown of Dun & Bradstreet. Which key functions should Dun & Bradstreet own in-house and what could better be outsourced? “The CFO and CTO are constantly talking about that balance today.” he continued. Crucially, a company must ensure it has the highest quality data on its workforce and organization, on which to make sound decisions. Flawed information could lead to poor decision-making.