Changing Role of Finance in Digital Era
As the demand for funds continued to increase rapidly, episodic events, including liquidation, merger, acquisition and consolidation have become an integral part of the finance function. Stock Market crash, Great Depression and Lehman Brothers crash increased emphasis on three C's - Compliance, Cost and Control. Going further, a number of factors such as the rapid technological advancements, intense competition, growing population, industrialization and government interference have contributed to the increased focus on the effective & efficient use of financial resources. The shift from episodic financing to managerial financing is a visible pointer to the emergence of finance as a function.
Modern finance leverages technology across main accounting and finance processes for enhanced performance. The finance as a function takes a broader view on various business aspects, including profitability planning, determining the asset mix, risk analysis, optimal capital structure, financing, investment and dividend decisions, as well as the direction of business growth.
Finance as a function is evolving from Accounting to Analysing, Schedules to Structuring, Ledgers to Dashboard, People to Processes, Rationing to Optimising, Controlling to Enabling. From a close associate to CEO reporting numbers, finance has transitioned itself to technology driven shared services function heavily offshore leveraged with ERP and internet establishing robust connectivity
Business is Changing
Technology has changed the way business is being done. The risk of being 'Ubered' is driving lot of changes in the way businesses are being restructured. Few years back, technology was primarily used to automate and improve efficiency in your support functions like HR and finance. But now, technology is embedded in business, whether you talk about self-driven cars or aggregators like Air BNB. This wave of transformational change is termed as 'Digitization'.
Digitization is widely seen as a competitive necessity. A majority of senior leaders acknowledge that it is far more than a source of efficiencies - it is required for survival. Changing customer and employee needs & behaviors, in addition to the emergence of new business models make older ways of working and delivering products and services far less effective. Technologies like Big Data, AI and Robotics are driving business into what is called the Fourth Industrial revolution.
Finance in the Digital Era
The role of the CFO/Finance leader in enhancing the customer experience or business possibilities pivots between advisor and enabler.
Finance is doing things that it never could before, thanks to digital technologies. End-to-end multi-dimensional data access is enabling total visibility into both enterprise and customer data. The result? The finance organization will evolve from an expense control, spreadsheet-driven accounting and reporting center, into a predictive analytics powerhouse that creates business value.
Finance in digital world or tomorrow's digital finance organization is a radical departure from the status quo. It deals in analytics and forward-looking decisions to create value and manage risk. It shifts traditional accounting and processing to cross-functional integrated business service models that use robotic process automation. It trades reporting the past for predicting the future. As this model takes hold, the role of the Chief Financial Officer (CFO) will change. Already in recent years, CFOs have become more influential within the business. 73 percent say that their engagement in strategic planning has increased in the last two years.
Role of Finance in Digital world
1.Finance Needs to Be Agile in Their Thought Process Collaboration: This will be an important aspect to ensure finance understand business and collaborates with business partners to design rights solutions around pricing, business models considering competition and risk management.
• Track Customer Behavior: Another important attribute to track finance would be customer activity through channel partners, social platform to generate new opportunities/leads for business from existing customers. Personalization is a big trend and this needs to be tracked at customer level than for a segment of customer to ensure customer retention.
• Risk Management: Tracking com-petition, project overruns, pricing and predictive analysis to secure topline and bottomline would be very important.
2. While Being Agile, Finance Needs to be Predictive with Right Controls:
• Predictive Analysis with Unstructured Data: Finance will have to combine enterprise data with finance data and then also combine this with unstructured data from call centers, social campaigns, and social web-sites to provide meaningful information to business to drive budgets and forecasts.
• Audit the Bots, AI and Big Data: Automating finance and enterprise data would be given but finance would have to in-turn develop data scientists who would continuously audit these technologies to ensure organization gets the desired results and also one improves continuously.
• Data Custodian & Cybersecurity: Establish right data governance and ownership would be very import- ant in data-driven decision making world. Having right cyber security strategy to prevent cyber attacks would be equally important. A role of Chief Data Officer would emerge as part of CFO organization.
3.Finally, Finance Needs to Foster Innovation:
• Forge Right Alliances: Startups with niche skills are disrupting business, especially in finance services industry. Finance should ensure that business does right alliances with proper commercial and revenue sharing arrangement to secure a sustainable growth for future. Employee productivity and customer/ vendor efficiencies need to improve through conversational interfaces like Bots, Mobile Messaging, and also track these interfaces to develop meaningful information.
• Foster Innovation Internally & Externally: Integrated, bolt on tools on top of ERP to provide insights to employees would be very important. Similarly keeping customers engaged with continuous product improvements by influencing business would also be one of the key roles of finance.
Education Systems Need to Add the Following
• Awareness sessions/Experts speak - Organize dedicated conferences, seminars, expert sessions during annual events on Industry-4.0 to help network and understand better.
• College connect programs and mentoring - Tie-up with corporates for mentoring. There is a big gap between academics and the need of industry; hence it is very important to start mentoring early by.
• Projects - Assign as part of internal curriculum atleast one project related to Industry-4.0.
• Internship - Promote 'internship to placement' in tie-up with industry, thereby creating win-win situation for fresher intakes. To conclude, finance of the future to succeed need to ensure: customer (both internal and external) centricity, culture centricity (learning with best practices and experiments), risk taking mindset, and drive skills centricity (critical thinking, creativity, influential and problem solving would be key skills). Finally, in my opinion 'It's not so much about Future of Finance, but about Finance of Future'.