3 Things that can power CFOs to improve decision-making
The CFO has become a business enabler and one of the primary drivers of future development and success.
The role of the CFO has evolved from being the financial gatekeeper to someone who is a vital strategic partner that can help organisations to harness potential growth opportunities. As part of the executive, the CFO is jointly responsible for the vision and mission of the business and, as McKinsey highlights, they are taking on an increasingly critical role.
The research firm has found that as CFOs start focusing on digitisation initiatives, they need to become more collaborative and leverage both their financial expertise and technology to achieve demonstrable returns. Ultimately, it is the CFO that can ensure digital initiatives are transformative and relevant, and that investments align with the core values of the business. The latter is more than just the products and services: now these values include the ideals of making a difference to the customer’s life, to the community, and to the workforce.
Many CFOs, like me, may look back and reflect on past decisions that influenced the direction of their business – about whether or not a certain decision was the best one given the information available at the time. This points to a common thread that information is the key when making impactful business decisions. But as much as analysing historical data is important, it is planning for the future that will guide the organisation along a specific path.
Resources must be allocated to where they can yield the best returns as the company seeks to reinforce its vision and mandate within an environment that has become increasingly disruptive. The challenge is that there is only one certainty – and that is uncertainty.
It is therefore critical for the CFO to plan for a future even if it seems impossible to do so given the increasing normality of black swan events. One of the secrets to this is to not just have one plan for the future.
A CFO must be adaptable and use the office of finance to plan for numerous possible scenarios. These must factor in all the variables that influence business outcomes in the modern global economy. CFOs also need to be ready to change and adjust those plans at short notice when the playing field changes and those original plans become redundant.
This is a mammoth task that needs to consider the following three elements:
1. Analytics: Your key to gaining financial insights
As mentioned, the CFO must know what happened in the past and what the reasons were behind it. Modern analytical technologies can gather information and data from across the business and bring all of it together into one trusted and comprehensive data set. This is where algorithms can highlight patterns, previously hidden in those pesky spreadsheets. Dashboards and graphs can track performance in every area of the business: sales, manufacturing, staff performance, market trends, and more.
An entire industry has evolved around the richness and ubiquity of this data, with data engineers and data scientists fulfilling this function. Data and analytics have been the great game changer over the last decade, and huge investments are still being made to improve our insights into what happened, and why.
2. Scenario planning: Predict effortlessly
The second component is looking to the future and planning for the ‘what if’ scenarios. It is also here that technology has come a long way. Modern planning technologies can use past data and predict any number of future scenarios. Predictive analytics is not an unfamiliar term anymore and the power of machine learning and artificial intelligence (AI) has made this task faster, more intuitive, and more effective to deliver the insights needed.
Businesses can run multiple what-if scenarios based on any number of drivers and variables, compare these scenarios with each other, and even assign probability scores to future scenarios based on historical trends. We are fortunate to live in an era where most of the guesswork has been removed from planning for the future.
The real value is that it brings the past and the future together in a harmonised set of data where plans and actuals can be compared to analyse performance. Adaptability is imperative within this step. These plans need to be updated quickly and easily using drivers and assumptions. There are many technologies that enable this function, and to see the investment in the space excites me about what the future may hold.
3. A key strategic technology partner
The third, and most important, component is having a trusted technology partner that can accompany you on this digital journey. You need to have a partner that understands the technology landscape and shares your values; a partner that understands your vision and mission, and your business and goals. When you have a technology partner of this calibre, you will gain insight into the art of the possible and ensure that all systems are best in class and fit for purpose.
The path of digital transformation is one of constant change and evolution. As the CFO, you need to focus on driving your business to a better, more successful, and sustainable future. Having a technology partner you can trust is an absolute necessity that can have a measurable impact on the success of your digital transformation agenda.
Evaluate your partner options based on shared values, aligned vision, competency, and capability. This is one of the most important relationships you will have on your journey, so choose wisely.