Digital transformation: The biggest shift in the CFO’s role in a decade

CFOs have a key role to play beyond the books and digital transformation.

CFOs face new complexities due to the Covid-19 pandemic. This includes managing a remote workforce as well as an expanding security and compliance mandate.

In fact, we’re witnessing the third major evolution in the role of senior financial decision-makers.

The evolution of the CFO
The first “edition” of the CFO focused mainly on keeping the company books up to date and reconciling profit and loss. Financial reporting was about showing what happened yesterday, rather than forecasting potential.

Then came CFO 2.0, the senior financial decision-makers who analyse data in the present using automated finance processes, financial management technology and sophisticated data sets. Today, most companies exist in a state of CFO 2.0 but, living in the present, they can at least see the road ahead of them.

Enter CFO 3.0, a new era where the amalgamation of robotic process automation (RPA), artificial intelligence (AI), and machine learning (ML) has created a new breed of trail-blazing senior financial decision makers who use data and emerging technology to create a vision for the future and break through finance.

CFO 3.0: Beyond finance
To fully understand this shift from CFO 1.0 to CFO 3.0, Sage commissioned a study, CFO 3.0 – Digital transformation beyond financial management, that helped us to identify the opportunities and challenges facing senior financial decision makers. Sage spoke to over 300 South Africa-based CFOs to gain insight into what their future job description might look like and to get a feel for the impact that technology is having on their everyday tasks.

The research reveals a radical new remit for senior financial decision makers as drivers of strategic change and visionaries of the future. Supported by advanced technologies, they’re confidently leading the digital transformation agenda within their organisations.

In fact, 87 percent of CFOs play a role in digital transformation, with 15 percent being fully responsible for their organisation’s digital agenda.

For Arthur Goldstuck, CEO of World Wide Worx, a leading independent technology market research organisation that conducted the research on Sage’s behalf, this shift in the CFO’s role emphasises the extent to which budgetary approval is a key element of digital strategy and the fact that the role of the financial function has moved to the core of business strategy.

Speaking during the official announcement of the research findings, which coincided with the launch of Sage Intacct in South Africa, Arthur says the research shows that digital transformation is not a tech issue per se. It’s a business process issue, and this is where the CFO is becoming integrally involved.

“One of the questions we asked was: Who has responsibility for digital transformation in the organisation? Had we asked that question five years ago, the answer would have been the CTO or CIO. But that role has, in fact, shifted to the CEO, who depends heavily on the support and partnership of both the CIO and CFO to effectively achieve digital transformation. What we’re seeing is that key C-suite roles have to be integrated to support not only each other, but also technological and business transformation. This is why the role of the CFO is evolving at such a significant pace,” says Arthur.

Remote working tops challenge pile
Beyond the balance sheet and digital transformation, CFOs also play a key role in managing a remote workforce, with 27 percent taking on this role since lockdown began.

A live poll, conducted during the exclusive virtual event, supported these findings. Of those who participated in the survey, 49 percent said managing, leading, and/or working within a remote team had been the biggest disruptor in the finance department this year.

“This aligns closely with what we found in the CFO 3.0 research. In fact, it suggests the trends we uncovered have actually accelerated since we conducted the research. If we had asked the same question in January, the single biggest shift in the role of the CFO would have been addressing the demands of digital transformation and changing stakeholder needs. But now, managing remote teams has risen to the top for everyone.”

This, says Arthur, is the most fundamental change in the CFO job description in the past decade, overtaking business strategy, which, until recently, was considered the most significant shift.

Shifting priorities
The move to remote working also shifted CFO priorities. It’s no longer only about managing new data, technologies, and stakeholder expectations. They must also maximise their technology investments by enabling their teams to work remotely, while retaining accountability, transparency, and productivity.

This has brought with it a host of additional challenges around cybersecurity, data protection, and compliance. However, with nine out of 10 businesses having adopted emerging technologies in some form, CFOs have risen to the challenge.

In not being bogged down by numbers, budgets, data integration, and reporting, CFOs can turn their focus to changing stakeholder needs and modernising business processes.

The Sage research found that, in the past two years, CFOs have taken on new job responsibilities, including:

  1. Driving business strategy and objectives (21 percent),
  2. Managing government affairs and relations (14 percent), and
  3. Digital transformation-related activities (14 percent).

What’s more, CFOs have shown remarkable adaptability, with only 12 percent saying they struggle to adapt to these new roles.

The emergence of a more versatile senior financial role
One thing was clear from the research: A more versatile senior financial role is emerging, one that merges skills like accounting, analytics, business management, and strategic thinking.

In handing over the number crunching to automation tools, South African CFOs are gifted with the time and opportunity for creative and strategic thinking. There’s more room for critical analysis and innovation to augment business strategy.

The research also suggested there’s still a massive financial automation shift on the horizon, with only a little over half of the businesses adopting process automation. But with 64 percent of South African CFOs spending more time analysing data than they do gathering and processing it (compared to 50 percent of CFOs in the UK), they’re on the right track.

What’s more, predictive-based technologies are expected to change the way CFOs operate at board level. Two-thirds of CFOs expect emerging technology to audit results continuously and to automate period-end reporting and corporate audits, reducing time to close in the process – and freeing up even more of the CFO’s time to focus on digital strategy.

“I expect the evolution of the CFO role to continue, as they play an ever more central role in being part of the core team that must manage risk in uncertain times. The extent to which the CFO is confident that data and technology will support them in unlocking opportunities, is what makes me excited about the changing role of the CFO,” says Arthur.

Looking ahead
Technology is taking finance in a new direction and the Sage research shows that senior financial decision makers are going along for the ride – and enjoying it.

Sage welcomes the collaboration between C-suite executives in spearheading digital transformation. CFOs are visionary, and they’re driving change through the adoption of technology. Those who have already invested in automation solutions cite efficiency, streamlined processes, reduced human error, risk mitigation, and competitive advantage as the main business drivers.

As the custodians of data, fraud, cybersecurity, and data privacy, CFOs are increasingly looking to emerging technology to decrease risk, enable real-time decision-making, and help them to build a finance function that can withstand future challenges.