For CFOs and other finance executives, supporting strategic initiatives now runs side by side with their traditional operational concerns and obligations. Fulfilling this expanded role requires more digital capabilities, more attention to the demands of internal customers for precision and timelines of financial data, more agility in resourcing. Add finance data security to the mix (a top concern according to Protiviti’s latest Finance Trends survey), and the list of competing priorities facing the CFO is quite full. In the podcast below, Chris Wright, Global Leader of Protiviti’s Business Performance Improvement practice, and Scott Bolderson, Managing Director with Protiviti’s Business Performance Improvement practice in the UK, discuss the latest finance trends and expectations as reflected in our survey, and add their own insights.
Powerful Insights Podcast, September 9, 2019
[Transcript]
Kevin Donahue: Hello. This is Kevin Donahue, welcoming you to a new installment of Powerful Insights from Protiviti. What, exactly, are the priorities for today’s CFOs and finance leaders around the world? Is it financial reporting, taxes, accounts receivable? Not at all. In fact, their top priorities concern security and privacy of data, enhanced analytics, embracing new technologies, and addressing the changing demands and expectations of their internal customers.
These are among the many key takeaways from a global survey on finance trends conducted by Protiviti. The results are featured in a new report, Today’s Finance Priorities: Security, Data, Analytics and Internal Customers, available at protiviti.com/financesurvey. I had the pleasure of speaking recently with Protiviti Managing Directors Chris Wright and Scott Bolderson about this study and some of the key takeaways. Chris, based in New York, is the global leader of Protiviti’s Business Performance Improvement practice, while Scott, who is based in London, is a leader in the firm’s BPI practice. Scott, it’s great to speak with you today. Thanks for joining.
Scott Bolderson: Absolute pleasure.
Kevin Donahue: Chris, always great to talk with you as well.
Chris Wright: Same here, Kevin. Good to speak to you.
Kevin Donahue: Chris, let me ask you the first question. One of the overriding takeaways from our study is the focus of CFOs and finance leaders on strategic issues, which appear to be as important as the traditional finance activities they’ve always done, if not more so. Why is this the case, and why now?
Chris Wright: Kevin, that’s a great question, and I should point out that the additional activity that CFOs are seeing is additive. It is an “and” on their duties, not an “or,” so they’re still focused on the traditional finance activities. What we’re seeing added to their remit, added to their duties, are a number of strategic initiatives driven largely by the fact that strategic decisions have been backed up by financial data that they provide as well as nonfinancial data that they’re able to provide, and that’s earned them a seat at the table. What we’re seeing now is the fact that the wisdom of that decision is proving to be good. They are adding value in those strategic discussions and decisions, and their activities are earning them a continued seat at that table. They are adding more value by virtue of the information they possess and are able to provide, and they’re doing so with good effect.
Kevin Donahue: That is great to hear, Chris. Scott, I wanted to ask you about customer service and experience, and I imagine that ties in very well to the things Chris just described. It’s fascinating to find what essentially is customer experience near the top of the priorities list for CFOs and finance leaders. This, of course, refers primarily to their internal customers, from the board on down. Is this what you’re seeing in the market, in the organizations you work with?
Scott Bolderson: Yes, Kevin. Certainly, in terms of the U.K. market and the European market, we’re absolutely seeing that significant shift in demand from our CFO clients. I think there are two angles to it, really. One is, to add to Chris’ point, actually, clients and organizations are going through a significant digital change agenda. Digital is a very popular term in the marketplace today, and all of that digital focus and strategic change has been very much around the client’s customers, what we call the digital veneer around an organization, but what organizations very quickly realize is that an external-facing digital solution into their customers requires the support and infrastructure and the supporting functions, operations and, in particular, finance to be on that same journey to be able to deliver on those strategic objectives that the organizations have and, to Chris’ point, to remain to have that seat at the table. That’s a fundamental element.
The second element is, yes, the businesses and the customer-facing parts of the organization have significantly increased their maturity and awareness of the art of the possible through digital and enabling technologies and beyond. To Chris’ point again, it’s not only we’re delivering our traditional financial responsibilities, but we have to change the finance functions to be able to embrace not only technologies but, really, really importantly, capabilities in this space. You have to put yourself in the mind-set of the CFOs who have had 10 years of running large global financial organizations in a significantly increased regulatory environment. I think, over the last 15 years, Sarbanes-Oxley has been one of those drivers where CFOs are being focused on hitting deadlines, hitting control requirements and, frankly, keeping the lights on.
We’re now in an environment where out of that actually comes an inherent set of manual processes, technical inefficiencies, that they’re having to deal with. They’re trying to be digital and innovative and bringing in new capabilities, but they really are having to change the environment they operate in, moving away from manual, moving away from legacy, technologies to be able to deliver to the internal customers because they’re demanding it. If they can’t keep up, they will no longer be at the table, and what’s been really encouraging, actually, looking at some of the survey results, is this isn’t just CFOs talking about this. We’re actually seeing funding being allocated in the next two to five years, so these are very real thoughts where organizations are making significant investment.
Kevin Donahue: Scott, that’s a great rundown, and a lot of what you said certainly ties into transformation. Chris, I think this relates to my next question for you, which is around analytics. We see a number of priorities identified in our survey tied to analytics. Are you finding that finance functions are keeping adequate pace with their needed analytical capabilities?
Chris Wright: Kevin, some are, and some are not. The CFOs and their organizations are being asked to provide increasing levels and volumes of financial and financially based or financially derived data. Scott mentioned some of that can support or, if not well done, impede revenue generation, for example, and so there are clear implications to their ability to do so, and it’s an area where they can add value if they do it well. What I would say and observe from our experience with clients and the survey respondents is both those that are keeping pace and those that are not are all struggling because the needs are increasing, the requests are increasing, and the precision and the timeliness of the data, the expectation for that — both precision and timeliness — are increasing as well. As they do good work, they’re expected to do more good work, and so the pace is difficult for anyone to keep.
Those who have a better tie to their IT organizations, who have regular dialogue with the people who handle their data infrastructure, are more successful. Those who have the financial results that are able to support budgets that enable the data production with more technology are doing better, but everyone’s finding it difficult to do, not so much because of the work they’re doing now but because their good work is resulting in requests for more good work.
Scott Bolderson: Yes, and I’ll just add to that question in terms of as CFOs with their own networks and their own forums and through their own service providers such as Protiviti as they become aware of the art of the possible — and that’s fantastic. You see a lot of enthusiasm and obvious opportunity there for clients, but before we can move to the art of the possible, we need to move up the maturity scale in a number of other areas in data governance, consistent master data across a global organization. These are all fundamental building blocks to being able to be agile and innovative to service their client needs. There’s no silver bullet here, and it’s difficult. It’s certainly a journey, and it’s not about buying a piece of technology, fundamentally not just that. It’s about organizational change.
Kevin Donahue: I want to touch on those struggles and challenges a little bit more in a moment, but first, I don’t want to forget about security and privacy. Chris, this ranks as the top priority for CFOs and finance leaders. Are these leaders concerned about protecting the company’s financial and performance data, or is there more at play here?
Chris Wright: Kevin, it’s a little of both. They’re clearly concerned about the security and the identity-management implications of their own financial data, particularly public companies, but also competitive data that might reach sensitivity levels for private and public companies. They are concerned about that, their own financial and performance data, keeping that proprietary information proprietary, keeping earnings that are unreleased unreleased until they’re ready for release, and that sort of thing. However, CFOs also get to pay the bills and have to deal with the budget implications where it’s nonfinancial data because breaches are expensive whether it’s financial data or not. If there are ransomware attempts, if there are denials of service, if there are attempts to make their security perimeter unsecure, those all come with costs even if it’s nonfinancial data.
For example, public companies need to disclose some of their cyber risks, and once it’s in an annual report, a financial statement attached there, too, CFOs have an obligation to make sure that the disclosures about cyber risks are accurate as well. To answer your question simply, Kevin, it’s a little of both. It’s the financial data, and there is more at play because of all the financial implications attendant to the nonfinancial data.
Kevin Donahue: Scott, I wanted to ask you about this as well. How are organizations in the U.K. and the EU looking at these issues? I expect the GDPR is a key factor in this.
Scott Bolderson: Yes, Kevin. It absolutely is and that’s notwithstanding, to Chris’ point, the cyber security and cyber risk are also significant, but obviously, the GDPR over the last couple of years has had a spotlight on that requirement. Let’s be frank: The GDPR doesn’t just hit our clients in the U.K. and the EU. There are global implications to the GDPR and the requirements around it, so organizations in the U.S., in the Far East, India, Asia-Pac, are all having to understand the implications of trading and operating and transacting on data from the European marketplace. To some extent, that’s an ongoing challenge, as the GDPR legislation is now live.
I think there are a number of aspects that our CFO community is concerned about. For the larger organizations, the CFOs have a seat at the board, so it’s inherent in their concern around the organization. In certain organizations, if we go more in the middle markets, we’re seeing CFOs are often responsible for IT and IT operations and ultimately report into them. Therefore, are they doing the right things in the right way? A lot of our work with our clients in that sector is being around providing assurance to the CFO.
Also, really for the financial data in particular, there’s an inherent dependency on IT departments essentially operating independent controls, technology-driven controls, key segregation-of-duty controls, key access controls, identity and access management controls — which, frankly, for a lot of CFOs, are outside of their comfort zone. There’s a good degree of trust, but there’s been an awful lot of effort around the GDPR, and an ongoing effort. There’s still a lot of work with our clients around education and what the legislation requires. To some extent, you can do too much that can stifle you, but you need to be at least meeting those requirements, so it will remain a challenge going forward. We just hope it doesn’t stifle some of that innovation and opportunities that CFOs have in front of them as well.
Kevin Donahue: Gentlemen, as we close out our discussion today, as I mentioned, I want to circle back and talk a little bit about the challenges you were describing. I want to talk about talent, and I think that ties into it. From embracing new technologies to leadership, finance functions are facing skill shortages on a number of fronts, and we see this in the results of our survey. Scott, are finance organizations set up to train and, if necessary, to reskill their teams?
Scott Bolderson: I think, over time, absolutely. I think having them understand what their capability, the required capabilities, are is important, and that can, again, evolve over time. I think what we are certainly seeing is parts of finance that could be picked up and fixed and rebuilt as a service offering that is greatly in demand, particularly in the European markets — so, for example, problems around receivables and the AR process, trying to understand how do we innovate and redesign and optimize that process? Often, we’re working with clients who actually take that process away from the client, redesign, innovate, optimize, operate, even, that process for a period of time as we support that client with upskilling their internal workforce and transition that workforce into the process. I think they are set up, but they need to draw on partners and skills and capabilities that can guide them through that journey.
Kevin Donahue: Chris, I’ll send the last question to you. Again, as we see in our results one way finance organizations are addressing these challenges we’ve been talking about is through various options for managed services and staff augmentation. What are the advantages these options deliver?
Chris Wright: Kevin, that’s a great point. We’ve seen some pretty substantial evolution in how CFO organizations have made use of outside help over the past few years. To use some current events as an example, for revenue recognition, for companies that had to deal with that, many brought in outside help. They were able to access some of the benefits — project-management expertise, subject-matter expertise, “been there, done that” examples — from people who had worked with other companies. They brought in outside help to help run the project and perform the project.
With lease accounting, which followed the year after revenue recognition, they still brought in a lot of outside help, and many more companies had to deal with lease accounting than revenue recognition. Some of them mixed the use of outside resources by putting some of their internal resources on the project so that the knowledge transfer would occur but brought in outside services to backfill the day jobs — so, some more mundane or routine staff augmentation to do the day job of the internal person that they had put on the project. Same number of people, but doing different things.
As companies in their back offices have sought to improve the speed of data, the quality of data and the cost of producing that data, they’ve moved to shared service centers. Many have started shared service centers. They’ve moved tasks offshore. Some have brought them back onshore. They’ve created shared service centers in different parts of the country or the world, and they’ve used outside resources in some cases to run those for a time or in perpetuity. They’ve used outside resources to create the control environment and consult on establishing but then staffed it all internally, and so we’ve seen a really wide variation of the way companies have accessed outside services to get their work done, particularly in the face of all the data needs that we have discussed earlier in this podcast.
What the use of outside services has gotten them is the ability to flex up and flex down. Some of these needs have come in bursts and then quieted down, and the budgetary implications of using outside services where you can flex up and flex down should be pretty clear, but they’ve also been able to access expertise, people who have lessons learned, who’ve learned lessons at other places, who can bring them to them, and some of the flexibility of cost. They’ve used a lot of different vantage points to approach this, and we’ve found a bit of evolution from one way of accessing outside services to the other. I would say that there are very few cases we can look at to say where one company’s approach is exactly the same as the other. There doesn’t seem to be a one-size-fits-all here. There seemed to be customer approaches that meet the needs for both getting the work done and transferring the knowledge into the organization so that it resides there when the projects are done.
Kevin Donahue: From a new strategic outlook to flexibility to transformational technologies, it’s a new world for CFOs and finance leaders. Chris, Scott, thanks very much for joining me today. It was a great conversation.
Scott Bolderson: Thank you, Kevin.
Chris Wright: Thank you, Kevin.
Kevin Donahue: We hope you enjoyed this conversation with Chris and Scott and gained further insight into the types of strategic challenges and concerns on the minds of CFOs and finance leaders today. To learn more, I encourage you to subscribe to our Powerful Insights podcast feed on Apple or wherever you find your podcast content.
[End of transcript]
Listen to additional podcasts by Protiviti and read other posts related to Finance Trends.
