How can disruption be constructive for your finance function? · Page 4 How can disruption be...

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October 2016

How can disruption be constructive for your financefunction?

How can disruption be constructive for your finance function?

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s How can disruption be constructive for your finance function?

About EY


The disrupted role of the CFO

The financial reporting environment is complex and highly demanding in most large companies, and is evolving at a rapid rate. Finance teams are faced with increasing organizational complexity and numerous different reporting systems. In a recent EY survey,¹ 33% reported they work with more than 15 reporting systems.Coupled with this, in another survey,² we identified four forces disrupting the CFO’s role:

As finance leaders embark on a change journey to meet these challenges, they should define a clear vision for the future so both they and their teams understand the opportunities ahead of them.

1. Are you prepared for corporate reporting’s perfect storm? Why trusted relationships, innovating technology and world-class talent matter, EY, 2015.2. Do you define your CFO role? Or does it define you? The disruption of the CFO’s DNA, EY, 2016.

Stakeholder scrutiny and regulation

Digitization Data Risk and uncertainty


Helping you manage complexity

CFOs are under pressure from both internal and external stakeholders to play a broader role, impacting both the CFOs themselves and also their finance function more broadly. However, many are struggling to adapt to this new role:2

56% of respondents cannot focus on strategic priorities because of time spent on compliance, controls and costs.

51% cannot focus on strategic priorities because of increasing operational responsibilities.

47% said their current finance function does not have the right mix of capabilities to meet future demands.

2. Do you define your CFO role? Or does it define you? The disruption of the CFO’s DNA, EY, 2016.


Helping you manage complexity

Confidence in financial reporting appears to be falling — even among finance leaders —due to issues of reporting accuracy, effectiveness and timeliness. Our research2 revealed declines in confidence year-over-year across all dimensions of reporting. As noted by the survey respondents, this drop in confidence is due to increased reporting complexity, growing demand and pressure on finance to do more with less.

Before they can address the increased complexity and scope of financial reporting and the finance function’s expanded remit, CFOs should:► Define what the future of their team looks like and the skills required in order to

strengthen key areas of their operations to be ready for the disruption coming their way.► Review the operational model of the finance function to balance delivering traditional but

essential functions more efficiently, with an increased focus on business partnering.

2. Do you define your CFO role? Or does it define you? The disruption of the CFO’s DNA, EY, 2016..


Getting the balance right

The finance function’s organization should understand the balance required to:

1. Be effective in driving the business forwardby delivering timely and accurate reporting and business information to strengthen business decision-making throughout the organization.

2. Promote strong governance and control by designing an appropriate control framework, promote the management of financial risk throughout the organization and meet the increasing number of statutory and regulatory requirements.

3. Be efficient by reducing the costs of the finance function, streamlining period-end close processes and realizing the investments in finance.

The key challenge for finance is to improve in all three dimensions while retaining the right balance for the organization.


“I think the most important thing for a senior executive of this company — the CEO and myself — is to explore, ‘What is the future for the business?’ Where do we want the company to be in five years’ time? … Part of our job as an agency is to find creative ideas. So we need to know what the future is. I recently met with two people and we had a discussion about virtual reality. In another meeting we were talking about mobility. These are the things a CFO needs to look at and discuss.”

Chris ChenCOO & CFO, DDB Greater China


Key questions being asked by CFOs

There are a number of key questions being asked by CFOs around the three dimensions:

Question Leading practices

Effe

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How can we organize ourselves as a global finance function to support the business more effectively?

Finance functions should become truly global organizations based on common standards and platforms.

How can we leverage the skills of our key staff to focus on business decision support?

Leading organizations are managing commodity processes separately, allowing business unit finance resources to support the business.

How can finance become a valued partner in the business and help to improve business performance?

Finance is shifting its role toward business partnering through investment in skills and technology, freeing up key people of routine processes.

Effic

ienc

y

How do I deliver quality transaction processing at low cost? Routine finance processes are being globalized and delivered in low-cost locations and outsourced.

How do I leverage the benefits from my existing shared service centers?

For mature shared service center implementations there is a move toward process improvement and standardization across global sites.

How do I improve the quality of multiple reporting processes? Large organizations are streamlining the reporting process and moving toward a uniform process.

How do I effectively use finance IT to support my organization strategy?

Organizations are looking to develop a global template for finance systems.

Con

trol

How do I monitor that there is a sound financial control embedded in finance processes?

Partly due to regulatory pressure, organizations are developing a global framework for financial control.

How do I monitor that finance is a key leader around control and governance across the business?

Partly due to regulatory pressure, many organizations are looking to develop a global framework for financial control.


Focus on stakeholder relationshipsCurrent requirements …

To increase confidence in data and reports, CFOs and finance functions should strengthen strong and trusted relationships with both external and internal stakeholders. But to do this they should:► Prioritize stakeholder relationships and understand the needs of the most important

stakeholders► Develop focused, high-quality, data-driven insights, rather than large quantities of

information► Communicate proactively and create trust by telling a consistent story about what drives

value for the business► Support reporting needs with data, processes and systems that are flexible and have a

high degree of credibility► Evolve internal relationships to shift from the team that provides the numbers and reports

to being a strategic business advisor


Focus on stakeholder relationships… and how to address them

To achieve this, the finance function should have a clear vision and framework for reporting that clearly defines how to:► Adapt business information for the specific needs of stakeholders► Align internal processes to generate the right information► Help facilitate IT systems that are streamlined and structured to provide consistent

information► Help different teams across the organization to work toward common goals and meet the

needs of stakeholdersThis approach will assist CFOs to gain the insights needed to respond to the competing demands being placed on them and to help their organizations reach more informed decisions.


Focus on innovation and technology

Leveraging their extensive experience with enterprise resource planning (ERP) solutions, many finance leaders understand how technology can improve the performance and value of their finance function. They can also identify departmental weaknesses that limit their team’s ability to take advantage of technologies such as advanced data analytics and blockchain, which have enormous potential to transform financial reporting.However, CFOs are facing a number of barriers to more effective use of technology. The top three are identified as:¹

► Lack of integration between IT systems► Difficulties accessing data► Poor-quality data

Barriers How to overcome them► Identify the data needed to support their

reporting objectives► Clean up existing data and improve reporting

processes► Access more data to generate new insights► Uncover the “hidden gems” that are revealed

when patterns emerge

1. Are you prepared for corporate reporting’s perfect storm? Why trusted relationships, innovating technology and world-class talent matter, EY, 2015.


CFOs* are focused on technological transformation and new skills development3

3. Is the future of finance new technology or new people? Preparing for the future finance function, EY, 2016

* Drawing on our survey of 769 CFOs and finance leaders in 32 countries and in-depth interviews with 22 CFOs.


Two people priorities for CFOs

Building a new finance function operating model Design a future operating model that focuses their best people on key priorities and delivers a better informed, more forward-looking and resilient finance function1Challenging the assumptions about what constitutes finance talentQuestion traditional ideas about what constitutes finance talent, how to find the right profiles, form strategic alliances and develop the skills needed to thrive in an increasingly connected, data-rich future2



Priority one: building a new finance function operating modelToday’s operating model



The future operating model

3 Is the future of finance new technology or new people? Preparing for the future finance function, EY, 2016


A smarter, more forward-looking, better aligned, more resilient operating model

Smarter

Better aligned to the business

More forward-looking

More resilient

Futureoperating model

Looking ahead five years from now, what are the top finance capabilities that will be critical to meeting the demands of your organization?

33%

40%

46%

53%

56%

57%

3 Is the future of finance new technology or new people? Preparing for the future finance function, EY, 2016

Strategic risk management, including reputational, regulatory and cyber risk

Sophisticated planning and forecasting

Big data and advanced analytics to provide business intelligence and management information

Corporate reporting, including meeting increase demands of stakeholders, from boards to investors

Management of regulations to meet increasing and changing requirements

Investor relations


Priority two: challenging the assumptions about what constitutes finance talent

Rethinking what constitutes

finance talent

Look beyond traditional financial analysis skills

Develop better finance business partners

Find digital finance talent

Use alliances to go beyond what your organization can deliver alone



Tomorrow’s finance talent — key findings

Looking ahead five years from now, will the following people and skills initiatives be important for your finance function?

57% 57% 55%47%

Building skill in predictive andprescriptive analytics

Improving regulatoryknowledge to keep abreast of

an uncertain changingenvironment

Improving digital technologyskills in areas such asmobility, cloud, SaaS

Developing deep technicalskills in key areas of risk such

as cyber



“From a skill-set perspective, we are constantly looking to slowly shift the organization to automate manual processes. Analytics are key, so we are growing our base of skills and positions that do more analytics for our business partners than we are spending time processing invoices or expense reports.”

Deborah GibbinsCFO, Mary Kay


CFOs can extend the benefits of their data-led approach beyond finance

“Financial data, as well as other data, is a key input to many other business decision processes, whether it’s procurement, supplychain, operational-type decisions,or risk management-type decisions. The CFO can be a driver of the application of analytics in many of those areas. Not necessarily ‘owning’ that area, but acting as a catalyst for encouraging and driving the use of analytics in other business processes outsidecore finance.”

Chris MazzeiGlobal Chief Analytics Officer, EY

“The best”Mature analytics organizations — 10% of respondents

► Slightly more than half (56%) say that enterprise, department and lines-of-business data and analytics groups exist and are well aligned

“The rest”Lagging organizations — 90% of respondents

► 13% say that enterprise, department and lines-of-business data and analytics groups exist and are well aligned

► CFOs are well placed to drive an enterprise-wide approach to data and analytics

► According to an EY and Forbes Insight survey4, many large organizations struggle to get business users to adopt analytics insights:

4. Analytics: Don’t Forget the Human Element — Data and Analytics Impact Index, EY and Forbes Insights, 2015.

http://www.forbes.com/forbesinsights/ey_data_analytics_2015/index.html

http://www.forbes.com/forbesinsights/ey_data_analytics_2015/index.html


Winning with data and analytics: investing in the human element

► Investment case for enterprise analytics are often dominated by the technical aspects, such as new technology tools

► But success with analytics is equally dependent on adequate and targeted investment in the human dimensions of data analytics

Organizational level Individual level

► Making productive use of data integral to business strategy

► Instilling the right leadership/culture► Aligning analytics delivery and business

requirements

► Providing the training to help individuals recognize decision biases — the psychological assumptions that often lead to poor decision-making

► Providing training and easy-to-use tools for users

► Aligning incentives, rewards and measurement with the actions suggested by analytics-based insights


Why EY

► It’s time for CFOs and finance functions to get prepared for the disruption coming their way.

► Often finance leaders embark on their change journey without setting a clear vision. This can mean that leaders and their teams can get lost on their way as they get caught in the inevitable pressures of change.

► CFOs should evolve their approach and focus resources to meet the business demands of financial reporting and the finance function more generally. By getting the right operating model in place for their organization and focusing on building relationships with stakeholders, expanding technological capabilities and developing the talent within their organizations, CFOs can mature their financial reporting processes and protocols to deliver timely, trusted reporting insights. In doing so, they can secure the finance function’s future as a strategic business partner.


Why EY

EY Financial Accounting Advisory Services (FAAS) team can work to assist you to address many of these issues and challenges. The EY global, multidisciplinary teams are experienced in helping the finance function improve its effectiveness and efficiency by:

Supporting you with in-depth knowledge of reporting and accounting standards

Helping you review finance function processes and procedures to become more effective and efficient

Helping you identify and implement technology infrastructure and financial analytics

Helping you develop a regulatory and governance framework

Certain services and tools may be restricted for EY audit clients and their affiliates to comply with applicable independencestandards. Please ask your EY contact for further information.


About EY


Financial Accounting Advisory ServicesEY contacts

Gelu GherghescuEMEIA

[email protected]+40 21402 8473

Myles CorsonAmericas

[email protected]+1 212 773 3232

Satyajit DuttaAmericas


Karsten FuserEMEIA


DaisukeYamadaJapan


Kieren CummingsAsia-Pacific


EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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