Financial institutions face heightened competition, greater security risks, rising customer expectations and a complicated macroeconomic environment. The pace and complexity of change can make it difficult for leaders to establish an agile, clear, long-term strategic path.
Many leaders are turning to the chief financial officer (CFO) for answers. In addition to finance-related issues and after-the-fact reporting, the CFO role now carries a greater emphasis on predictions, forecasting and strategic direction. CFOs can play a critical part in establishing the connection between technology transformation and successful business outcomes aligned across the enterprise. Comprehensive data analytics help CFOs provide those insights, but there's much more to it.
Guiding a financial institution's growth has four key components.
1. Broad Knowledge and Skills
Today's CFOs are often asked to step outside the numbers and get comfortable in the operations side of the business. Understanding the market dynamics and influence of every profit source – customers, products and channels – informs effective decision making.
Broader financial services knowledge is important, too. Ideally, strategically focused CFOs have experience in all types of financial risk management, including interest rate, market and credit risk. And as finance teams become more skill-diverse and future-focused, sophisticated leadership and communication skills are more important.
Executive teams, including CFOs, are responsible for creating and protecting value. Without strong leadership, it becomes increasingly difficult to manage the day-to-day responsibilities of the CFO position while shaping a course toward growth.
2. Data Literacy
One of the most valuable contributions a CFO can bring to the organization is the ability to help everyone make better decisions. To increase that capacity, CFOs are using data and analytics to identify trends, compare assumptions and create scenarios based on real-world performance data.
Data literacy is about more than just crunching numbers. It's about curiosity regarding the data, asking the right questions and revealing the story behind the numbers. That's where operational experience helps fill in important details, adding color and dimension to traditional reports.
Of course, CFOs and their finance teams will continue to have strong financial skills. But as the role becomes more strategic, the finance team is evolving, becoming more akin to data scientists and business analysts. Ideally, a finance team would spend just 20 percent of its time gathering and reporting data, and 80 percent analyzing it. Unfortunately, the opposite now occurs in many organizations.
With access to good information from the right sources, CFOs can formulate, execute, measure and adapt powerful strategic plays.
3. Flexible IT Systems
CFOs need information about key business drivers, and that data should be timely, contextual and validated. With access to good information from the right sources, CFOs can formulate, execute, measure and adapt powerful strategic plays.
Inflexible IT systems, silos and spreadsheets that can't adapt to business changes, including expansion of the CFO role, can be a deterrent to that growth.
Instead, CFOs need information that goes beyond traditional financial systems and sources. Access to the right data can drive the strategic decision-making process. But there are challenges, which are often summed up as the four Vs of data:
A single platform is typically regarded as ideal, but not always attainable. For most CFOs, entering data from multiple sources into a single platform will likely result in failed or ineffective strategies. Instead, an analytics platform should wrap around existing systems to maintain data quality and enable deep discovery. It's critical to retain data relationships, such as context and correlation, to uncover causation.
4. An Appetite for Change
Digital tools and talent are essential to transforming the CFO role. But adding more resources likely won't be effective if there's not an organizational appetite for change. Organizations succeed when they value curiosity and continual improvement. Look to the strategic CFO as a leader and analyst who can model the way.
For example, many financial institutions pursue back-office automation for easy efficiency gains: saving time and money, lowering risk and ensuring compliance. Those are valid pursuits, but back-office digital transformation isn't just about penny-pinching. It's also about growth, which comes from curiosity.
Every digitally enabled interaction results in information – clues to better match customers' banking needs with an institution's goals. The right questions – the “whys” and “what ifs” – must be asked about the data to uncover the most powerful bottom-line contributions.
Ready for the Job Ahead
Strategic CFOs are constantly thinking about problems in the market, imagining solutions for their customer base and investigating their own organizational capabilities.
Unfortunately, CFOs can't see into the future. But today's CFOs will be better equipped for the monumental job ahead if they have the right technology for greater insight, top-notch talent with nontraditional skills and an organizational enthusiasm for change.