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FINANCE LEADERS FACE A PIVOTAL MOMENT IN THE ACCELERATION OF THE DIGITAL ENTERPRISE

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By Gavin Fallon, General Manager at Board

 

From the many discussions we have here at Board with finance leaders everyday, there is one theme that continues to resonate consistently in each conversation. Finance leaders frequently tell us, that if last year they were focused on reducing the cost of operations, to ensure their enterprises survived the biggest business challenge in a generation posed by a global pandemic, what’s changed today, is they are now being challenged more than ever, to focus on funding growth through new technology and business models.

Enterprises now expect revenue to return to or exceed pre-pandemic levels and expect their office of finance to be a major stakeholder in driving the recovery. The C-suite demands acceleration of the digital enterprise, growth, and new genuinely transformative business models as a number one strategic priority. They expect their finance leaders to play a crucial role in making this all happen.

This return to an emphasis on transformation, as well as managing and restoring enterprise financial health, creates a whole new set of challenges, and pressures on finance leaders which have wide-ranging implications across the complete office of finance function.

Gavin Fallon

If the C-suite expect digital technology to transform their industries and are racing to accelerate the execution of these plans, then it’s clear the office of finance will have to rise to the challenge too and transform at pace.

Last year showed the importance of being agile and setting-up the enterprise to be constantly ready to pivot products and services to new opportunities, customers, and sources of demand. In this context, planning and budgeting previously undertaken once a year, is simply not fit for purpose, as inflexible budgets hinder enterprises from exploiting new opportunities as they happen.

Despite all this, many enterprises continue to run traditional finance processes using outdated technology, in some cases with vital strategic plans still run using basic spreadsheets. Progressive Finance leaders know a change is needed, with more sophisticated insights and planning capabilities to be able to change and keep on changing, plan for the unexpected, and generate new meaningful insights, beyond traditional budgeting processes, to always plan and be ready for new opportunities when they arrive.

We also know from talking with many CFOs, that they are keen to embrace the opportunity to invest in the latest finance technology that enables their teams to deliver best value for the business. Inevitably this means exploiting the biggest asset for business in the digital age. Data.

Data is the fuel for the acceleration of the digital enterprise. The highest transformative value of data comes by enabling and empowering the finance function to unlock and generate insights from data which business leaders can use to make game-changing decisions.

The problem is that the office of finance potentially lacks the expertise to get under the skin of the data, and perform the deep analysis required to drive the business forward. What this means in practice is finance is being challenged to generate insights that business leaders can use to make decisions, but perhaps doesn’t always have the professional data scientists or technical knowhow across the office of finance to make this happen.

It doesn’t have to be this way. The opportunity exists today for finance leaders to democratise access to intelligence, analytics and planning delivered via the cloud, to provide a genuine empowering and transformative experience across finance teams. This in turn reduces a reliance on the office of finance for repetitive and routine finance tasks and instead frees them up to focus on high value analytics and insights generation demanded of them to help accelerate the digital enterprise.

Fundamental transformative finance capabilities need to be deployed securely at scale, this means accelerating cloud adoption of insights, analytics, with planning technology like Board, with expertise in handling large volumes of data, who will ensure the speed, trust and robustness of the insights being provided.

Finance may have shifted many activities to the cloud already but must continue to demonstrate value in scaling processes to support strategic business priorities. Similarly, we know there are many finance leaders who know they must spend less time fixing the basics and more time on leading the digital finance function of the future, but it’s clear that to do so, the finance function itself needs to be subject to the similar transformation asked of the rest of the enterprise.

There is a huge opportunity for finance leaders to play a leading role in shaping the future of the digital enterprise and make the office of finance the natural home of data, the digital enterprise’s most strategic asset. Yet to do so, implies big change in some organisations, including a bold new focus on analysing, planning and reporting on what the future could look like, rather than being satisfied to report on the past, and a shift in talent, qualifications and mindset to become a true digital champion and transform the digital finance function of the future.

These are big questions, with far reaching implications for acceleration of the digital enterprise and the future of the finance function as we know it today. The even bigger question is, are finance leaders ready to rise to the challenge? It’s precisely this question and more, which we are asking in major upcoming Board research to over 500 Finance leaders across major industries worldwide. We look forward to sharing our findings when ready, in the coming months ahead.

 

About the author

Gavin Fallon, General Manager, Board

Gavin Fallon is the General Manager for Northern Europe, Middle East, India and Africa at Board International. Gavin is responsible for driving the businesses strategy in these regions, working with the teams across the organisation to ensure success. With more than 20 years’ experience, Gavin has spent the last 19 years at Board International working in roles including Head of Services & Consulting and Product Director. Prior to joining Board International he worked as a consultant for SDG Business Consultants. With his passion and experience, Gavin is widely considered an expert in the application of Enterprise Performance Management (EPM) across sales and operations.

Finance

Why financial services is stepping into a new era

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by James Mingard, Head of Retail & Finance at Maintel

 

When comparing industries, financial services has arguably fallen behind when it comes to digital transformation. The sector has found it especially challenging to move from more traditional, legacy ways of working. But, with challenger banks and changing customer expectations, the tables have turned. According to a  recent research report from Maintel, in partnership with RingCentral, the financial services sector is leading the way when it comes to implementing digitalisation plans. In fact, 35% of those surveyed within the sector claim to have fully implemented their digitisation plans, compared to just 26% in other industries.

 

Evolving Technology

As such, banking technology is innovating at a significant rate, with everything from start-ups offering online-only credit cards to TSB opening a 100-seat tech centre in Scotland. There is little doubt that the sector understands the need to be digital-first, but there is room for improvement. Over half of respondents said they have seen an increased demand for digital communication from customers because of the pandemic, but the channels on offer fall behind other industries.

Over half (55%) of other industries communicate with customers through Twitter, compared to just 30% in the financial services sector. We might not want to discuss our mortgage over Instagram or to tweet about how much money is in an ISA. However, there is a real opportunity for the financial sector to add to its offering and grow its digital communication channels. By giving customers more options, it will help improve customer experience and let the end-user reap the benefits of digital transformation strategies. Balancing the expectation for digital-first interactions while ensuring a high-quality customer experience is central to creating an efficient, yet personal service.

 

Collaboration is the future

The contact centre of the future should represent an integrated approach to unified communications. It should bring business experts and agents together, across every channel to deliver real-time customer experiences in a cloud-based, collaborative engagement model. For financial services, this once seemed a pipe dream but advancements in digital transformation mean that the sector can in fact set the standard for other industries.

From a productivity point of view, team collaboration can also be enhanced using innovative communication technology. This helps to improve an employee’s workplace experience by providing instant access to essential information and allows them to work effectively from any location. Flexibility has not always been associated with the financial sector, but by giving employees better technology and more autonomy, naturally, this has a knock-on impact on the experience that customers receive and helps to foster long term loyalty.

 

Customer comes first

Banks used to be built on life-long custom. Many people would be with the same bank from their first current account through to the day they passed away but the volume of competition, variety of offers and new customer deals mean that today’s consumers are fickler than ever.  To really stand out, financial services providers need to make sure that everything from communication strategies through to software has the customer at its heart. And technology is key.

Indeed, customer experience, customer  and technology insights were the top three benefits of digitisation within the sector, according to Maintel and RingCentral’s 2021 report, It’s therefore clear that a customer and user experienced focused approach is key to success in the financial sector.

 

Click here to read the research report in full – How to translate unified communications and digitalisation into better customer experience.  For further information find out more :- https://www.maintel.co.uk/industries/financial-services/driving-financial-services-digital-transformation/

 

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FINANCIAL MARKETS IN 2022: INFLATION, ENERGY PRICES, AND THE CONTRASTING PERFORMANCE OF STOCKS

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Bob Jenkins, Head of Research, Refinitiv Lipper

 

Anyone hoping for a reprieve from the chaos and uncertainty of the last couple of years is likely to be disappointed. The pandemic will continue to have an impact on global economies, both directly (such as ongoing lockdowns and restrictions to combat the disease) and the exhaust effects we’ve seen in areas such as the production of goods, supply chain challenges, labour shortages and rising energy prices.

At the same time, the digital disruption of the financial world continues apace, with assets once overhyped becoming increasingly mainstream.

To make specific predictions in such an environment might seem like a fool’s errand, yet it is possible to discern some themes that will shape the course of financial markets in the coming year.

 

  1. Global inflation gets stubborn: Inflation is not transitory, and we are seeing a foundation for higher prices being put in place thanks to the supply chain and labour issues previously mentioned. In major developed markets, I think we’ll see stubborn inflation regardless of whether Covid remains a pandemic or begins to enter an endemic phase. The situation is slightly more positive in the US; while inflation will remain at a 3.5-4.5% range, a reduction in supply chain bottlenecks, increasing labour force and improved unemployment rates will serve to reduce the impact of primary inflation forces. We should bear in mind that households are estimated to have around $2 trillion in savings, which will maintain consumption levels and keep up the pressure on labour and supply chains.
  2. Rates will rise: Rates are likely to rise, with discussions in several major economies indicating a tapered end to the period of low rates we’ve seen since the 2008 financial crisis. This will probably be achieved in fits and starts as central banks navigate virus outbreaks and any resulting economic shocks. For instance, both the Fed and the Bank of England have indicated there will be hikes, but it is likely that they will rely on tapering at first to slow stimulus while also trying to navigate sentiment swings and volatility arising from waves of infections and/or new variants.
  3. China to lead economic growth, but not by much: China’s growth is likely to be around the 4-5% mark, with the US just slightly behind at 3.5-4%, off its 6% pace from the first part of 2021. The European Union and United Kingdom will likely trail the US, even if they have been exhibiting similar economic issues, while emerging markets could be hit by a combination of the Fed tightening up and challenges dealing with Omicron and other COVID waves.
  4. Higher energy prices are here to stay: Multiple forces will provide support to higher energy prices: supply chain issues, political posturing, demand for heating/cooling due to climate change, but Covid will occasionally step in to disrupt and counteract these forces. Even carbon neutral efforts could cause overall energy prices to rise in the near term as energy producers shift to renewables, with many of these alternative sources remaining expensive. Oil will stay in the $70-$80 range, with the occasional dip towards $60 as intermittent Covid concerns influence energy consumption in the travel sector.
  5. Underperforming stocks with a positive finish: In general, slower growth and lower rates help Growth and Tech stocks while faster growth and higher rates benefit Value and Cyclicals and I believe the economy will tend to lean towards the latter scenario. That said, growth and value leadership will change hands throughout the course of the year as the economy reacts to Covid waves and switches between lockdown and reopening. I suspect Value and Cyclicals will outperform Growth and Tech at the margin, but the dominate capitalization size of the latter two will pull down overall stock market returns. Of course, as with consumers, there is a lot of money being held back at the moment. Businesses have significant cash reserves and self-directed traders continue to shovel money into markets, which, when combined, can help buoy stocks.
  6. Flattening the bond yield curve: I think we will see some retrenchment as a result of rising rate programs by central banks that will largely result in negative to flat returns across core fixed income. Any selling in longer term bonds in reaction to either economic or central bank activity will be mostly offset by buying due to the global desire for yield, thus keeping a lid on longer term rates. Rising short term rates in this environment will serve to flatten the yield curve. High yield bonds could provide for pockets of opportunity as they are potentially tied to cyclical areas of the economy that could show leadership.
  7. The contrasting futures of ESG and digital assets: In the coming year I think we’ll see digital and tokenized assets become almost as popular as Environmental, Social and Governance (ESG). However, whereas ESG is a permanent shift that will eventually encompass the evaluation of all mutual funds, digital currencies still look a little more niche. We could well see them proliferate over the next few years, potentially even becoming a new quasi-asset class, but they will remain a satellite allocation in risk tolerant portfolio strategies. They are unlikely to achieve the status of being included in mainstream portfolios such as defined contribution retirement plans where assets can flow in large, consistent amounts – unlike ESGs, which could well reach that point in the coming years.
  8. A more defined ESG: It is looking increasingly likely that ESG funds will begin to splinter into more thematic offerings as investors eschew the combined “ESG” mandates in favour of more targeted strategies that enable them to better assess stocks aligned with fund objectives. This will also help avoid those securities jumping on the ESG bandwagon.
  9. The continued rise of the Big Five: Of course, in an era of unpredictability, there are always going to be trends or themes that run counter to accepted wisdom. Despite the aforementioned attempts of central banks to raise rates, the Big Five stocks (Microsoft, Alphabet, Apple, Amazon and Nvidia) will continue to show leaderships. While technically falling into the camp of richly valued Growth, these stocks have begun to also acquire a status as a safe haven, with generally strong earnings demonstrating a consistency and dependability that attracts investors. They also populate immense amounts of passive and retirement plan assets under management, equating to steady flows into them in almost any economic environment.

 

All this plays out against a backdrop of our changing stance on COVID. While there are some commonalities in how different regions tackle the pandemic, the continued uneven nature of our global responses makes it hard to determine what state we will be in this time next year. If most major economies can move to an endemic setting, then we should have the tools in place to make ‘living with Covid’ a reality. However, the continued emergence of other variants will cause volatility, and with it a predictable jostling of market leadership. Perhaps the only predictions anyone can truly make is that life will continue to be unpredictable for some time to come.

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