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HOW THE CFO’S ROLE IS GROWING TO GUIDE BROADER BUSINESS INNOVATION

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Tim Scammell, Finance, Treasury and Risk Solutions, SAP

 

All companies experience a healthy competition for available resources as demand for change continually outstrips the capabilities of the organisation. This practical reality forces the organisation to select which of the limitless opportunities will lead them to future success.

More than any executive, the CFO is key to the successful determination of this future strategy. The CFOs role in guiding the businesses through this process has evolved even further amidst the Covid-19 pandemic. Indeed, research conducted by Grant Thornton before and after the pandemic struck points to this. In February 2020, CFOs said that they split their time fairly evenly between four roles: strategist (crafting corporate strategy); change agent (generating business value); producer (standardising and automating transactional processes); and guardian (standardising control and compliance processes). However, in May, when questioned again, strategist and change agent roles were taking more of CFOs’ time compared with the producer and guardian roles.

 

Tim Scammell

A single view of success

What is clear, and has been accelerated in recent months, is that through necessity, CFOs are the objective stewards of the company and honest judges of the capabilities of the organisation when it comes to driving innovation. The CFO is not dealing in mere conjecture but rather conducts analysis based on operational results, discussions with external analysts and available sources of funding. Through these perspectives, they can estimate the available working capital and channel it to the most favourable of the available opportunities.

The same Grant Thornton research indicated that 62% of CFOs have delayed their transformational projects, as opposed to completely abandoning them. So, when organisations are ready to reignite their innovation projects, it is this single perspective that grant the CFO an even more important role than before. Accenture research highlights the importance of this single authoritative view of corporate performance, with 76% of CFOs agreeing that without “one version of the truth” across business units, their organisation will struggle.

The CFO is now the linchpin in realising and relaying this version of truth. They can track the progress of opportunities, record whether the project is delivering against expectations and, if required, grasp the axe that cuts underperforming projects. The process of cancelling projects is traumatic, political, unpopular and one of the hardest in a modern corporate environment. Yet, the CFO needs to steel themselves and ensure that capital is not eroded by underperforming projects which distract executive attention and direct resources away from more favourable initiatives.

 

A catalyst for cultural change

In the digital economy, the CFO is not a passive spectator in the process of business prioritisation. They can drive awareness and hone the skills of the company; promote accountability and foster an entrepreneurial atmosphere across the organisation. The CFO is ideally positioned to champion innovation and catalyse cultural change which helps the company embrace the digital economy and raise its level of competitiveness.

Through their ability to influence the direction innovation takes and shape the enabling culture, the CFO can create the agility sought by modern companies. A finance team able to take chances, fail quickly, recognise mistakes, cancel underperforming initiatives, embody lessons learned and search for new and better directions will inject energy in the enterprise. The same Accenture research shows that 51% of young finance professionals are eager to embrace new digital skills that will be critical for keeping up and success in years to come, so the CFO therefore now has the role of fostering this willingness to learn and prepare the next generation of finance leadership to assume their role.

The ubiquitous nature of the finance team and its ability to steer the direction of the company ensures that the organisation is evolving uniformly into an agile enterprise. An agile enterprise that can generate the innovation necessary to retain relevance and prosper.

 

The past, present and future

Supporting this aspect of their mandate is the CFO’s often-overlooked responsibility as the owner of the company’s history. The CFO retains a long memory of what has and has not worked in the past. They know what initiatives have previously succeeded, they know how to navigate through organisational obstacles and can create guides that accelerate projects and avoid the repeating costly mistakes.

Therefore, the CFO exhibits many of the key traits of a Venture Capitalist (VC). They allocate funds, inject wisdom into the project, structure governance team and look for ways to maximise the return on this investment. To maximise the outcomes of this investment, the CFO can draw from the treasury, central reporting, operational governance and even the business unit’s finance organisation.

This virtual structure can foster entrepreneurial endeavours and develop capabilities and cultural facets that promote future success. Paradoxically, using these legacy structures can deliver future strategic agility that the organisation needs to compete within the increasingly more demanding digital landscape.

Therefore, one of the most valuable assets within the digital company is an inspirational and digital-savvy CFO.

 

Business

HOW CAN BUSINESSES BREAK INTO MARKETS BEYOND THE EU?

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HOW CAN BUSINESSES BREAK INTO MARKETS BEYOND THE EU?

Atul Bhakta, CEO of One World Express

 

The build-up and aftermath of Brexit impeded the long-term plans of businesses both in the UK, and of EU businesses trading to the UK. The heavily protracted negotiations induced a culture of uncertainty in business, with few able to adequately prepare for all the future trading landscapes left on the table.

Once a deal was struck, with just one week before the Brexit deadline of 31st January 2020, organisations were then left scrambling to improvise new processes to translate their operations to the new systems and avoid spiralling costs, shipping delays, and various other disruptions.

As a result, businesses both here and in the EU saw a substantial trading slowdown in the months following Brexit, with new rules on customs checks, lengthy tailbacks at ports, denser and knottier administrative rules and new limitations on visas for the workforce all contributing to a tense trading relationship.

Indeed, the Office of National Statistics (ONS) figures revealed a precipitous drop in trading immediately after Brexit, with UK exports to the continent plummeting 40.7% year on year to January 2021.

This is a striking decline, given the historically close economic and cultural ties between the UK and EU. Inevitably, this caused a lull in long-term confidence amongst UK businesses. Indeed, a previous study conducted by One World Express in January 2021 found that 25% of UK companies doubted that they would last until the end of the year.

Atul Bhakta

Of course, Brexit is even now not a finalised issue – it will shift and evolve in significance and relevance as time passes and economies reshape; but the loss of confidence for businesses in UK-EU trade has been a tangible impact within the first year.

Accordingly, some organisations have begun exploring the scope for expansion into territories beyond the EU.

 

New opportunities attracting attention

As noted, the UK’s trade with the EU saw a sharp decline immediately following the formalisation of Brexit. While this decline has recovered steadily over the year, there has been an equally impressive parallel forming, as non-EU trade has remained mostly stable throughout.

Of course, UK imports from global markets have always remained at high levels, and when considering business growth and the economy as a whole, outward trade holds a heightened significance. On the export side of matters, ONS figures suggest that UK exports outside of the EU increased by 1.7% year-on-year to January 2021.

While a very modest increase, such figures indicate that international expansion could carry promise for business leaders, and hint at potentially lucrative opportunities within non-EU markets.

As 2021 progressed, it became evident that UK businesses’ appetite to explore opportunities further afield had grown. To take in the views of decision-makers, One World Express commissioned an independent survey of 752 business leaders in the UK, finding that 61% were either already operating abroad in some capacity, or had plans to expand into new territories over the coming year. More than six in ten (62%) reported Brexit as a key motivator in their decision to diversify beyond trading with the EU.

There was also some evidence that these plans were not solely in pursuit of the gains of modest uplifts in trade with non-EU countries. The survey found that more than two thirds (68%) of exporters had observed increased overseas demand for their products in the previous year, while 63% felt that markets outside of the EU were more willing to pay a premium for British-made goods.

The role of ‘Brand UK’ is significant here. For many years, products made in the UK have benefitted from the country’s reputation for high quality production and excellent service, which has driven a consistent rise in demand as emerging markets with high levels of consumer spending, such as India or China. In turn, UK businesses have found it easier than most to gain a foothold in new markets. Indeed, the majority (67%) of exporters reported their British brand had enhanced the reputation and demand for their goods and services when targeting international consumers.

Despite this innate – and highly welcome – competitive advantage, there are a number of factors UK firms must consider before diving in to unfamiliar markets.

 

The importance of planning

Many would be surprised to learn that a large number of businesses look to enter new markets with minimal planning in place. Notably, almost one third (32%) of exporters do not have such a strategy in place, which is likely to hamper the growth of British businesses abroad if left unaddressed. A crucial starting point for any international expansion plan lies in the research and relationship building.

Ascertaining the consumer preferences and audience behaviours in target markets, and forging appropriate connections with distributors, vendors, and ecommerce platforms, will allow firms to access consumers more easily, and in greater numbers, than marketing from scratch in unfamiliar territory. Encouragingly, according to One World Express’ research, 72% of exporters already include this in their plans.

UK organisations must also recognise the value of a robust and flexible logistics strategy. When products are being shipped to the furthest corners of the globe, there is a degree of risk if the finer details are not handled correctly. Delayed, missing, or damaged deliveries will erode consumer trust, and diminish the prospects of companies before they get off the ground. Accordingly, companies should ensure they have a transparent tracking system and efficient and user-friendly returns process. Investment in adopting the right software solutions to manage the shipping will create a streamlined and cost-effective process, affording firms the best chance at success.

Naturally, the EU will always be one of the UK’s most critical trading partners. However, as the dust settles on Brexit and the pandemic recedes into memory, the next few years present an interesting crossroads for the international prospects of UK businesses. With a tranche of new free trade agreements arriving in the near future, and international demand for Brand UK going from strength to strength, the scope for expansion into unfamiliar markets is growing apace. Provided business leaders get the finer details right, the rewards for bold investment in expansion could help charge a boom in the UK exports sector.

 

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Business

WHAT FIREFIGHTERS CAN TEACH FINANCIAL INSTITUTIONS ABOUT DATA COLLABORATION

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Gabriele Albarosa, CEO, LiveDataset

 

Digital transformation can be difficult for any business, but in the financial services industry it can prove especially tricky. Replacing manual data processes is a big step, but in an industry so heavily regulated and audited, cohesive and comprehensive transformation is crucial.

Today, the challenge is no longer in convincing financial services organisations that they need to transform their processes and tasks; the vast majority understand the benefits of automating and streamlining their financial processes.

Instead, it’s about instilling the message that there is more to transformation than ripping out and replacing outdated technologies. A good financial transformation strategy must also take into account how these technologies are implemented, ensuring they integrate into an organisation’s culture, connect data and guarantee compliance, without completely demolishing the custom processes that employees want to use.

 

Little Fires Everywhere

While business transformation offers long-term benefits throughout an organisation, individual departments are often loathe to abandon the bespoke processes that facilitate day-to-day operations. Many organisations feel under pressure to transform quickly, and subsequently focus on how to get their employees onboard with a new solution rather than integrating every minute component of the old.

As a result, digital transformation efforts tend to bypass these disparate components, leaving small, potentially non-compliant hazards smouldering like little fires across an organisation.

These “little fires” don’t immediately represent a threat to business operations, but the lack of quality control, integration, and visibility of these manual workflows, means they’re inherently high-risk.

When a pressure situation hits the organisation, like a surprise audit, legal proceedings or new reporting demands, these processes become a highly combustible cocktail for non-compliance, lost data and human error.

 

Tackling the flames

Organisations need to tackle these little fires early on, rather than sitting back and hoping they will burn themselves out. But how can they be dealt with?

If you think of these small, unregistered processes as little fires, then your team needs to think like a firefighter — being fast, agile, flexible, and well-prepared for potential risks.

So how can CFOs, CXOs and Chief Transformation Officers bring this strategy to life?

 

  1. Be fast — don’t wait around for largescale digital transformation

There’s a common misconception amongst financial service organisations that before facing the issue, you need to wait until an overhaul of department processes or an in-depth audit. This could leave you waiting years for a solution that needs to be implemented in weeks, putting your department at risk.

Organisations must act with speed and address the issue head-on as soon as it has been spotted. Businesses don’t need to wait for largescale transformation; temporary or even permanent solutions do exist and can be tailored and installed immediately — targeting the issue before it becomes a bigger problem.

In my own business, we recommend a three 3-step approach to tackle these issue quickly: First, listening to an organisation’s business challenges to locate the most pressing fire. Second, build a working example for business leaders and decision-makers to evaluate. Finally, follow up with real-time collaboration to ensure that wider company processes don’t cause similar problems in future.

 

  1. Be agile and flexible — look for customisable solution that evolve over time

Organisations are ever-evolving, and so are the problems they face. However, some financial services organisations see the answer to these problems as a one-time, short-term fix. Working to put out these fires at speed shouldn’t stop organisations from considering how to prevent and deal with future ones. That’s why businesses run fire drills!

Financial organisations need forward-thinking systems that will work now and in the future, whenever they face their next data collaboration crisis. The ability to act in an agile way is fundamental to this sort of futureproofing.

Agile, flexible solutions will enable organisations to fight multiple fires, with the same systems, as time goes on. A one-size-fits-all approach won’t work here. Putting one fire to rest won’t prevent more from happening, and not all fires are the same (just try throwing water on a chip pan fire!) Every organisation has distinct needs and that means customised solutions.

 

  1. Be prepared — implement solutions before disruption occurs

To understand their weakness and subsequently prevent fires, financial service organisations must encourage employees across departments to hold an ethos of self-improvement. Preparation is key to success.

That means establishing a comprehensive understanding of the day-to-day routines of employees at all levels. It’s in habit and routine (one-off processes, keeping data on email, spreadsheets as systems, etc) where financial fire hazards thrive.

If new, more compliant technologies are to be installed, they cannot dismantle these existing routines. Flexible data collaboration solutions are needed that perfectly match the existing way of working. Achieving the goals of transformation without any of the disruption.

 

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