CFO roles are expanding as technology drives innovation
Directing traffic at the intersection of strategy and technology
INSIGHT ARTICLE |
CFOs need to be prepared to handle responsibilities outside of traditional accounting, finance and budgetary planning duties as rapid technological shifts transform the investment industry and bring new risks.
In the past few years, financial performance has become the biggest priority for CFOs, outweighing other functions such as control, execution and efficiency. In addition to strategic planning, CFOs are expanding their responsibilities to include information technology and cybersecurity, according to a survey of chartered global management accountants.
"That transformation can mean thinking like a venture capitalist when it comes to evaluating how information technology fits within an organization's broader strategic objectives," said Bill Kracunas, an RSM US LLP principal and national leader of management consulting.
Helping drive IT strategy
"As CFOs become more integral to decision making about information technology, they are playing a key role in helping to prioritize which projects are aligned with a company's strategy," Kracunas told an audience of executives at RSM US LLP's seventh annual Investment Industry Summit in New York. "The IT department may have a number of back-office projects to handle, but shouldn't lose sight of what is important and how to serve clients and drive the business forward."
In order for a company to keep pace with customers and competitors, it needs to allocate less of the IT budget to maintaining existing systems and put more resources into innovative technologies.
"Many companies may only put about 35 percent of their budget into ‘new' stuff," Kracunas said, "But the goal is to reach 50 percent."
The need for CFOs to evolve with technology is becoming more imperative as the millennial generation – the estimated 80 million people born from 1980 to 2000 – mature into a major consumer group with high expectations for interactive gadgetry that is seamlessly connected through computer networks.
Keeping pace with a new generation
"Just talk to any group of millennials or watch how they use the latest financial technology," said Paul Calamita, an RSM US LLP partner in technology and management consulting. "Whether they are using mobile cash apps to execute real time cash transactions with friends and family, or establishing relationships with robo-advisers to help guide and manage their investment decisions, they are helping to lead the change in how we do business today."
"Keeping an eye on the direction of innovation is critical for CFOs," Kracunas said, pointing to research firm Gartner Inc.'s annual "hype cycle" report that tracks the adoption of emerging technologies. Cloud computing, social media and tablets were being touted as the next big thing seven years ago, but have become commonplace as businesses and consumers demand greater on-demand connectivity.
"Smart mobile devices, broadband wireless networks, cloud-based services and sophisticated data analysis are driving the evolution of financial services," Kracunas said. "The pace of change keeps accelerating as innovation builds on itself."
This year, Gartner identified many items including neurobusiness and human augmentation among the emerging technologies that will move off the drawing board and into the marketplace in the next 10 years.
"New technologies can be intimidating, but CFOs can apply their analytical skills and strategic perspective within an organization to make well-informed decisions," said Steve Jugan, an RSM US LLP assurance partner with the financial services practice in New York.
"It's important for an organization to ask, ‘What's the role of the CFO with regard to information technology?'" Jugan said. "That's especially critical, given the every changing regulatory environment surrounding the use of technology in today's business world."
Depending on the organization, those regulatory requirements can include privacy notification laws, health care information restrictions, internal control principles mandated by the Sarbanes-Oxley Act, or credit card payment assessments.
Cybersecurity and risk
Cybersecurity is also a major concern for CFOs. Computerized attacks can result in financial fraud, identity theft or the loss of classified information. "The SEC has enhanced its focus on cybersecurity." Jugan said. "It is now included in its examination priorities. The SEC recently issued its first cybersecurity enforcement action for failure to protect client data.
"A key step in managing security threats is to train and educate your employees," Calamita said, "Many times, a data breach is caused by unsuspecting employees being tricked into granting access to facilities, giving out passwords to impostors or loading malware that spreads malicious code on company PCs."
But it's not all bad news. Leveraging analytic tools and applications, technology is also helping CFOs to make more informed and timely decisions, leveraging real time access to dashboards and predictive analytics.
"Predictive analytic tools and dashboards are critical in managing today's businesses," Calamita says. "They can help to transform raw financial data into actionable insights, including the creation of a customized client experience or better alignment of decisions with key strategic initiatives."
CFOs are also playing a key role in enterprise risk management (ERM). They are crucial in helping an organization to overcome competing priorities as part of a longer-term objective to stay relevant in the marketplace.
"ERM is about actively being on the lookout for new business opportunities that can replace the current model," Kracunas says, "It's not about playing defense or protecting the old way of doing things."
Photographic imaging, video rental and mail delivery are just a handful of the industries that have been transformed by technology in the past 15 years with newer generations of companies replacing legacy businesses.
"Just as technology has evolved, so must the CFO," Kracunas says.