The chief financial officer's evolving role in digital transformation

Oct 16, 2019
Digital evolution Digital transformation Management consulting

In the past five years, the chief financial officer role has seen a significant shift. Recently, the position has transitioned from managing the financial health of the organization to becoming more strategic within the company. They are no longer focusing solely on accounting, reporting and regulatory demands, but because of their unique perspective, they are focusing on the entirety of the organization—including increased involvement in technology and digital strategies.

For example, RSM’s recent Digital Transformation Survey details how CFOs are now taking a more active role in determining technology investments and strategies. Nearly two-thirds of CFOs (66%) surveyed own or share the responsibility for digital transformation initiatives, and 36% believe that digital transformation will continue to broaden their roles.

It’s not hard to imagine the CFO taking an even more active role in technology strategy. The accounting function is the backbone of an organization, and because the CFO owns the budget process and sits in the middle of critical decision-making processes, they see—and help guide—so much of what is happening.

For instance, they see the challenges that marketing is having if they do not have an effective customer relationship management system, they hear the issues raised from customers about company apps and from internal employees about the level of insight into buying patterns. They are in a good spot to know what is going on in an organization and bring innovation needs to the attention of the leadership team.

CFOs are now focused on how they can automate their world, and also the organization as a whole. Many companies are looking at applications, including robotic process automation (RPA), blockchain and artificial intelligence (AI) as ways to advance the business. They may not be ready for all these solutions today, but they are working to understand what their options are and what tools make sense.

With their perspective across the organization, CFOs are well-positioned to determine the technology needs of the business. It may not necessarily involve a full change across the organization, but potentially small gains in technology that can create efficiencies in an effort to counteract the challenging labor market. By taking a more active role in innovation, the CFO can provide valuable insight to effectively match demand with available solutions.

Building a digital strategy

The CFO is in a unique position to be able to step back and look at the organization as a whole. They can consider the overall strategic plans—whether the company wants to grow, contract, introduce new product lines or enter new geographies—and how technology can fit into the equation. The capabilities for innovation today are seemingly limitless, but applications must be a fit for the organization to get an effective return on investment.

RPA, AI and blockchain are buzzwords and solutions that can have significant benefits to an organization. Many organizations want to do something with them—or at least understand how they work—but it’s important to fully vet and understand the benefit to the company. CFOs can play a key role in strategic planning sessions by outlining internal requirements, customer demands and even what competitors are doing.

With that knowledge, the company can determine how to better utilize technology solutions. Perhaps the organization does need to take advantage of an entirely new platform, but maybe it can also benefit from optimizing current tools or adjusting processes. The CFO can provide key insight to guide those difficult decisions, helping to recession-proof the business, stay in front of unemployment issues and stay relevant to customers.

The future of CFOs and innovation

In fact, the CFO’s role in digital strategy will likely grow further in the future with more involvement in data design. The CFO typically owns the data for the organization, and the challenge of transitioning volumes of data into useful information. The CFO has the ability to key into the information that is most important to grow or defend the organization, understand the market and the customer base.

Better utilizing data is one of the top items companies are talking about; a key competitive differentiator is how data is processed. CFO insight into data can give organizations an edge to determine where to focus energy and guide company initiatives. The need for data analysis never ends; the metrics analyzed evolve over an organization’s life.

Furthermore, because companies are taking advantage of more cloud solutions, and therefore, a greater number of providers, CFOs will likely become more involved with third-party relationship management, including: data storage, security, support, backups and risk management.

In highly regulated industries, effective vendor management guidelines have existed for years. However, in other industries, organizations must understand who their vendors are and the data element to review on a regular basis—response times, audit exams, SOC reports, etc. The CFO can help to control these expectations within contracts, getting the right data to put vendors in a place that the company trusts.

With so many different technologies available to streamline processes, it is a very exciting time for CFOs with an opportunity to play a more active role in the success of the company. Finance teams are transitioning from doing manual repetitive work, to allowing more time to do analysis and provide more value to the organization by becoming a true strategic partner.  As the CFO role expands, the new responsibilities for digital transformation provide more potential avenues to guide the business, making the CFO a stronger leader.

RSM contributors