For long, enterprises placed their bets on the CIO or CTO to drive their digital aspirations forward. While these leaders do have an edge in creating a roadmap for technology adoption and excellence, today’s digital economy requires a more holistic approach involving every member of the C-suite to ensure a successful digital transformation experience.
The Chief Financial Officer (CFO) has a much bigger role in accelerating enterprise digital transformation than ever before but in reality, most financial leaders are yet to catch up. Studies estimate that 60% of a CFO’s time is still spent on core budgeting and accounting functions within the organization. It could be because they are not yet aware of the possibilities that CFO’s can bring about in digital initiatives. Let us explore the top 5 from the list of digital enabling possibilities:
Eliminate Bureaucratic Hindrances to Transformation
The success of an enterprise-wide transformation initiative relies heavily on how well internal policies and frameworks accommodate change with minimal disruption. However, policy frameworks within an organization often rely on legacy hierarchical approval and budget allocation mazes. Very often, departments take their own sweet time playing with approvals trying to constantly push away the investment from their internal budgets and have some other business units bear the cost. The CFO can step in to alleviate this bureaucratic challenge by setting in place a digitized finance function. The central finance engine would seamlessly be connected to different engines and automatic provisioning of budgets, allocation of funds, and tracking of expenses against concerned departments will eliminate the need for waiting for budgetary approvals.
Create Disciplined Monetization Approaches for New Business Models
We are seeing massive disruptions in almost every industry by tech-driven startups which challenge traditional business models and drive away key market share in a matter of days. To survive, traditional enterprises need to discover and experiment with new business models that deviate from their traditional revenue streams. For example, music labels that once garnered massive revenues with quick CD sales are now having to adjust to the subscription model of revenue realization that happens over a period of time with profitability dependent heavily on economies of scale. But this new model is not a small market in any way. In 2020, music streaming worldwide reached a staggering USD 13.4 billion in revenue figures. In such scenarios, CFOs are well-positioned to help key stakeholders discover and finalize a pricing or profit realization model that can help drive enough revenue to sustain operations till a break-even point is reached.
Raise Awareness for Security Investments
In the traditional business scenario, all corporate assets are safeguarded under the watchful eyes of the CFO. In the digital economy, CFOs have the added responsibility to install guardrails on the business’s digital assets as well. Besides, they are responsible for selecting the right platforms and tools to automate compliance functions, fasten end-to-end financial operations, and structure reporting for corporate programs. With financial records, compliance, and documented policy frameworks transitioning into digital formats, it is imperative that due diligence is followed to eliminate unauthorized access and fraudulent tampering. Studies estimate that a data breach in a large organization can cost an average of over USD 8.64 million. While the security leadership might find it hard to compute an impact figure for their respective organization based on such industry observations, they can very well work with the CFO to draw up a conclusive and supportive statement to convince the rest of the leadership about the threat landscape. Amongst the decision-makers, the CFO and his/her team have the insights to substantiate potential losses and penalties that can impact the business’s financial stability. Thus, the most vocal voice for investing in upgraded security infrastructure for the enterprise’s digital ecosystem can come from the CFO.
Add Credibility to Investments in Innovation and Business Transformation
As far as shareholders are concerned, their eyes quickly scout for profitability and returns on every investment in the shortest time frame. However, when businesses set targets for investing in innovation and transformation initiatives, profitability may take a substantially longer period to materialize. Technical leaders within the organization may not be able to create a convincing demonstration of the long-term value that will be realized by the investment. CFOs can take up the responsibility of taking investors into confidence for innovation budgets. After understanding how the innovative additions or transformations can help the business move ahead in a more agile and digitally accommodative fashion, the CFO can leverage insights from their experience to determine how the improved business traction can translate into long-term profitability and revenue guidance. Such information will prove to be a very convincing story for investors and help them make better and faster decisions on pledging capital support for innovation programs.
Facilitate Fund Pooling
CFOs have the most transparent view of budget utilization amongst different teams within an organization. They have access to expenditure and revenue reports which they can use to pool funds internally within the organization for investments into internal ventures. CFOs can break traditional siloed working cultures between teams that prevented fund pooling avenues in the past. This also results in a balanced and optimized financial system getting shaped within an enterprise’s operational environment. It can provide better leverage in the future when budgets are constrained owing to external factors.
CFOs have the potential to become a torchbearer of digital transformation within an organization. The finance function will always be at the center of driving change, facilitating access to capital for strategic initiatives across customer relationships, operations, and employee welfare. By leveraging technology, the finance function can transform into a core growth engine that supplements the larger digital ambitions of the business. Additionally, they can work diligently to lower the cost of operations significantly. Studies estimate that a digitized finance function can operate at nearly 43% lower cost when compared to traditional financial units within organizations. Getting access to the right tools and the right technology advisory will be a key factor that will help CFOs become the new icon for digital transformation within an organization.
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