Corporate finance is at the heart of every company, big or small, national or international, no matter the sector. You can’t run a business without taking in more money than you spend! The CFO has traditionally been a position of checks and balances: the person at the top making sure the company’s financials work out the right way. They’re the person who sees all the silos of the business.
But what happens when you take away the silos? What happens when, like all aspects of a business, you inject a plethora of data into corporate finance? Suddenly, there’s context for the money coming in and going out. And with context comes the opportunity for transformative change.
This is exactly what the latest episode of Data Champion Roundtable is about. I’m joined once again by the ever-insightful Sally Eaves, Emergent Technology CTO and Senior Policy Advisor at the Global Foundation for Cyber Studies and Research. Together, we’re taking a deep dive into a rapidly changing world of corporate finance and how data is disrupting one of the organizations most entrenched positions.
Sally’s insights on the explosion of fintech and how it’s affecting corporate finance paint a picture of disruptive change that’s not on the horizon—it’s already here. And, her thoughts on the CFO position as the new C-suite powerhouse show that corporate governance is on the cusp of a similar transformation.
The Changing Role of the CFO
They say change starts at the top, and it’s no different when it comes to finance. The Chief Financial Officer (CFO) is the person at the head of business’ financials. But what does this mean today, when data and finances collide? I asked Sally—who’s no stranger to the C-suite—what her take on the role of a modern CFO is.
“The role of the modern CFO is one that’s active. It’s moving beyond financial acumen and the traditional skills in this area,” says Sally. “Within operations, for example, the CFO is becoming a change agent and a real driver of business strategy. They’re doing this with a multidisciplinary skill set.”
Sally and others aren’t seeing a CFO as someone to balance the books and make sure there’s consistent top- and bottom-line growth. They’re seeing a leader charged with creating financial agility and innovation, to help businesses adapt to perennial change. This is a drastic change from the traditional role of CFO—one that’s been steadfast for a century.
“Today’s CFO is moving away from the numbers, to how we apply them,” says Sally, summing up how data has taken the reins of this leadership position. It’s yet another instance where data is changing the definition of modern operations, forcing companies to go a level deeper. “The story and the meaning behind the numbers matters.”
Digital Transformations Drives the ESG Mindset
If the CFO’s new, primary role is as a driver of change, it begs the question: what kind of change? The answer, according to Sally, rests in a company’s commitment to Environmental, Social and Corporate Governance (ESG). Data is casting new light on how companies spend and save, and organizations are quickly learning that an ESG focus can reduce risk and raise returns.
“I've been doing research with a couple of organizations. The ones that have been most resilient and have come through the pandemic thriving, rather than just kind of surviving, are the ones that were investing in ESG, really, really strongly,” says Sally. “At these organizations, it was the CFO who was instrumental in looking at a particular area and bringing data to bear for decision-making on that business model evolution.”
Why the CFO? Because money talks! According to studies even before the pandemic, solid ESG practices resulted in better operational performance in 88% of companies. When these benefits show up on the balance sheet and come out in real dollars and cents, CFOs become the primary evangelists for betterment. It’s this data that allows them—almost forces them—to become change agents, according to Sally.
This focus on ESG manifests in both top- and bottom-line arenas. Financial data from both ends of the business sets the tone for initiatives worth exploring. There are also external variables privy to the CFO that make some ESG choices easier than others.
“There are a lot of pressures around costs and resource availability. Adaptability around these models has been another area where I think the CFO role has been instrumental,” says Sally. “Getting meaningful data insights that impact the decision-making processes puts CFOs in a position to be hugely, hugely helpful in ESG.”
Need more proof that financial experts will be the core drivers of change in a business? Sally also mentions that the United Kingdom’s Consumer Credit Association (CCA) is already emphasizing green finance and sustainable accounting principles in an effort to prepare for the next generation of accountancy. Data is driving smarter insights, which is changing the way businesses think about capital.
The Explosive World of Fintech
The most disruptive and exciting developments in the world of finance are, of course, in fintech. From alternative payments to new ways of tracking money as it moves around the world, there are groundbreaking developments in fintech that are shaking the core systems of business finance—in a good way.
We can thank the pandemic for some of the disruptions—namely a shift to digital payments, says Sally. “There’s an expression that necessity breeds invention. Because of the pandemic, we couldn’t do things in the same way—for example, we couldn't walk into our local bank. So, generations that weren't using [digital payments] before started to—particularly the 55+ group. Now, these groups love using digital methods for making payment. They’re seeing the convenience, added functionality and seamlessness of the service.”
In this instance, the pandemic accelerated adoption of technologies that already existed—and in some cases, made them better. There’s also been rising interest in new applications for existing fintech. Enter: the ever-popular world of cryptocurrencies. Specifically, blockchain, the technology backing them.
“There’s a particularly interesting focus on blockchain. We’re seeing the conversation change there, from cryptocurrencies,” says Sally. “Over the last few months in particular, we've seen that conversation bridge not only into other areas of financial services, but other sectors as well: supply chain, pharmaceuticals, etc.”
While it has roots in fintech, the opportunities for blockchain in the future of corporate finance extends far beyond cryptocurrency. Sally and other technology leaders see its potential for everything from cybersecurity to trust certificates within the supply chain. And, of course, it all relates back to money: money spent, saved, transferred, tracked and generally handled better.
According to Sally, these individual breakthroughs in fintech are exciting, but they add up to something even more revolutionary: democratization.
“I'm hugely, hugely passionate about financial inclusion, and we're seeing that in many different areas,” she says. On one hand, we've got AI and automation making a difference in terms of enabling more people to get involved in investment about trading platforms. More broadly, we've had a big switch to digital remittances over the last year. So that's really great for saving costs, and increasing financial inclusion.”
The Biggest Struggle Facing Financial Leaders Today
There’s an inundation of change affecting companies surrounding their financial data and what they choose to do with it. We’ve got CFOs who are stepping into a new and exciting role. We’ve got the ESG mindset from companies. We’ve got fintech innovations and other technologies out there. The only question that remains is how to put them all together. It’s the biggest struggle companies face today. But it’s not an insurmountable one.
First, CFOs need to accept their new role as data and finance stewards. According to Sally, that means taking up the role of storyteller. “Helping people make sense of the data that’s coming in and walking them through it to see the meaning behind that data—that’s hugely important. Some organizations are further along the path in terms of the CFO role really being at the seat at the table and part of the C-suite, in terms of that level of dialogue.”
Next, it’s up to companies to embrace new technologies—ones that will likely displace legacy systems. It’s a scary prospect, but instrumental in welcoming the new age of informed financials.
“Technology integration support is absolutely key to get the benefits of data,” says Sally. “You've got a situation where the volume of data is increasing, in addition to its volatility and veracity. Companies can't lose the meaning behind it. It's no good having all that data coming in if we can't pull it together, filter it and use it in the right way. Supporting people through better tech integration is key.”
Finally, for companies to break into a new era of smarter finance and capital management, they need to leverage talent and tech together. If fintech data tells a story and the CFO is the storyteller, it only makes sense to put them together and turn them loose on an organization.
“Companies need to cultivate the CFO position as the architect of business transformation value. This allows you to accelerate growth, bring on new value and lead collaboration across the organization,” says Sally. “And to support that, companies need to introduce new metrics, leverage collaboration, and show how [data-backed] decision-making influences the entire enterprise.”
Corporate Finance is About to Accelerate
After chatting with Sally, it’s abundantly clear that the world of corporate finance is in for radical change over the next few years. Much of that change is happening right now. The CFO role is changing. Fintech has exploded onto the scene. Data is driving social governance. Put them all together and you get a fresh new landscape of opportunities for businesses that are growing more cost-conscious, competitive and concerned about their impact on the world.
To learn more about the disruptive power of data and its role in changing corporate finance, register for our next episode of Data Defined airing on March 30, 2021, subscribe to the Data Defined: Monthly Bytes newsletter, and catch-up on the latest episodes here.
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