Formerly EquaTerra, now KPMG, we are excited to share expanded insights to support a smarter, empowered enterprise. Thus, we will highlight KPMG studies to better enable your analysis, planning and decision-making processes, ideally making you more effective in your role.
Late last year KPMG collaborated with CFO Research Services on a study to examine senior finance executives’ views on the role of the corporate finance function and their aspirations for the years ahead. The resulting report – A New Role for New Times: Opportunities and Obstacles for the Expanding Finance Function – contains both positive and negative findings.
What CFOs from the study cite as working today:
- More than seven out of 10 respondents feel finance is highly credible with its internal customers including the C-suite, the board and other stakeholders to line of business and functional management
- More than half say improving their abilities to support line of business management will help finance increase its contribution to the company’s success, while nearly half see such opportunities in improving their support for business growth, either organically or through M&A; standardizing and streamlining core finance processes; and helping to reduce the company’s overall cost structure
- Executives give themselves high marks when it comes to processes that are internal to finance
- The process for planning, budgeting and forecasting – which is among finance’s most forward-looking activities – was cited by 50 percent of respondents for moderate or incremental change, and by one in three as a target for “dramatic change” over the next two years.
Respondents are less positive in the following areas:
- Across the full collection of companies responding to the survey, finance executives show less confidence in their ability to collaborate successfully with other parts of the company, and respondents are least likely to see strength in their relationships with staff functions such as HR, IT and legal departments
- While 39 percent of respondents agree that their company’s use of IT within the finance function is very effective, more than one in four disagree with this statement. Many survey respondents cite concerns that their IT systems are not evolving fast enough to meet their changing needs, and that their current systems are antiquated.
- Unfortunately, while the planning, budgeting and forecasting process is one that finance executives are targeting for near-term change, it is also the area that finance executives also find the hardest to change, as cited by 54 percent of respondents
- More than three out of four respondents regard growing organizational complexity as the most acute risk threatening their ability to be effective, and human capital/professional staffing and IT were also cited as high risks
- When asked about the greatest barriers to improving the effectiveness of their company’s finance function, almost half of senior finance executives complain that their IT systems are out of date, inflexible or unable to support new requirements. And four out of 10 respondents cite shortage of time and attention within finance to improve capabilities.
We believe that the state of the relationship between finance and IT (see the second bullet in the section above where respondents were less positive with respect to certain areas) could pose challenges to companies whose finance leaders are prioritizing transformation of their organizations. Conversely, there are opportunities for those companies who embrace technology and find ways to collaborate successfully with IT to implement real and sustainable change.
While there are no panaceas, one-size-fits-all answers to solving issues such as those brought out in this research study, in a point of view paper entitled Transforming Finance; we identify several methods that will help finance leaders transform their function to more strategically support their company’s business objectives. First, they must find a balance between strategies that are both effective and efficient. Second, they must find a balance between strategies that are both transformational and transactional as they relate to strategic services and tactical execution and to incremental change and disruption. Third, they must find a balance between strategies that focus on both transformational and transactional as they relate to strategic services and tactical execution and to incremental change and disruption. Third, they must find a balance between strategies that focus on both risk and reward. Fourth, they must view technology and people as key enablers – rather than be-all, end-all solutions – of a successful, value-add transformation journey.