Finance organisations must focus on risk, governance to be future-ready

Finance organisations are transforming; slowly but surely. This change has driven to a large extent by the disruption in  the business environment, whether caused by emerging technologies, changing demographics, new business models,  or convergence of industry sectors. 

Future-ready finance functions have disrupted the finance operating model with the use of extreme automation,  delivering new and better insights and analysis with a simpler organisation with skills and talent for the future, and all of  these are built on a strong foundation of data management, quality and governance, and strong focus on risk,  governance, compliance and controls.

Many of these emerging technologies are fast changing from “technologies to watch” to “technologies to deploy”. We  see eight disruptive technologies playing the biggest role; data management, cloud ERP and EPM, blockchain,  robotic process automation, machine learning, cognitive technologies, natural language processing, and digital  analytics and delivery. A well-architected use of these disruptors will enable extreme automation and allow the finance  function to transcend its traditional role and take on a business partnering role that delivers significant business value  through insights generation and enhanced risk management, while significantly reducing costs.

Today, most finance functions spend time analysing historical information generating descriptive analysis (what  happened) and diagnostic analysis (why did it happen). These activities can be fully automated, leaving finance teams  with time and resources to focus on predictive analytics (what will happen) and prescriptive analytics (what should we  do about it). For instance, as part of their planning process using predictive analytics, we can now help companies  deliver accurate forecasts created automatically through machine learning (ML) and external signals. Leveraging  thousands of external signals allows us to spot patterns and perform sensitivity analysis to understand key drivers for  revenue, margin, and earnings. These models can significantly enhance accuracy while also be linked to real-time,  updated data streams to enable rolling forecasts. As companies mature towards prescriptive analytics, they can start  generating hypothesis for strategic scenario analysis of revenue and profitability, advanced customer and market  analysis, and so on. 

While companies see the “art of the possible” with this transformation, most struggle to succeed at implementing the  most important, future-oriented initiatives. According to KPMG’s Future Ready Finance 2019 survey, only 28 per cent  of organisations see their current initiatives as a great success, with the two most important initiatives of using data  and analytics and extreme automation having even lower success rates. It shows that the digital transformation of the  finance function is less about technology and more about data and people -- the two key components that can make or  break it. 

Sai Venkateshwaran, head of CFO Advisory, KPMG in India

Dealing with the avalanche of data, both from internal and external sources, by fixing the fundamentals is the essential  first step. According to this survey, data quality is the biggest challenge to improving analytics capabilities, followed by  the ability to integrate analytics tools to legacy systems. Both are critical pre-requisites for delivering predictive  forecasting and advanced analytics. Once this is fixed, organisations can focus on the business problems they can  address using these data and analytics capabilities. 

Automation also needs to be accompanied by a transformation of skills and talent to enable the finance function to  take on the more value-added activities. However, only a few organisations, according to this survey, have been able  to adapt their skill bases to operate in this more automated workplace environment. Existing staff will require  fundamentally different skills, including data and technology skills, new behavioural skills and process, and exception  management skills in addition to stronger core finance skills. 

In summary, finance organisations must develop a roadmap to be future-ready, focussing on (i) transcending the role  to enabling business decision-making and driving enterprise performance; (ii) thinking like a venture capitalist  enabling innovation and disruption; (iii) establishing a digitally-enabled service delivery model; (iv) driving the adoption  of advanced analytics and automation technologies; and (v) taking a comprehensive and flexible approach to talent. 

The writer is partner and global lead-smart digital finance, and head of CFO Advisory, KPMG in India