The role of the CFO function has been rapidly evolving in the past years. While the CFO function still has an important role in fulfilling the statutory compliance tasks, reporting and record keeping, its role has shifted more towards business partnering and transformation. In this new role the CFO function utilizes increasingly the understanding of its financial position to help execute and direct the whole organization’s strategy, improve its competitive position, and enable growth.
This blog is the second part of the data-driven finance and technology blog series and focuses on how organizations can utilize data in their finance function’s digitalization journey. To make the finance function work more as a business partner and facilitator for the business transformation, the finance function needs to:
The exponential increase of data and evolving analytics have placed data at the central stage of business management. Data has become the lifeblood of the modern corporation, and thus the skills and tools for creating insight out of the data has become an essential factor for business success. Many companies consider data as an asset and manage it in a way as they would manage a tangible asset. Since data has such a central role in the success of a modern organization, it’s useful to have a clearly set data strategy, meaning a definition of plans and actions regarding the use of data in a way that supports company goals and creates a competitive advantage.
From the enterprise perspective, data platform technologies are as essential as data itself. In addition to exponential increase of data, there has been a substantial increase in computing power. These drivers have enabled companies to build more sophisticated reporting and analytics solutions e.g. real-time analytics, learning algorithms, multivariable models. The rapid evolution of data usage has also set new requirements for the data platforms. Data warehouses have been widely in use already for decades. Data lakes started to emerge in late 2000s. Data lakes enable to capture and store raw data with a low cost. Many companies are now focusing on cloud data platforms and how to utilize technologies such as streaming and APIs in data management. While the range of different data platform technologies have broadened, it has become utmost important for every company to clarify the role of data platform in the company’s overall value creation.
Using traditional data sources will lead to mundane outcomes. Data can be extracted from both external and internal sources. Utilizing internal sources (e.g. ERP systems) is a necessity to fulfill external reporting requirements. It is also an important baseline for the management reporting. However, in an increasingly complex and uncertain time, CFOs must broaden their traditional data sources beyond company’s internal data to be able to embrace their role in risk management, forecasting and long-term strategy.
External data could include industry related data, competitive data or customer behavioural data. For example, business forecasts can be enriched by leading business indicators, meaning indicators that drive customer behaviour. Creating the understanding of these true business drivers, and consequently the external data points, is not necessarily an easy task, but it is worthwhile.
In our CFO 4.0 2021 study’s Part 2, you can find more insights on different data-driven technologies. The next part of our blog series will demonstrate how strategic value is created through the use of this data.
Heli Moilanen
Director, Finance & Risk
BearingPoint Finland
Joona Ronkainen
Senior Business Consultant, Enterprise Performance Management
BearingPoint Finland