|1. Advanced data analytics and forecasting|
|The value to the finance function|| |
|Current market activity|| |
In the future, contending with volatility and uncertainty will be the new normal. A range of forces — including growing pressure on natural resources, more frequent and severe climate events, and increasingly sophisticated cyber attacks — will create ever-greater challenges for multinational organizations, particularly as global operations become increasingly connected.
To be able to set the right course for the future, finance functions must get better at processing — and extracting forward-looking insights from —large amounts of data, keeping track of new types of data and incorporating them into their models as they emerge. CFOs must actively investigate how they can use sophisticated, forward-looking analytics to enhance their organization’s performance in a range of areas, for example by:
- Deploying big data platforms that are designed to be interrogated by computers rather than humans, using machine learning to analyze massive data sets to make fine-grained predictions, such as how an asset on a balance sheet will behave
- Combining structured and unstructured data (such as social media and web monitoring) to identify rogue activities, patterns and trends and mitigate risks such as fraud or cyber breaches
The future of tax management: managing data as a strategic asset
In their efforts to meet the increasing compliance demands of tax authorities, tax teams already consume and distribute significant amounts of data. But in some countries, tax authorities now expect that data in real time – an expectation that is likely to become more common as tax administration around the world becomes increasingly sophisticated.
Many organizations are not ready for this change. In particular, organizations that continue to rely on manual spreadsheets, which can be inefficient and raise the risk of tax statement errors and potential reputational damage, will find it difficult to comply.
According to Carolyn Bailey, Americas Digital Government Tax Transformation Leader at EY, tax teams need to radically streamline the collection of data through information management systems. “The data they collect should be aligned with a global data management strategy that addresses tax requirements across multiple jurisdictions,” she said. “Once collected, the data should be analyzed to identify the value it contains for the organization, then assessed for sensitivity and various audit risks before being shared with tax authorities around the world. By establishing robust data management and analysis processes for tax information, CFOs can help make this possible.”
For Simon Kelly, former CFO and COO at Australian media company Nine Entertainment Co., this means historical data is losing some of its importance. “While historical information is important for areas such as reporting and tax, it doesn’t add a great deal of value beyond that,” he says. “Value-add is in the real-time data about how things are trending in our business right now.”
“In the future, the investment is going to need to be in real-time data and in generating insights so businesses can respond to changing consumer preferences without waiting for accountants to pull together historical financials. The historical transactional part of finance is really a commodity, not a competitive advantage,” said Kelly.
For Vincent dell’Anno, EY Executive Director, Performance Improvement, Ernst & Young LLP, part of the investment CFOs should be making is in real-time data, and the other part is in real-time analytics. "For example, there are sensors that are required to act in real-time or as close to that as possible,” he says. “That means you want to facilitate analytics as close to the source of data as possible, you want to be able to drive streaming analytics where possible and relevant to the business problem.”
This is also reflected by our survey, in which “improving data and analytics capabilities to transform forecasting, risk management and understanding of value drivers” was the priority most cited by CFOs as number one for their finance function (see Figure 1).
Figure 1: Priorities for the future finance function
|Improve big data and analytics capabilities to transform forecasting, risk management and understanding of value drivers||23%*|
|Meet the need for new skills by transforming how finance talent is recruited, retained and developed||22%*|
|Make significant changes to the finance function skill set||17%*|
|Reduce finance function costs through new technologies such as robotics and process automation||14%*|
|Refine risk management capability, including cyber||13%*|
|Drive efficiency improvements through offshoring, shared services and outsourcing||12%*|
*% of finance leaders that chose this priority as number one
Reaching your analytics potential
Many organizations find it difficult to introduce the technology needed to generate forward-looking insights. For example, they are often impeded by multiple ERP systems, legacy applications and non-integrated architecture.
In the future finance function, however, inflexible and costly IT infrastructure will be replaced by scalable and innovative IT. Many CFOs are already incorporating new advances into their ERP systems, such as:
- In-memory computing
- Cloud and hybrid cloud deployments (see later section on “Cloud and SaaS”)
- Better and more mobile user experiences
- RPA to federate data from different systems.
Choosing the right tools to capture and mobilize data and enable the insight-driven enterprise is a complex challenge, particularly given the rapid pace of technological innovation. But CFOs also need to focus on the “consumption” side. Finance leaders need to think about, for example, where technological innovations such as those cited might come up against the brick wall of organizational resistance, or what incentives systems are needed to encourage adoption.
Change management will be essential to address this critical “people” dimension.