What CFOs are focused on now
Our research showed CFOs adopting market-driven perspectives. Increasing competition tops the list of potentially disruptive forces, with nearly half (47%) of respondents saying it will put pressure on their organizations for the next 12 months. Changing consumer behaviors, regulatory shifts and the need to expand into new markets were the next factors on the list, each cited by just over a third of CFOs. Three-quarters of CFOs said macroeconomic uncertainty and political tensions had significantly (29%) or somewhat (46%) reduced their confidence about the future.
These results illustrate the need for CFOs to serve as forward-looking strategic advisors. They also highlight the unique challenges of finance transformation. As one CFO said, “Of most functions in the organization, transforming finance is probably less understood.”
The challenges start with the central role of finance in supporting internal and external stakeholders. Specific parts of the business — most notably, risk, actuarial and the board — are highly reliant on the information finance provides. Similarly, the quality of insurers’ relationships with regulators and investors is dependent on their confidence in the numbers CFOs produce.
CFOs face a range of conflicting priorities, such as the need to simultaneously reduce costs and promote growth. "Transformation is part of the overall strategy to achieve our financial results by growing our top line and reducing costs.”, the CFO added. Engaging new talent while automating work and promoting innovation while protecting the business are other paradoxes outlined in our full report.
Five CFO priorities to advance on the transformation journey
So how are CFOs seeking to drive successful transformation? Our survey respondents highlighted multiple priorities, which can help finance units assume a more strategic role and help establish a future-fit target operating model.
1. Doing the right work in the right way
In the eyes of many chief risk officers (CROs), the road to greater effectiveness starts with increased efficiency. “It's about making processes easier, making them simpler, doing less by cutting out what doesn't need to be done and using technology,” said one CRO EY teams interviewed.
Another noted how many insurers still have multiple accounting departments and other duplicative functions, so “consolidation still needs to be done.” CFOs are automating as much basic administrative work as possible in pursuit of highly efficient processes, as one of the interviewees described his vision.
2. Taking advantage of smart sourcing options
Creative sourcing models are increasingly the answer for high-performing finance functions. Shared service centers and centers of excellence can balance localized support and centralization, while boosting performance levels. Third-party relationships can deliver value via high-efficiency transaction processing, specific functional outputs (e.g., reporting, actuarial modeling) or access to deep knowledge and advanced technology.
There’s no one-size-fits-all approach. One CFO noted that “shared services make sense now as we implement new tools and technology,” while noting the need to periodically evaluate and modify service delivery models as business needs evolve. Another highlighted success with “pockets of managed services for operational and financial reporting.” The key is to understand the benefits and drawbacks of each approach for each process, weighing cost and efficiency gains against potential loss of knowledge.
3. Addressing the human factor
There was broad consensus among the research participants that engaging people is critical to transformation success. “I would put as much focus on people as on tech,” one CFO said. “Especially as we advance towards AI, we want the best people to stay with us.” Another reiterated the value of strong teams, “Even with AI, people are still what sets us apart from other companies.”
But human resistance to change can be a barrier. “Transformation means doing something new — learning a skill, implementing software or adopting a new process which is always challenging for a number of staff,” noted one CFO.
Re-skilling is a top priority. “Every organization in every industry needs to re-skill people and everyone knows it,” said one CFO. Another was optimistic because, “There are fewer barriers to re-skilling now than there were 10 years ago.”
4. Embracing the tech-led and data-driven future
CFOs recognize that the industry is living in the age of tech-driven disruption. One CFO noted that it’s critical to “keep pace with the change in technology and make sure we are not just left behind.” From a business perspective, that means “continuously innovating and incorporating new AI advancements as part of your operation.”
Older technology remains common across the industry, the research showed. Smaller carriers are as likely to use spreadsheets for data collation as they are to adopt artificial intelligence (AI) solutions, while CFOs from larger carriers are seeking “the tools they need to scale.”
The adoption of sophisticated data management practices is a particular challenge. But the hard work is necessary as data remains at the heart of the finance operations and the insurance business overall. “Companies that harness data in the most effective way will win,” noted one CRO. Another added, “My core thinking is that transformation is to become a data-driven business.”
5. Establishing a future-fit operating model
Collectively, these priorities point the way forward to a lean, flexible finance operating model that will help CFOs to contribute even more value to the business. As the report highlights, that operating model will optimize how:
- Finance services are delivered
- People are organized, managed and developed
- Processes are designed and connected
- Technology is deployed
- Data is used from source to report
- Governance models and controls identify and manage risks
