5 minute read 16 Feb 2021

How COVID-19 influences the CFOs’ role and speeds up its transformation

Authors
Katrien De Cauwer

EY Belgium Actuarial and CFO Consulting Partner

Seasoned Actuary and Insurance Professional. Entrepreneur. IFRS 17 expert. Devoted to helping talents define the legacy they want to build. Mother of three. Passionate about photography.

Laurent Nossent

EY Belgium Financial Services Finance Transformation Partner

Expert in Banking. Focused on Finance Transformation. Excited about Digital Finance and Cost Efficiency. Building successful transformation teams. Raising client satisfaction. One daughter.

5 minute read 16 Feb 2021

While the Finance transformation journey started some time ago, the current health crisis brings CFOs to re-assess their key priorities.

At EY Financial Services, we surveyed CFOs from important financial institutions in Belgium to find out where they are in their transformation agenda.

Why COVID-19 is an opportunity for the Finance transformation

Considering the uncertain and moving context, CFOs have changed the short-term priorities on their agenda to cope with the urgency of the situation and deliver on the organization’s needs.

  • In the context of the current health crisis, where management and business more frequently need real-time information on their performance, one of the short-term priorities for the Finance function is to contribute to more agile business planning, forecasting and analysis. The quickly developed scenario-based business projection tools and capabilities now need to be stabilized and professionalized.

  • In the next 12 months, CFOs will focus on business growth. Indeed, this ranks as the number 1 priority for 1 out of 2 respondents. This confirms CFOs play an increasingly important role in developing and delivering on the organization’s growth agenda.

  • As income and impairment metrics are moving adversely, cost is the main lever that CFOs can pull. The current context might have made cost containment even more of a priority than pre-COVID19: cost reduction is the second top priority on CFOs’ short- and long-term horizon. At the same time, 1 out of 3 respondents mention cost constraints in the top 3 inhibitors to achieving their priorities.
Graph: Top three key priorities for the next months

Source: EY CFO Flash survey performed in September / October 2020

What will be the next challenges for the CFOs?

Finance has been traditionally known for its solidity, promoting process stability and a controlled execution framework over efficiency and agility. In the early days of the COVID-19 crisis, Finance has also demonstrated the ability to react quickly to unexpected change. Building on this, CFOs now have a unique opportunity to accelerate their transformation journey, creating the “Finance Function of the Future”, that is able to quickly and efficiently respond to increasing stakeholders needs, be it from business and clients or from the regulator.

To support their business partner role, CFOs must further develop and transform their departments in many areas.

  • Finance technology has been historically under-funded and can be unnecessarily complex and fragmented. 8 out of 10 respondents to our survey mention legacy technology and system complexity as a top 3 inhibitor . Process optimization and technology enablement combined with the realization of data ambitions is critical to shift the finance operating model to higher value-adding and more cost-efficient processes.

  • Business planning is a key tool to equip business, management and the Board in making important decisions regarding the future course of the company. To respond to the urgent need for insights during the crisis, many CFOs have taken the opportunity to develop tactical solutions to help the management and the Board navigate through the crisis. Next challenge for Financial Planning & Analysis (FP&A) teams is to stabilize and professionalize these solutions, to further integrate business data in their predictive models and to develop the capability to run and maintain what-if scenarios. Supported by an increased collaboration across Finance, Risk and Business, this will allow Finance functions to become more flexible and agile to provide insights quicker, with increased confidence. 
Graph: How do you plan to address challenges around business planning?

Source: EY CFO Flash survey performed in September / October 2020

  • From a people point of view, scarcity is a challenge, as well as the fact that there must be an evolution of Finance people’s skillset in order to be able to respond to the changing role of the Finance function. Predictive and prescriptive analytics will be key to be able to deliver agile business planning, dynamic forward-looking analysis and real-time insights in response to stakeholders needs. The current uncertain context, and changes ahead, make that agility will be required from Finance people. Therefore, change management as well as resilience and openness to change are considered key skills for Finance people going forward. Recent events have also highlighted the importance of additional skills such as team leadership, IT curiosity and ethical decision making. As Finance continues to transform and challenge old norms in a post-COVID-19 environment, these skills will continue to become of growing importance. 
Graph: What are the key skills that are critical to your Finance function over the next two years?

Source: EY CFO Flash survey performed in September / October 2020

Conclusion

The COVID-19 crisis has been the opportunity for the Finance department to take on a more visible role, providing financial and non-financial information to the management in an agile way.

During the last months, day-to-day activities have been focused on responding to the requirements of the regulators, the management and the business. Going forward, the Finance function will need to further develop its agility to better and faster meet the different stakeholders’ needs. This requires that CFOs adapt their organization, acquire new skills, optimize technology, …

The CFO position has always been an exciting one. Now more than ever, with the multiplying challenges and opportunities, CFOs have a transformed and transformative role to play. They have learned lessons from the COVID-19 crisis and are capitalizing on them to make their institutions stronger. They have a hand in writing the future of financial services. A crucial one.

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Summary

The Finance function proved to be agile in its ability to quickly adapt its day-to-day activities in the early days of the COVID-19 crisis. The remote operations ensuring business continuity, the absence of delays in the year-end financial closing and the responsiveness to the additional regulatory constraints are only a few examples of this fact. At the same time, the current context brings to light areas for improvement to the Finance function and provides an opportunity to re-focus its role within the organization. Indeed, CFOs are offered an opportunity to take an important step forward in further developing its strategic, forward-looking business partner role.

About this article

Authors
Katrien De Cauwer

EY Belgium Actuarial and CFO Consulting Partner

Seasoned Actuary and Insurance Professional. Entrepreneur. IFRS 17 expert. Devoted to helping talents define the legacy they want to build. Mother of three. Passionate about photography.

Laurent Nossent

EY Belgium Financial Services Finance Transformation Partner

Expert in Banking. Focused on Finance Transformation. Excited about Digital Finance and Cost Efficiency. Building successful transformation teams. Raising client satisfaction. One daughter.