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Myles Corson

Hello, I’m Myles Corson from the EY organization and you’re listening to the Better Finance podcast, a series that explores the changing dynamics of the business world and what it means for finance leaders with insights key topics affecting the world of corporate finance. In this episode, Maria Montenegro, Chief Strategy and Innovation Officer at Wolters Kluwer, and James Paterson, Vice President and General Manager at CCH Tagetik North America, discuss the integration of environmental, social and governance (ESG) performance management with financial and operational reporting, and how a digital-first mindset can prepare CFOs for the challenges and opportunities ahead. There is a lot to cover with Maria and James, so let’s get started!

Well, James and Maria, thank you so much for joining us today. Great to have you and looking forward to the conversation. Before we jump into topic, perhaps I could ask both of you to share your backgrounds and the current roles you hold for our listeners.

Maria Montenegro

Thanks for having us here today, Myles. It’s a great pleasure to be able to share our views around the role of technology and ESG. My name is Maria Montenegro, and I’m the chief strategy and innovation officer at Wolters Kluwer. I joined just over a year ago, after about a decade where I did strategy and digital transformation work with some of the largest companies in the world across sectors. Before that, I spent some time in investment banking, where I served mostly private equity clients, and before that, I was an ecommerce entrepreneur. I’m originally from Portugal, but I’ve been living in the US for eight years now.

James Paterson

Thanks, Maria and hello, Myles. My name is James Paterson and I’m the VP and general manager for the North America region of CCH Tagetik, which is Wolters Kluwer’s flagship platform in the corporate performance management space. It’s a pleasure to be here with you today. I joined Wolters Kluwer approximately seven years ago and was initially responsible for our North America corporate tax business, before joining the Tagetik leadership team about two years ago. Prior, I led a portion of business software organization and worked in software business development roles before that. I grew up in the UK but I’ve been living here in the US for 20 years now.

Corson

Fantastic. Well, a wealth of experience to draw on there. Maria, not all of our listeners will be familiar with Wolters Kluwer. Can you share a little bit of background on the company and some of its products and solutions?

Montenegro

Wolters Kluwer is a publicly traded portfolio of B2B software and information services companies. So, our market cap is about EUR30 billion. We have EUR5.5 billion in revenue and 20,000 employees. We’re a truly global organization and do business in over 180 countries. We serve corporate customers across industries, like health care, banking, insurance, oil and gas, and also across functions, including finance, internal audit, environment, health and safety (EHS), sustainability, risk, compliance, legal, et cetera. We serve the professional services segment in both tax and accounting, as well as legal. So, that’s from the Big Four accounting firms all the way to the solo accountants, as well as law firms. But the finance audience of this podcast is most likely familiar with our CCH Tagetik corporate performance management solutions, which is the area that my colleague, James here, supports, but we also have a unique value proposition in the broader ESG space, because for a long time, now we’ve been serving the key corporate stakeholders that are involved in ESG and that’s the topic that I know we’re going to dig into in today’s conversation. So, very much looking forward to that.

Corson

Looking forward to getting into that topic specifically. Maria, one of the things we talk about with CFOs is them becoming increasingly involved in setting strategy — more of a strategic role. So, I’m interested from your perspective in a strategy and innovation role at Wolters Kluwer, your interaction with senior finance executives. What are things that as a strategy professional you see is being done to add value in those relationships? Are there other things that finance professionals should be thinking about to add even more value?

Montenegro

There are two main situations in which I interact or work with my finance colleagues. One is around strategic planning and the other one is actually ESG. On the strategic planning fronts, as head of strategy, I’m obviously laser-focused on the financial performance of our businesses and in capital allocation. I really rely on my finance colleagues and systems as sources of data and insights to help me officially make or guide strategic decisions, but that’s been the case for heads of strategy for a long time now. What’s really helpful for me from my finance colleagues is to not just access to the data, but also to the insights because there’s so much data out there. There’s only so much that I can process myself as a human. So, having the top insights from my finance colleagues is something that really helps me in my role. What’s a more recent phenomenon is ESG and this has really risen to the top of the C-suite agenda. And in most large companies, ESG is managed through a collaboration between various departments, including strategy, finance, sustainability, legal and compliance, et cetera. And Wolters Kluwer is no different. In my case, I’m part of our sustainability board, which is a cross-functional body that sets and guides execution of ESG initiatives and also supports our finance function with ESG reporting, because finance is really front and center in leading this for most major corporations. I’m very proud to say that we, at Wolters Kluwer, practice what we preach, meaning that we’re a key software player in this ESG space and we have a great track record in ESG performance. We’ve a “AAA” MSCI sustainability score, which is the highest possible. And we do that by drinking our own champagne, so to speak, because we use our own ESG software that’s available to our customers to drive better performance. And that includes Enablon, whichis a safety and sustainability management platform, very well known in the EHS space, as well as Tagetik, which I mentioned earlier which really supports with ESG reporting and helping tie operational and financial metrics together.

Corson

Some great things there. I love the actionable insights and that’s such a key focus for successful finance executives. James, perhaps I can ask you the same question in your role as a general manager.

Paterson

Sure, and while it’s true that each and every one of our senior finance customers faces unique challenges, and they have their own unique needs, now we tend to see that most senior finance leaders, they really value a few topline qualities in their partnerships with technology providers. First and foremost, they value proven domain expertise.

In the case of finance, our customers value our deep understanding of their key financial workflows and in traditional Corporate performance management (CPM) areas, such as planning and analysis, close, and consolidation, and also, our expertise in tax and other areas of compliance. We really deeply understand the challenges finance leaders have in these areas and that’s why we can develop innovative technology products to automate those workflows. We hear time and again that our customers value that our solutions are developed by finance experts for finance experts and that domain expertise makes all the difference. Second, finance leaders place a high value on responsiveness, working side by side as a true partner and providing ongoing supports. It’s true enterprise-wide technologies require significant financial investment. Senior finance executives want partners who can make that implementation go as smoothly and efficiently as possible. They want partners who offer the ongoing support they need to ensure that their teams fully understand how to use their technology resources and tools in a way that ensures that they get the maximum return on those investments. And thirdly, theyvalue partners who are committed to helping them stay future-focused. Today’s senior finance leaders have ever-evolving job descriptions and they need partners that are there doing the work not just to solve the problems and challenges of today, but to develop the innovations that will solve tomorrow’s challenges too. We see this today in a couple of emerging areas, such as the OECD global minimum tax requirements and ESG legislation, which is a specific area where really the role of the finance leader is expanding to cover the collection, reporting, analysis and assurance of new and very diverse data sources.

Corson

We started to touch on this convergence of these broader topics and obviously you’ve touched on some of the solutions that Wolters Kluwer has — Tagetik and Enablon. As an organization, you announced some structural changes, putting those solutions under the same business unit. So, perhaps you could just talk about the strategic rationale behind that and the opportunities it’s creating for you.

Montenegro

This is a topic that we’re really excited about. Earlier this year, we announced the creation of a new global division called corporate performance (CP) and ESG, which aims to meet what we see as a growing global demand for integrative financialand operational ESG performance management and reporting solutions. We see ESG as a true team sport within large companies, one that requires the finance function, EHS, sustainability, risk, internal audit, procurement and others to rise above their silos and come together to collaborate, so they can share, report and make meaningful use of data in a way that empowers them to continually measure and improve their ESG performance just like they continually finetune and work to improve their financial performance.

But our new division, CP and ESG, brings together our global enterprise software assets, all of which play a key role in the ESG workflow of corporates and banks. These include Enablon, which is the global leader in EHS and sustainability software, CCH Tagetik, our corporate performance management platform which focuses on the office of the CFO, FRR’s OneSumX, which is a risk and regulatory reporting platform catering to financial institutions, and finally TeamMate, which is a global player in internal audit software. The ESG software market is growing very fast and the vendor landscape is highly fragmented. Our software solutions have, for more than a decade, been driving the digital transformation of several key functions that I mentioned before, and now, this division brings all of these software platforms together to really help customers drive the enterprise-wide digital transformation of their ESG efforts and helping them break their own silos too.

Corson

That need for cross-functional teaming and collaboration, I think, is such a consistent theme, particularly in this ESG space, but also broader, how finance can help drive agility in business. James, what are you hearing from your customers and what it means to them?

Paterson

Well, we really do believe the launch of this new division is a market-shaping move, and so far, it’s been exceptionally well-received by our CCH Tagetik customers, our partners and industry analysts also. ESG strategy and reporting is an issue that’s rising very quickly to the top of the corporate agenda, right up there alongside financial reporting as an indicator of organizational health.

Our customers in the C-suite, they’re very hungry for guidance on how technology solutions can help bring the same kind of efficiency, structure, reliability and rigor to ESG reporting, as they’ve come to expect from their financial reporting. They ask us how can they leverage their existing investment in our CPM technology to help solve these new requirements. Our CCH Tagetik ESG reporting solution does just that and it sits together alongside the other products that Maria referenced all across the four corporate ESG workflows.

Corson

That very much resonates with me, James, and again, I think how companies report financial and nonfinancial information is materially going to be really important. So, integrating ESG performance management with financial and operational reporting makes sense, particularly as organizations drive change management and adopt behaviors to embed sustainability into that business as usual. It's just going to become part of the normal course as I see it. James, building on that, what are some of the challenges that you're seeing on this integration and how your customers are seeking to address them?

Paterson

If we stop for a moment and think about it, this is really the first time in history that companies have been required to report on both financial and nonfinancial data. It's a big change. It's a huge challenge and there's good reason for it. Investors, consumers, analysts, employees and other stakeholders, we've long looked at financial KPIs as key gauges of our businesses’ operational health. And now, these same stakeholders are increasingly demanding companies make and keep strategic commitments to advance social responsibility and environmental stewardship too.

But when it comes to aligning investments and ESG strategies in the short and the long term, it's important to remember that right now, there are over 600 different pieces of ESG regulation with many having different interpretations of sustainability. That myriad of inconsistent and ever-evolving regulatory frameworks makes ESG reporting even more complicated. That context is important, because it sets the stage for why centralizing, standardizing and assuring the accuracy of integrated financial and nonfinancial data from a multitude of internal and third-party sources can feel overwhelming. It's an exceedingly complex task. But having one source of accessible, reliable data is essential to organizations that want to use data to drive change management and embed sustainability into their business as usual. Over the past decade, leadingcompanies have been increasingly using CPM technologies, such as CCH, to collect, report, analyze and support accuracy of financial data. The customers who we predict will be the most successful in integrating ESG performance management with financial and operational reporting are the ones who leverage technology to collect, report, analyze and support the accuracy of their ESG data too.

Corson

Maria, James has kind of referenced there the evolving regulatory landscape and you referenced earlier on that Wolters Kluwer is a leader in the space in terms of your own business. As the regulations are finalized and the processes and data and controls that support that ESG reporting need to evolve, how do you continue to stay abreast of the changes and support your customers to meet the evolving requirements?

Montenegro

Regulatory change is the bread and butter of Wolters Kluwer. This is what we do across the entire company day in and day out, and we've been at it for decades, or I should really say centuries now. We have deep regulatory experts in these fields embedded in our product development teams to ensure that we stay ahead of the changes that are coming, so we can support our customers in their compliance with regulatory requirements and really help drive financial and operational value from their ESG strategies. A core part of our strategy is to enable the end-to-end ESG workflow from data collection and calculation through reporting, analysis and assurance. And to do that efficiently, we focus on deep data management capabilities from which our customers can then report through whichever voluntary or mandatory frameworks they need or want to use and support traceability and consistency of data throughout. Moving beyond ESG reporting and into risk management and performance improvements to drive sustainable business value is something that I'm passionate about and that the new division is laser-focused on, because we know that ESG performance drives company performance. It improves return on assets, share price, risk management and so many other key metrics and working to help our customers deliver on the promise of ESG, because it's not just the right thing to do for society and our planet. It's also great for business.

 Corson

James, coming back to you, we talked a little bit about the importance of effective resource allocation and touched on some of the needs for agility. The pandemic has obviously driven that in terms of the importance of more real-time decision-making and the role finance can play and using that to create value for organizations. What are some of the examples that you've seen of how your customers and their finance organizations are doing this well?

Paterson

When finance teams take on strategic initiatives, like integrated business planning, extended planning, scenario planning and other FP&A projects, they are more able to positively influence decision-making and resource-allocation challenges by putting a heavier reliance on planning technology and data insights often in real time. And finance teams are better armed with actionable intelligence to benefit resource constrained decision-making. And I'd like to share a few examples then of where this might play out: sales support. Finance functions, they typically support sales teams in territory and account management by providing insights into resource allocation perhaps across different regions, customer accounts, product lines. Through data analysis and performance evaluation, finance teams can identify high potential territories, accounts and product lines that deserve additional resources. If we think about supply chains and supply chain optimization, including inventory management, demand forecasting and cost optimization to ensure efficient utilization of resources, finance teams can enable organizations to minimize cost, while still meeting customer needs. Finance functions also have a very critical role to play in capital budgeting by using FP&A techniques, like discounted cash flow analysis, sensitivity analysis and scenario planning. These tactics enable finance teams to make informed decisions on allocating limited capital to projects with the highest potential for value creation.

A very specific example that perhaps we have all experienced and that is the dynamic pricing in the airline industry. Airlines that constantly face the challenge of seat availability and market demand fluctuation. Finance organizations in the airline industry utilize super sophisticated pricing models in real time to get the highest amount of dollars for every seat. They forecast the potential for seat profitability using scenario planning, and by using historic market trends, sales data and demand patterns, they can create models that adjust fares dynamically to maximize revenue, while still filling seats effectively. In some cases, they can use rules-driven artificial intelligence (AI) and machine learning (ML) to drive this, and this can allow them to redirect team members to other strategic initiatives. Some other detailed examples can vary dramatically by industry. In service industries, it's critical to understand the pool of resources that are available, as it relates to what you are forecasting your demand to be and predicting the utilization of those resources. For manufacturing or CPG companies, it's about understanding capacity constraints, which drive those organizations to plan at a very low level of detail, including operational planning.

Best-in-class organizations have a very detailed operational plan that is fully integrated with their financial plan to take into consideration the capacity constraints of the company. It could be in their supply chain inputs, production capacity, staffing levels, so on and so forth. This helps them to develop a plan or a forecast for resource utilization that drives the best financial outcomes for their business.

Corson

Really helpful there in terms of the opportunity, and again, how finance can play a role in that value-creation story. One of the key drivers of effective reporting is high-quality data, and many companies struggle, particularly as the volumes and the sources of data seem to grow exponentially. Can you share any perspectives on the role of effective data strategies and management in corporate performance management?

Paterson

Absolutely. C-suite leaders are increasingly realizing that quality reporting of any kind requires a massive and ever-increasing volume of data sets. That can come from disparate businesses, divisions, functions, third-party sources and all this needs to be collected in a way that allows it to be reported and analyzed and audited for accuracy. That volume of data looks set to increase over time. For example, finance leaders no longer can just focus on financial data from an array of internal sources. They need to also be able to take the same process — collection, reporting, analyzing and auditing — into unstructured nonfinancial data, and again, this can come from both internal and external sources like third-party suppliers. So that's why spreadsheets and isolated legacy solutions, they no longer suffice for larger organizations that are committed to integrated financial and non-financial reporting. Meeting stakeholder demand for investor grade financial and ESG insight just can't be done without reliable, integrated and standardized automation.

Corson

Maria, let's bring you back in. James mentioned the role of AI and machine learning in value optimization in the airline industry. And there's a lot of discussion around the role of AI in predictive forecasting, et cetera. The hot topic at the moment is generative AI, which is getting a lot of attention. Can you share some thoughts on how you see this particular technology being applied and its impact on corporate performance and ESG reporting?

Montenegro

That's the question of the day. The reality we're all facing is that the business world is changing fast, and for CFOs in particular, that means that the complexity of their roles will continue to grow exponentially. CFOs have more data at their fingertips than they ever have before, but they also have more questions to ask and answer and a need for greater planning for multiple scenarios. In order to manage financial and operational complexity and optimize performance, CFOs need intelligence analytics. In CCH Tagetik, we've been working diligently to add AI and ML capabilities to what we call the Analytic Information Hub, which is one of our strongest differentiators. It's a single platform that fuels all the applications, ranging from data integration and workflow management to master data management. And some of the capabilities include managing all financial and operational data for entire enterprise, automating planning, and ongoing simulation processes, as well as facilitating integrated business planning by connecting financial strategic planning, budget and operational forecasting and planning along with nonfinancial planning for the key business drivers, like HR, and demand supply planning. We've been using AI extensively for quite some time and are, of course, expanding to include generative AI and large language model (LLM) capabilities to evaluate massive volumes of disparate, structured and unstructured data, adding a new dimension in the automation of the process of generating insights and analysis of the financial and operational data that we deal with. So, gen AI will help identify trends and patterns which might not be immediately apparent through human analysis. For example, gen AI-powered predictive analytics can help predict future trends and metrics in financial forecasts, sales performance or inventory fulfillments by quickly synthesizing large amounts of texts and other types of data. And it can also be extremely useful in identifying, extracting and quantifying ESG information quickly and efficiently, developing insights and solutions to help with compliance or to solve complicated problems related to ESG performance. And it can go even further, bringing in data sources, like social media feeds, competitors’ announcements, customer support queries, and climate and economic conditions. Even general news can really be invaluable in monitoring public opinion and sentiment about a company's brand or reputation and help generate new product descriptions, marketing campaigns, et cetera. The potential is incredibly high and we've been diligently leveraging these technologies to accelerate the value that we provide to our customer.

Corson

A lot more to come on that, no doubt, as this evolves, but just another example of the kind of disruption that's driving transformation in the finance organization. And one of the things, James, that we know from our research is that successful finance transformation depends on engaging finance talent effectively. And you provide great tools for finance and sustainability professionals and broader business professionals to use. As we think about the future skill sets, what are the skills and the competencies that you think are required? And what are the opportunities going to be created within the finance function as a result of some of this disruption?

Paterson

I think, as Maria referenced, there are huge amounts of disruption coming from all kinds of angles, and so to succeed both today and into the future and really to meet the increasing demands for integrated financial and nonfinancial management reporting, C-suite leaders need to build integrated teams across not just finance, but also reach out to their sustainability, IT, business teams;people in different areas. These teams, they need to be filled not just with the traditional functional expertise. Finance leaders, they're going to need to think through how to build teams inclusive of technologists data analysts, for example. These finance leaders, they need to reach out and identify in their organizations who would be strategic, forward-thinkers who can leverage technology to identify trends, solve real-world problems and collaborate with multiple stakeholders. Because of all this, what we see is very much an increasing need for finance professionals who understand that they need to spend far less time producing and maintaining historical records of performance and more time, more focused leveraging that real-time data to help shape future business and ESG outcomes. It's essential to their ability and to serve as well-informed driving forces behind corporate strategic decision-making. Those finance professionals who can drive collaboration with both internal and external partners to fill gaps in knowledge and to identify and implement best process workflows and technologies, they are the people who will drive improved financial and ESG performance over the long haul.

Corson

That need for business acumen to really unlock the power of AI and the tools that we have available to us to unlock the power of the data, very well said, and I think collaboration effectively depends on good communication skills, which I think finance professionals need to continue to develop, and successful finance leaders have that ability to balance EQ and IQ, as we've talked about a lot on the podcast. Let's just have some rapid-fire questions. We'd like to share some other perspectives with the audience, and particularly things that you use and how you’ve managed yourselves and your businesses. Maria, perhaps I'm going to start with you. Are there any podcasts, books, resources that you use to stay educated and informed?

Montenegro

Well, there're so many to choose from. There are two folks I follow on LinkedIn that I find really insightful. One is David Metcalfe from Verdantix. Verdantix is an industry analyst in the space.

And the other one is David Carlin, who leads the finance initiative within the UN's environment program and really shares great perspectives pretty much daily. Actually, I also think the EY Sustainability Reporting Development monthly newsletter is also a great summary for the folks that want to stay up to date on regulations across jurisdictions.

Corson

I appreciate that plug. Thank you. James?

Paterson

I enjoy following leaders who have driven a change in the markets that they operate in. Maybe the obvious one from a technology of the 21st century would be Steve Jobs, but I like the entrepreneurs who have really driven disruption. People like Sir Richard Branson or Travis Kalanick are two individuals who found very new and innovative ways to disrupt the industries that they were involved in. Also, I like to read the Wall Street Journal and The Economist. I like to keep a perspective of global issues that can have an impact on the markets and customers who we serve.

Corson

Are there any quotes or sayings that you apply in your professional lives? Maria, let's start with you.

Montenegro

I don't know if it's an official quote. I quite like the saying, “Teamwork makes the dream work.” That's very true in the world of ESG. Another great one, very apropos, is, “There's no planet B.” Unless find a way to make Mars habitable and soon, we should really care for the planet that we currently live in.

Corson

Very wise words. James, you?

Paterson

As a little bit of a student of history, I like to look back in time and see what applies today, and a quote that springs to mind for me comes from Sir Winston Churchill: “You'll never reach your destination if you stop and throw stones at every dog who barks.” I think it's appropriate for any finance leader actually who's embarking on a digital transformation in their organization.

Corson

Stay focused on where you're heading, not all of the distractions along the way. I love it. Maria, is there any particular piece of advice that stands out in your career as something that's had a big impact?

Montenegro

One of my biggest mentors in life often tells me to follow good people, not companies or flashy opportunities, and this has served me well so far.

Corson

That's a good one and James, same question.

Paterson

Maybe not so much specific advice, but I do like the Simon Sinek theory of why and it resonates with me, because it's always important to understand the motivation of whatever it is that's being requested by any particular person at any given time on whatever the topic.

Corson

Very good. And then obviously, you know, we're all under a lot of pressure and stress. Are there particular things that you do to maintain your wellbeing and balance? Maria, I’ll start with you.

Montenegro

People often talk about work-life balance. I find the expression a little flawed, because it implies that work drains energy and that personal life restores it. Maybe I'm lucky because I'm super happy and energized by work, and the same is true for my personal life. I guess I like to work hard and play hard. So, as long as I'm getting a lot of energy from both sides, that keeps me feeling well and balanced.

Corson

James?

Paterson

Similar to Maria, it is, of course, important to have a purpose and to have fun in what you do, and outside of that, I do get to travel a reasonable amount with the job that I do. And so whenever I go somewhere new, I try to make the time to visit some kind of historical site. And the reason I do that is I like to learn about what came before us and how that shapes today's society.

Corson

I love that one. And in terms of shaping today's society, James, what emerging technologies do you see as having the biggest opportunities and impacts on finance and why?

Paterson

I think there's an obvious answer around the generative AI which seems to be the buzzword at the moment, but I’d like to think less about technology in and of itself but more about how it's used to create better or improved outcomes for whatever the stakeholder. The technology without purpose only leads to problems.

Corson

(Laughs) Very good. We've covered a lot of grounds. I really appreciate all of the insights you've shared across these very interesting and timely topics. As we wrap up and distill this down, any final recommendations you would give to our listeners? And Maria, I'll give you the opportunity to go first on that.

Montenegro

I would say as you think about your organization’s ESG journey, go with solutions that can support your evolving needs and enable you to focus beyond compliance or beyond reporting, and really go into risk management and performance improvements to really get the most value from ESG and make it a competitive differentiator for your organization.

Corson

That's great and James.

Paterson

Any of your finance leaders who are listening to this podcast, you're facing a period of great change. Now, we've just come out of a pandemic. We all experienced our global supply chain issues and we still have a war unfortunately continuing in Europe, and now there's new disruption in the form of the emerging global minimum tax and ESG. And so, it's really important. Just be prepared for more continued change and I believe the best way to do that is adopting a digital-first mindset. That's going to be a great way to be prepared to be, you know, future-prepared for upcoming challenges, whatever they may be, and help you continue to thrive.

Corson

A great positive note to end on there. James and Maria, really appreciate you joining us today and look forward to the continued discussion.

Montenegro

Wonderful. Thanks for having us.

Paterson

Thank you, Myles.

Corson

If you’ve enjoyed this or any episode of the Better Finance podcast, please leave a rating or review and don’t forget to subscribe, so you get future episodes. You’ll find related links in the show notes or ey.com/betterfinance. As always, thank you for listening and if you have topics you would like to see covered or guests you’d like to see featured, please don’t hesitate to reach out. I look forward to speaking to you next time.

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