Asset growth/product expansion (58%) and talent management (47%) are the highest priorities for PE firms in the coming few years.
2. Technology
CFOs said that they are still in the early stages of technology development for practically every finance function, especially management reporting (51%) and valuation services (53%).
- Similarly, while PE firms understand that harnessing and managing data is a top priority, 62% of CFOs feel their data is not well-integrated across the organization.
Despite the difficulties in incorporating new technology, over two-thirds of CFOs (66%) said they currently invest or plan to invest in next-generation technology.
- Firms are currently investing in emerging technologies such as digital data delivery (37%) and advanced analytics (20%). While they are just beginning to delve into robotic process automation (4%), more CFOs said they are planning to do so in the future (14%).
Investment plans
66%The percentage of CFOs who said they invest or plan to invest in next-generation technology, including digital data delivery and analytics.
3. Talent management
Despite larger firms’ reliance on technology, talent management remains one of the highest strategic priorities for CFOs across the board.
- They see human capital as a valuable asset, but 47% also identified talent attrition as a top risk. A trusted CFO with a capable team that exceeds investor expectations and upholds the firm’s reputation is an important piece that investors consider during due diligence.
Although CFOs are trying to engage millennials and tech-savvy individuals to stay within finance functions, 35% said it is difficult to attract talent in these functions.
- As a result, firms are increasingly offering other incentives beyond compensation to retain talent, such as expedited title changes/promotions (62%) and flexible work arrangements (51%).
4. Outsourcing
CFOs view outsourcing as a way to shift finance teams’ tactical responsibilities to more value-add activities.
- If a “perfect” outsourcing model existed, CFOs believe that shifting tactical finance areas such as fund accounting (67%), tax (67%) and regulatory compliance (62%) to a third-party would be most valuable to their ongoing success.
Satisfaction of outsourcing varies based on how large a firm is and which areas they are outsourcing.
- Tax is currently leading the way, with an average of 70% of respondents saying they currently outsource this function, most under US$2.5b in AUM.
5. Cybersecurity
The increasing sophistication of cybercriminals poses a risk to private equity firms, regardless of size.
- Twenty-two percent of private equity firms surveyed reported they have experienced a cybersecurity breach, but many more could have gone unreported. Over half (58%) of those breaches were considered at least moderately serious.
To identify vulnerabilities and manage risk, most private equity firms (70%) rely on externally developed intelligence products to monitor cybersecurity.
- Firms are beginning to recognize the effectiveness of a multipronged approach, taking steps to improve employee training (87%), email monitoring (80%) and using external vendors to perform ethical hacks (80%).
Summary
While achieving operational maturity is still a few years away for most private equity firms, CFOs are increasingly confident that they will be taking major strides toward making their organizations more scalable, competitive and efficient in 2018.
