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How a strong vision can empower successful finance transformation

Finance leaders could transform their finance functions, but many may not realize the potential because their vision does not go far enough.


In brief
  • A digital transformation of finance should align with a compelling vision for the future of finance.
  • People should be at the center of any transformation effort. 
  • Tomorrow’s finance function should draw on more dynamic, network-based organizational structures to provide next-generation services.

The fast advance of digital technologies can provide a unique opportunity to transform finance operations — combining smart tools with process improvement to enhance the operating model:

  • Accounting knowledge can be codified into artificial intelligence (AI).
  • Tax operations can be digitally optimized to support the automated exchange of data with third parties.
  • Controls and compliance monitoring can be automated, with alerts triggered when risk metrics trend toward unacceptable tolerance levels.

However, many finance teams can often fail to realize their potential because they lack one vital building block — a vision. Focusing on the “how” of operations without the “why” of a clear vision can lead to incremental and underwhelming change. When external factors change at an unprecedented scale and pace, and in unexpected ways, a compelling vision for the future can help finance teams to master disruption rather than being reactive to it. Crucially, this vision can help to galvanize and inspire the finance team: motivating them when change can be difficult, and keeping people focused and committed over the course of long-term transformation programs.

While each function’s vision is unique, it will likely articulate an aspirational future for finance in a digitized world — one where smart people and intelligent automation technologies utilize real-time, data-driven insight to guide the organization’s performance and radically improve how strategic decisions are made. While there are many aspects to that new future of finance, this article focuses on the requirement to provide next-generation finance support services for the business.

These issues form part of a series of articles on the future of finance, which examine how finance leaders should simultaneously transform their digital and people capabilities, including rethinking team dynamics to bring creativity and fresh perspectives to data analytics, and rebooting the skills, career path and culture of the finance function.

1

Chapter #1

The future finance operating model

Providing next-generation services though a fluid and networked operating structure

The future finance function will likely face increased demand to partner with new stakeholders to meet new and broader requirements from the business. Today, finance leaders are increasingly involved in sustainability reporting and the requirement to provide stakeholders, such as investors, with credible, verifiable and high-quality data and disclosures around environmental and societal issues. The EY Global Corporate Reporting and Institutional Investor Survey found that a company’s sustainability disclosures are central to how investors make decisions but that the reporting expectations of the investment community are not yet being met.

The use of ESG disclosures in investment decision-making
99%
Nearly all investors surveyed utilize companies’ ESG disclosures as a part of their investment decision-making.
The importance of enhanced financial and ESG disclosures in investment decision-making
73%
But close to three-quarters said that “organizations have largely failed to create more enhanced reporting, encompassing both financial and ESG disclosures, which is critical in our decision-making.”

The demands on the finance team continue to grow, and at the same time, the technology landscape continues to evolve at a fast pace. As EY examines in How emerging technologies can usher in the dawn of pervasive intelligence, by 2030, the world could be in the 6G era — an intelligently autonomous, sensory, massively distributed but highly networked world that blends our physical, digital and human systems.

Responding to this level of disruption and change will likely require greater operational agility, including a more fluid operating structure that extends beyond the walls of the enterprise to tap into an ecosystem of third parties and provide the next generation of finance services. In the future, it is the outcome that will likely matter, regardless of who contributes the data, tools, skills or systems, either within or outside the organization.

 

Moving to the next generation of finance services will likely require CFOs to address what is and what is not retained within the finance remit. External partners could even conduct activities that could be seen as core to the finance function — such as treasury or sustainability reporting – more efficiently.

 

This approach can help finance leaders tap into today’s digitized and connected world to consume higher-value finance services from ecosystem partners. It can also help to unlock value and drive innovation because resources are less consumed by running the day-to-day finance function. Data should also flow in real-time between ecosystem participants, including tax authorities and regulators, who could require companies to provide direct access to relevant data.

 

Through cloud-based systems and applications, finance function partners can provide a more efficient and effective way of managing the data-intensive processes that form a large amount of the finance team’s remit.

2

Chapter #2

The vision to achieve

A compelling vision should put people at the heart of the transformation effort

Providing next-generation services by moving to a more networked operating structure can be a major undertaking and require overcoming significant challenges, including cultural challenges such as inertia and resistance to change.

Large-scale change can be difficult to achieve. However, according to research conducted by EY and the University of Oxford’s Saïd Business School: “How transformations with humans at the center can double your success,” finance leaders are seasoned transformation leaders but are also familiar with underwhelming returns:

Involvement in transformation projects
78%
The majority of finance leaders surveyed have been involved in two or more major transformations in the last five years alone, compared to 85% across all respondents.
Experience of underperforming transformation projects
77%
More than three-quarters of respondents said that they have experienced at least one underperforming transformation during this time, compared to 67% across the whole sample.

The research used predictive analytics and identified six key drivers that, when done well, can increase the likelihood of a successful outcome by 2.6 times to 73%. In addition, the EY-Saïd Business School research highlights that the complex factors influencing a transformation’s success or failure are rooted in human emotions. For example, a negative cycle emerges in an underperforming transformation. Overall, negative emotions in the workforce increased by 25% in a successful transformation, but by more than 130% in an underperforming transformation.

This is why the vision can be so important for galvanizing and inspiring the finance team. But it can require finance leaders to be honest about their own strengths and development requirements when it comes to adapting and nurturing the necessary leadership skills, including designing and communicating a compelling vision of the future.

Summary 

Cost efficiency can be an important element of operating model transformation. For example, a network-based structure can allow finance leaders to consume services in a flexible, on-demand way while avoiding substantial upfront capital costs. But it is important to remember that successful transformation often starts with the ambition to do things differently and the willingness to put your people at the heart of the change effort, united behind a compelling vision of the future that fuels innovation.

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