50% CFOs contemplating data’s impact on corporate reporting
- Challenges with the greatest impact are increasing volume and pace of big data (50% very significant impact vs. global 26%) and complexity of organization’s global structure (50% very significant impact vs. 23%)
- Technology change is the standout issue in India: 53% respondents see this as the main external challenge, vs. 30% global average
EY’s latest survey; ‘How can reporting catch up with an accelerating world?’ observed that companies in India are facing higher levels of complexity across all aspects of the organization. They are more likely to have higher numbers (20+) of jurisdictions, reporting systems and reporting standards. The sample for India findings consisted of 40 India-based CFOs (50%) and financial controllers (50%) of large organizations.
Companies in India are also experiencing a greater increase in demand of products and services across all aspects of the organization compared to global levels. In particular, 33% have a significant increase in number of products sold (vs. global 13%), 25% have a significant increase in number of reporting standards (vs. 7%), and 23% have a significant increase in financial reports issued (vs. 9%).
CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them. Many, more particularly in India (57% against 30% globally) are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insights from large, fast-changing data sets. The result is an expectation mismatch between what boards now look at and what CFOs can deliver. Incrementally, Indian CFOs face challenges of multitude of regulatory changes across various industry sectors.
Another major finding from the survey in context of India indicates that technological changes are seen by CFOs as main external challenge (53% vs. 30% global). In addition, complexity is creating an impact on reporting effectiveness –challenges with the greatest impact are increasing volume and pace of big data (50% very significant impact vs. global 26%) and complexity of organization’s global structure (50% very significant impact vs. 23%).
Level of compliance is most effective aspect of external reporting: Respondents in India rate all aspects of reporting as more effective vs. global average. 43% say level of compliance is highly effective (vs. global 17%), while 35% see external stakeholder view as highly effective (vs. 13%).
Companies are increasingly witnessing huge increase in data required to manage compliances arising from new regulations. Some of the regulatory changes are also impacting the business model of the companies. Leading organisations are using these drivers as an opportunity to invest in technologies to better control compliances and optimize business value through added efficiencies, cost effectiveness and improved business intelligence.
Other key findings-
Data analytics and technology
- For Indian companies, the main technology challenges associated with making changes to the corporate operating model are dated IT systems (45% vs. global 25%), number of reporting systems (43% vs. 29%) and dated IT architecture (38% vs. 25%). Poor quality data is seen as less of an issue (15% vs. 22%).
- Respondents stress the importance of upgrading data analytics tools in corporate reporting to a much greater degree than at the global level – (75% top priority vs. global 41%). Meeting stakeholder demands for information is also relatively more important (48% vs. 31%).
- Reflecting these priorities, the overwhelming majority of companies in India plan to spend more on reporting technology. 98% expect to increase investment in corporate reporting technologies over the next two years vs. global 84%. This investment will be at a higher level –71% plan to increase their investment by more than 10% (vs. global 29%).
- As part of this increase in investment, companies in India expect to prioritize spending on big data technologies (48% vs. global 30%) and cloud computing (47% vs. 28%).
- Looking at the skills required to improve reporting processes, Indian respondents identify IT infrastructure as most critical (58% vs. global 36%). Financial data analytics skills (45% vs. 33%) also have relatively higher importance.
- Companies in India are making greater use of all aspects of the corporate operating model to a greater degree than global levels. The top two arrangements are centralized centers of excellence (65% vs. global 48%) and managed services (60% vs. 35%).
- They are also planning to increase use of operating model arrangements to a much greater degree than other markets. 90% plan to increase use of managed services (vs. global 52%) and 90% plan to increase use of outsourcing (vs. 55%).
- Expected investment will be higher than global levels across all areas. The largest spending increase over the next two years will be in centralized centers of excellence (45% at more than 10% vs. global 13%) and outsourcing (28% at more than 10% vs. 12%).
- Migration of reporting to SSCs, managed services or outsourcing is considerably more advanced compared to global levels: 25 to 40% of all reporting activities has been fully migrated to SSCs, managed services or outsourcing in India, vs. global 11 to 13%.
- Planned migration of reporting is also significantly higher in India vs. global. Over the next two years, financial reporting, risk analysis, business analytics and local statutory reporting are expected to be 40 to 45% fully migrated, vs. global 13 to 15%.
- The main reasons behind operating model changes are an increase in the accuracy and effectiveness of reporting (40% vs. global 30%) and improvement in meeting stakeholder reporting needs (38% vs. 27%). All reasons have higher priority in India except for cost cutting (25% vs. 27%).
- Indian respondents share the global view on the top two reporting challenges: complexity and cost of tackling legacy IT environment (72% vs. global 50%) and balance between central control and local reporting requirements (55% vs. 42%).
- Reporting functions in India have more local control vs. global average –20% are highly decentralized (vs. global 14%), 33% head office control with significant local market responsibility (vs. 24%).
- Responsibility for making decisions about the operating model rests primarily with the CFO --Group CFOs (53% vs. global 47%), followed by divisional/regional CFO (25% vs. 20%).
- Finance respondents in India acknowledge the importance and implications of operating model change: 92% agree that changing the reporting operating model is key to providing forward-looking insight (vs. global 56%), while 85% agree it is a major focus for their role (vs. 56%).
Notes to Editors
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