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What’s makes a great digital CFO in 2021?

The digital CFO makes his appearance in an age that does not cease to surprise with all kinds of new and interesting things with which we need to keep up in order to have a sense of comfort about how informed and prepared we are for a new world

All things Digital

Digital transformation, digital strategy, digital innovation and other terms which start with the word ‘digital’ seem to be emerging as the latest popular vocabulary in several business discussions today.

Some people cannot help but feel left out and uncool for not being able to use the word ‘digital’ in their daily conversations, because at times it appears as though almost everyone in the workplace is talking about all things digital. If you think you have heard it all, perhaps it is not a bad idea to consider yet another emerging term which may soon become the coolest thing to say in a strategy meeting.

Brace yourself for the era of the ‘digital CFO’ and if you are a finance professional, it is probably best to incorporate this new terminology into your business vocabulary. What it means to be a digital CFO signals an interesting evolution of not only the CFO role but also the finance function in the 4IR.

The digital CFO’s role

The CFO role and finance function as a collective in any organisation is a key pillar for financial management and without this pillar, one could argue that the financial performance of an organisation would be inconsistently accounted for. A CFO is the strategic leader behind the financial management pillar and in the digital era, the CFO is increasingly required to acquire digital acumen. Digital acumen will assist a digital CFO in driving financial management with a relevant approach to change as enterprise value transitions from tangible to intangible data assets and financial information.

Why a digital CFO needs digital acumen?

To get a good grasp on what it means to be a digital cfo, it is probably best to have a high-level understanding of what digital acumen is and why it is important for a CFO to acquire digital acumen.

Broadly put, digital acumen involves being up to date with the latest digital trends with a view of what the implications are for a business. Digital acumen also involves knowing how to use new technologies to innovate business processes for improved efficiency and organisational digital transformation.

Why is it important for a digital CFO to acquire digital acumen?

In a future-ready organisation, a CFO is at the centre of using insights from data analysis to drive financial performance and strategy. Extracting valuable insights from digital data requires a reasonable level of digital acumen that will enable the digital CFO to provide strategic direction which is more relevant in the digital era.

There is no rigid definition of what it means to be a digital CFO at this point in time because the CFO role is currently transitioning into a new normal of digital optimisation in various organisational functions. Digital transformation is challenging the status quo of operational efficiency and strategic management and these areas are accounted for in the financial management function of a business.

In order to keep up with rapidly evolving business needs in the 4IR, a CFO is increasingly required to implement relevant innovation and continued risk mitigation to deliver better-informed decisions and dynamic financial performance. A digital CFO will most probably focus on specific frameworks which are currently driving financial digital transformation in organisations. These frameworks include:

Financial data security The digitisation of financial information requires measures that will safeguard the integrity and safety of data. The regulatory framework around data management and the growing risks associated with data breaches require not only the chief information officer but also the CFO of an organisation to implement and maintain a reliable approach to data security management.

Automation of processes through digital platforms More speed and accuracy are required to keep up with rapidly growing volumes and the fast-paced accumulation of digital information. Automated digital platforms are an applicable solution in this environment.

Robotics process automation (RPA) is emerging as a great way to innovate around time-consuming and repetitive finance tasks. RPA can be used to record progressive steps that are followed to register financial information or prepare financial reports and statements. Receivables, cash management, payroll processing and invoice processing are some of the functional areas where RPA presents immediate benefits through automation of repetitive tasks.

Agility of processes and extended capacity through cloud infrastructure In a digital environment, it is important to have forward-looking processes and systems in place to address unpredictable growth in demand on business processes. Agile ways of work and cloud infrastructure make it possible for the digitalv CFO to plan functional tasks and cost-effectively invest in systems that will be accessible on a ‘pay as you use’ basis.

Proactive and predictive response through artificial intelligence (AI) AI is particularly useful in proactively identifying trends in information and using that to make predictions about the future. Financial performance forecasting and forward-looking measurement of performance targets can be done more accurately and efficiently with AI-enabled predictive models. This puts a CFO in a more empowered position regarding critical decision making about the financial future of a business. Machine learning as a function of AI also proposes the ability to mimic and replicate human tasks. Where possible machine learning may be a relevant application for financial report writing on behalf of a CFO.

Regulatory compliance and enterprise risk management through digitisation The regulatory landscape for statutory compliance, tax administration, fair competition, labour compensation and other legislative areas are becoming increasingly dynamic. The risk of high penalties and fines for non-compliance has become a high priority for CFOs, because this may adversely impact the going concern assumption in a business where the financial consequences are significant. Because of these challenges, a digital CFO would be an advocate for the digitisation of compliance processes for timely and accurate digital submissions to regulatory authorities.

As the digital CFO becomes more of a necessity with the evolution of the role in the digital era, it will be interesting to see how CFO job specifications will adapt to cater for this change. The finance function of the future may similarly become an area that is characterised by more digital processes and digital ways of work. In a future-ready environment, a CFO will be expected to work more closely with the chief information officer and the chief data officer. The CFO will need to have a deeper understanding of IT systems and data management and more synergies between the finance and data management functions will need to be explored.

In some corporate circles, the emerging changes in the CFO role and digitisation in the finance function may be spoken of as disruption which challenges the relevance of the traditional norm. On the contrary, this change is arguably a mere signal of ongoing evolution and improvement which is not a new phenomenon. The difference is that these changes as characterised by the 4IR are more rapid than ever before.

If you haven’t heard of a digital CFO, consider this your first encounter with the term. If you are a CFO or finance professional, perhaps reflect on the organisational impact of the characteristics that currently define a digital CFO and digital finance function. Also, consider what this means for you in a future-ready environment.

Author: Kevin Ssemwogerere CA(SA) is Digital Innovation Intrapreneur Lead, a keynote speaker and digital transformation and strategy consultant