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Why CFOs are looking to invest in digital transformation

Following a year of global crisis that prompted organizations to adapt on the fly to uncertainties around a variety of critical factors affecting their operations, many finance leaders are looking to the future. Namely, they are focused on deploying smart digital technology to improve their agility, their decision-making capabilities, and their ability to nurture a workforce prepared to handle the next generation of challenges.

Change is in the air.

Following a year of global crisis that prompted organizations to adapt on the fly to uncertainties around a variety of critical factors affecting their operations, many finance leaders are looking to the future. Namely, they are focused on deploying smart digital technology to improve their agility, their decision-making capabilities, and their ability to nurture a workforce prepared to handle the next generation of challenges.

Transformation is already happening. Organizations are looking to accelerate their post-pandemic processes—including data collection, access, and analysis—to future-proof their operations, and meet the growing challenges of environmental, social, and corporate governance (ESG) and diversity and inclusion (D&I) considerations.

Frictionless finance is a key goal

Not surprisingly, CFOs recognize that investments should reflect these priorities over the next one to three years, according to a recent worldwide survey Workday conducted of 267 CFOs at medium and large enterprises in a variety of industries, including financial services, manufacturing, retail, technology and media, and transportation.

Top of mind for many respondents was the concept of frictionless finance—or, using automation or machine learning (ML) tools to eliminate friction in their everyday processes and create data-driven strategies—as a way to evolve the finance function to handle future challenges more effectively, efficiently, and intelligently.

Yet even as finance leaders are able to visualize the direction they want to take, nearly one in five respondents (19%) said they were only beginning to digitize, while the majority report being at various stages on the way.

Among the survey’s key findings:

  • 49% of CFOs said the past year revealed their organizations’ biggest gap was the ability to execute with accurate, timely data to drive quick, informed decisions.
  • 52% said the lack of necessary data to make critical decisions had resulted in delayed product launches and missed financial forecasts.
  • 49% said data management and analysis are their top priorities over the next three years (with 60% investing in revamping finance operations in the cloud and deploying automated intelligence (AI)/ML solutions, and predictive analytics the most sought-after automation capability for 50% of CFOs).

Where CFOs are looking to invest

Boosting available resources geared for the finance function is also clearly a priority, according to the survey.

Fully one-half of respondents (50%) reported that their greatest progress over the previous year has been heavily investing in creating an intelligent data foundation and advanced analytics to improve decision making across the enterprise, while nearly a third (32%) invested in skills training for finance teams and improving existing infrastructure. The remaining 18% increased investments in enterprise management cloud solutions to automate transactions from end to end, as well as create digital solutions for customers.

When thinking about enabling a smarter way to handle data, CFOs said the greatest need for investment is in the area of analysis and reporting (28%), while they also expressed a need to improve the quality of their inputs through cleansing data, sourcing data, and reconciling siloed data.

Predictive analytics (50%), ML (45%), and AI (43%) took the top three spots for where CFOs said they intend to invest in, strongly suggesting that the future digitization of finance will focus not only on processing larger datasets more efficiently, but also extracting greater insight from that information to drive business decisions. Respondents followed those priorities with robotic process automation (RPA) at 39% and process mining at 34%.

Focus on emerging topics

As regulators, investors, and the public become more aware of organizational behavior, CFOs have taken notice and expressed a desire to address emerging topics. Of these, ESG emerged as the top priority for respondents, with 29% of them saying they’re most focused on prioritizing it, with D&I in the second spot (26%). The remaining areas CFOs are looking to prioritize include changes in corporate taxation policies (25%), cybersecurity (11%), and cryptocurrency (9%).

While potential impacts to the corporate tax code are a priority for finance leaders, a clear majority of them are confident in their organizations’ ability to adapt to those challenges—whatever they may be: 31% of CFOs said it would be very easy to do so, while 43% said it would be easy. Yet more than one in five (21%) said that it would be difficult for the enterprise to adapt to tax uncertainty, and 5% saw the task as very difficult, suggesting that a significant proportion of enterprises sees a genuine need for smarter technology in their future.

As the past year of pandemic-related uncertainty has shown, legacy systems and processes are not as likely to be effective in an increasingly data-driven economy. Although some of the challenges revealed in the survey aren’t new, the global COVID-19 crisis served to highlight—and, in some cases, exacerbate—existing enterprise challenges.

CFOs understand that the new normal appears to be one driven by enterprise-wide digital innovation, and that will require investment in smart technologies, management tools, and continuous training for workers—with robust data-handling capabilities at the foundation of it all in order to remain competitive and succeed well into the future of finance.

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