One of the highlights from a study by professional services firm EY (Ernst & Young) is that macroeconomic fallout from COVID-19 creates a fresh opportunity for finance leaders to rethink their roles in the new normal.
Reflecting digital transformation’s forced rise to the top of leadership agenda, financial professionals are redefining their operating models, which includes reimagining employee experience as one of its aims.
Indeed, active participation in digitalisation heightens the CFO’s role and relevance amid the general transition to a post-4IR world (4th Industrial Revolution).
EY’s sixth annual Financial Accounting Advisory Services (FAAS) survey, How can corporate reporting connect your business to its true value?, tapped the view of more than 1,000 CFOs and financial controllers across 26 countries.
Tim Gordon, EY Global Financial Accounting Advisory Services leader, says that finance leaders foresee their function to look very different in the future, with a major shift to a smarter operating model.
Some of the results include:
- 53% of finance leaders surveyed say more than half of current tasks could be automated over the next three years;
- 54% think it is likely that blockchain-based systems will underpin finance;
- 63% have concerns about the risks of using artificial intelligence in finance and reporting.
Turning to Malaysian perspectives Lee Pei Yin, partner, Financial Accounting and Advisory Services, Ernst & Young PLT, said: “In Malaysia, organisations are at varying stages of adapting their business models to the new normal. The finance functions in some sectors are still responding to the unprecedented challenges of the pandemic itself, while others are already looking to plan for what’s next.”
“The financial reporting over the past year has provided some insights into the business and financial challenges that organisations face and the arising accounting issues.”
CFOs are rethinking roles and adapting their processes around data, according to conference discussions over the last couple of years.
Data at the heart
“Clearly, organisations and their finance functions will need to prioritize strategically and reimagine what the new normal will look like for their business, people and sector,” she says.
“It is important to explore opportunities to operate differently in the future, leveraging data and technology to build agility and flexibility to ensure future-fitness and the ability to create long-term value in a post-pandemic world.”
Digitalisation is altering finance functions by shifting focus towards analytics in the pursuit of generating new value.
Automation, blockchain ROIs
Speaking to Disruptive Asia about the current state of automation and blockchain in Malaysia, Pei Yin notes: “Organisations in Malaysia have more choices now than ever in the digital economy, especially with the recently-launched Malaysia Digital Economy Blueprint (MyDIGITAL) and the deployment of the fifth-generation (5G) infrastructure and network nationwide.”
“Automation offers tremendous benefits for businesses looking to drive transformation in their organisation: from cost savings and increased delivery speed, to solving their return-to-work challenges today and new operating models to support the future of work in a post-pandemic world.”
As a start, an organisation needs to decide on its mix of tasks performed internally and by service providers, and how technology may support these.
Pei Yin believes that “Most companies will likely decide on a hybrid approach, where they may continue to own some critical tasks, while co-sourcing or out-sourcing others. This approach drives overall effectiveness and efficiency while empowering internal teams to focus on high-value strategic matters.”
“For an organisation to focus on the right automation plan that really creates value, we suggest a three-step approach: (1) link the automation strategy to business priorities and the culture transformation agenda; (2) perform an organisational review to prioritise potential automation projects, identify talent needs and skill gaps; and (3) define a build, buy or partner plan to unlock the right talent and technologies.”
Commenting on the current attitude of Malaysian finance leaders towards blockchain’s role in delivering benefits in the short term, Pei Yin believes that, “Finance leaders in Malaysia are becoming more aware about the potential and benefits of using blockchain technology, which allows them to streamline and accelerate their business processes, increase protection against cyber threats and reduce or eliminate the roles of intermediaries.”
She concedes that.”It will take time to build a blockchain community in Malaysia as it involves multiple parties in the business ecosystem that requires trust and some level of increased transparency between parties.”
EY’s study noted that ‘to make the most of smart technologies in corporate reporting, however, respondents identify building trust as a key prerequisite. As such, more than two thirds (68%) of responding finance leaders say that governance, controls and ethical frameworks still need to be developed and refined for AI’.
Without those frameworks, finance leaders (63%) are concerned about the risk implications of using AI in finance and reporting, from security threats to regulatory risk.
At the same time, many respondents do not have complete trust in the output of these systems, with 47% saying that the quality of the finance data produced by AI cannot be trusted in the same way as data from traditional finance systems.
Looking ahead on a global front, leading CFOs are taking ownership and driving data-fuelled digital transformation beyond financial functionality: the bottom line is the digitalisation of finance is aligned to an emerging new hybrid normal of working and living.
“The COVID-19 pandemic has accelerated the transformation of finance functions and made the use of smart technologies increasingly the norm,” Tim Gordon commented.
“The challenge for finance leaders now is to map out how finance and reporting are to be delivered in this new reality,” he continued. “Building trust into smart technologies can unleash a tech-powered future for finance functions, where digitally savvy people work seamlessly with smart machines to provide the forward-looking insights that stakeholders require.”
“Finance leaders should rethink the role that reporting is expected to play in helping to tell the story of the value that the enterprise creates,” he advised. “If finance fails to play a central role in meeting these changing expectations, reporting could become increasingly irrelevant. There is an opportunity for finance leaders to establish their functions as a source that can provide what is expected by the business, with the speed and flexibility required.”
Pei Yin concluded: “Business leaders today have the opportunity to reset (or even reimagine) a ‘future-ready’ workplace for their business and for people to stay relevant and competitive in delivering sustainable, long-term value to all their stakeholders.”