Chief financial officers have a lot on their minds. The CFO role has expanded beyond financial duties to encompass strategic responsibilities across the company — so the majority are stretched thin. After closing the books on the extraordinary year that was 2020, CFOs have faced some of their toughest tests yet. Below are the Top 10 CFO challenges the modern CFO is managing today, as compiled from multiple surveys, studies and interviews with CFOs in companies of all sizes.
Role of the CFO: the Old & the New
Today’s CFOs are active participants in their companies’ C-suites, report directly to CEOs and boards of directors and have broad, strategic responsibilities. In fact, a Brainyard survey of leaders across 21 industries showed that most CFOs are responsible for functions outside of finance.1 Whether by focusing on strategic partnerships, evaluating technology or working to meet revenue and earnings goals, CFOs are expected to be strategic catalysts of company growth — not just the head of the financial organisation.
This evolution of the CFO role has left very few of these execs focused only on finance.
This is not to say CFOs have relinquished their accountability for maintaining cash flow; owning financial processes; attesting to financial statements’ accuracy; and dealing with investors, auditors and tax authorities. The proverbial “buck” still stops with CFOs when it comes to the overall financial health of their organisations. Between that core responsibility and their expanded roles, CFOs log some of the longest working hours in most organisations.
And they worry about being effective in new strategic duties, a concern that’s perhaps more acute in smaller companies that may not have engaged controllers or finance directors. This tension is evident in almost every survey, as CFOs describe different versions of an expectation gap — the strategic role they are supposed to fill and the quagmire of gatekeeper tedium that takes up an inordinate amount of their day-to-day time.
This evolution of old and new roles is expected to continue; according to research by Brainyard, CFO’s are directing their attention across many different areas already, including information technology, human resources, and operations and facilities.2
The 10 Toughest Challenges for CFOs Today
When looking at what has kept CFOs awake at night in 2021, tough challenges come from all corners of their jobs. Here are ten of the most troublesome challenges.
- Talent acquisition and retention
- Unify disparate data
- Embrace big data
- Add automation with technology
- Prevent fraud and invest in cybersecurity
- Support a remote workforce
- Ensure compliance
- Embrace innovation
- Accelerate post-pandemic growth
- Manage taxes and regulation
Finding people with the right skills to staff their departments is a critical challenge for CFOs. As their own roles and requirements have broadened, the skills CFOs need from their staffs have also changed. 43% of APAC executives have said that due to the pandemic and global movements toward working from home, when it comes to hiring strategies for the coming years, they’re open to attracting talent unbounded by the geographic location of the company’s operations.3
For the CFO’s team, given the role technology plays in finance, some believe hiring data scientists and teaching them financial principles may be more effective than getting financial folks up to speed on data skills — the additional costs of hiring workers with technical prowess makes it critical to focus on retaining employees with these skills. CFO’s are prioritising automation and upskilling, with 85% of APAC respondents to PwC survey suggesting they will be increasing budgets to expand automation and accelerate digital skills development.4
However, hiring may be necessary to accommodate for the needs of future workforces; 82% of CFO’s surveyed by Deloitte are expecting to hire or train talent with skillsets that are different to those currently held by their employees.5
Great communication skills are also increasingly important from CFOs and their staff. The need to build consensus and convey policies across multiple media — email, text, in person and virtually — permeates the entire finance department. CFOs believe there is much room for improvement in this area; they’re training current staff and focusing on it for new hires.
Cultural change continues to be priority for CFO’s.
“It’s a lot of people skills, and I do view 5-10 years from now, the reporting will be better, the technology will be better, information will be more accessible, so all that stuff will be given to you – what do you do with it? How would you use that to engage with other team members? How would you use that to tell a story to the market? That’s more important. Those are the things that are harder to teach.”
- Chris Tham, CFO, Bailey Nelson
CFOs will need to finally address the challenges posed by legacy data in 2021. Rachel Grimes of CPA Australia notes that poor data is now one of the biggest issues that may wipe out boards and management going into the future.6 Gartner emphasises that CFO’s can’t afford to wait for data trends to emerge and should be proactively taking action to innovate and rebuild their data and analytics strategies.7
The nimbleness demanded from businesses in 2020 amplified the need for current, accurate data to support decision-making. Unifying data for analysis eliminates the need to pull it in from disconnected databases and spreadsheets. At the same time, a single source of data also increases the speed of reporting and reduces the inefficiency and errors inherent in manual processes.
Another important dimension in the disparate data challenge is the need for CFOs to ensure company financial statements are accurate and auditable. This is a perennial issue for public companies that will affect both public and private businesses of all sizes — for example, when applying for loans. A corollary benefit of unified data: smoothed audit engagements and lower costs for professional services and finance department overtime.
For CFOs, the challenge today is to follow their data to uncover trends and insights that support forward-looking company strategising. Big data analysis, done right, enables CFOs to forecast with more accuracy and makes the entire organisation more agile.
To that end, CFOs and their staff are being asked to move beyond financial data. They’re being challenged to include data from operations, markets, social media and marketing, and to translate that information into actionable intelligence.
Paradoxically, while data analytics tools have become more available and effective, studies show that many CFOs rely more on intuition and experience than on data. Overcoming this challenge to embrace predictive analytics can be difficult for CFOs who have traditionally relied on historical analysis.
Inevitably, however, there will be more time available for CFOs to combat separate challenges where big data is used effectively. On this point, ASX’s CFO, Gillian Larkin has said to the Australian Financial Review that big data allows CFOs to move their attention from more tedious areas to other issues;8 particularly, those that require more intuitive, human driven approaches. Where CFO’s can use big data and analytics to their advantage, corollary benefits will allow for business development and growth.
During 2020, many businesses embraced technology in new ways and found success driving revenue growth while keeping their workforces connected remotely. Further technology implementations to drive automation have been a key challenge for CFOs in 2021 and likely beyond. Over a third of APAC business leaders say automation is a strategic C-suite priority.9 However, according to Accenture in a global survey, around 2 in 3 CFO’s say they aren’t knowledgeable enough to fully optimise technology — which concerns them because most believe (rightly) that financial management software increases productivity.
One underlying reason for this gap is that adoption can be hindered by a change-averse staff. CFOs need to point out that automating routine tasks frees finance staffers up to do more creative work, while the insights that come with automated intelligence can help the business succeed.
At the same time, while some CFOs are conflicted about automation versus their ability to manually or personally manage risk, the majority believe finance will be cloud-native within a few years. Regardless of the obstacles, though, strategic CFOs have stated that investing in new financial management technology has been one of the most important goals for 2021.
More forward-looking CFOs are considering emerging technologies, like financial forecasting with machine learning, robotic process automation and blockchain, to help maximise business value and efficiency. As they work through their return-on-investment calculations, they’re looking for cost efficiencies across the company and setting targets to measure the effectiveness of those investments.
As part of the CFO’s mandate to be the economic guardian of the business, these leaders are often responsible for risk management, including finding and preventing fraud and investing in cybersecurity.
KMPG Australia has explained that “Finance leaders accept they are now responsible for the effectiveness of controls over all business data and performance — not just financial — but almost one-third are not yet in a position to take on this role.”
CFOs need to keep sensitive data protected and reduce the potential costs that cyberattacks can cause, but risk management has been one of their toughest challenges in 2021 — EY has identified that the percentage increases with the size of the organisation. CFO’s are now expected to play a bigger role in cyber security with 70% of APAC business leaders agreeing regulation is vital to increase public trust in cybersecurity, AI and data privacy.10 The CFO has become pivotal for both the proactive and reactive management of cyber-attacks and as such, cybersecurity will continue to pose challenges going into the next decade.
Moreover, the expected permanence of remote workforces adds a new dimension for CFOs managing potential fraud and cybersecurity risks and makes cloud more attractive, given security advantages.
The shift to a remote workforce provides both opportunities and challenges for CFOs today. Finance roles have not previously been remotely based and as such, teams have had to quickly roll out the necessary tools to accommodate new arrangements. In China, 39% of respondents in Deloitte’s CFO survey said they invested in work enablement measures last year to allow teams to carry out remote work.11 In Australia, 67% of workers were sometimes or always working from home compare to the 42% of from-home workers prior to 2020.12 In Singapore, 38% more workers are working from home more often than before the onset of the COVID-19 pandemic.13
Organisations where the shift to remote work has been successful are rethinking their investments in physical office space. The potential cost savings and returns on technology investments, together with benefits for employees, favour continued work-from-home or hybrid options.
The most-cited challenges for CFOs with remote workforces are the potential for employee burnout and the need to rebuild culture. In Asia, the typical CFO works 73% of their waking hours according to research by the Federal Reserve Bank of Richmond.14 Exacerbated by the blurring lines between work and home life, this workload can cause unsustainable stress. The potentially lasting negative impact on finance team culture is a key challenge for CFOs, especially as business picks up again.
A report by Grant Thornton encourages CFOs to ‘choose their new normal’ in the post-pandemic landscape. The way companies should operate going forward will depend on the style of working that best suits their organisational structure and objectives.15
CFOs are primarily responsible for ensuring regulatory compliance for their companies, and 2021 will bring another batch of challenges.
For example, changes to IFRS standards proposed by the Board in February 2021, for example, require close attention by companies operating in regions like Australia, India or Hong Kong.16 Moreover, increased disclosures on environmental, societal and governance (ESG) factors are likely to require significant compliance projects. CFOs will likely rely on external auditors to help implement the changes.
As standards of reporting and compliance continue to change, using AI-based analytics tools are becoming increasingly important for CFO’s.17 Where compliance is automated and human errors are reduced, CFOs have more time to invest in growing more profitable parts of the business.
How CFOs fill out their expanded roles will largely depend on how well they are able to lead innovation within their organisations. A top challenge for CFOs today is to continue the pace of change and innovation that enabled their companies to survive the economic climate of 2020 and 2021 so they can capture future opportunities.
“The role of CFO in business has changed from being somebody who’s really focused on finance, to somebody who’s focused on ensuring that the business grows and is managed through a finance lens.”
- Mike Hirschowitz, CFO, Guzman y Gomez
Speaking on this point to the Australian Financial Review, CFO of Insurance Australia Group, Nick Hawkins, said the expectation for CFOs has become that “they are enterprise leaders who just happen to be in charge of finance.” 18 CFO’s need to be able to brainstorm with the C-suite leaders, using intimate knowledge of business performance to adopt financial innovation in a way that drives growth. Tools like predictive analytics, dashboards and key performance indicators will play important roles in helping CFOs identify opportunities early so they can direct operations to adapt quickly.
CFOs are bullish in the second half of 2021, and especially the outlook for 2022. Growth looks promising through the end of 2021 and into 2022, with predictions for growth in the APAC region sitting at around 7%.19
Encouraged by promising economic shifts, 94% of C-suite executives across the APAC region have growth strategies involving new international expansion.20 The challenge is to ensure their companies are well-positioned to capture that growth. Strategic CFOs understand that businesses can’t cost-cut their way to growth; instead, they need to invest deliberately. They appreciate the balance between spending to gain new businesses and fuelling core operations. Helping to increase revenue via customer growth, launching new products and mergers and acquisitions are at the forefront of many CFOs’ minds.
New Horizon’s Chief Financial Officer, Richard Gregg, has said that with the access CFO’s have to data within organisations, they are the key to identifying unmet needs and early shifts in demand and supply that can turbo-charge growth, through the pandemic and beyond.21 As such, CFOs have been increasingly focussed on consolidating and using this information in ways that outperform competitors and put their companies ahead of the market.
In APAC finance departments, much of the responsibility for tax functions falls in the hands of finance teams.22 Moreover, 46% of tax leaders report to APAC CFO’s. Globally, changes in international taxation, like value-added tax (VAT) and goods and services tax (GST), may have a significant impact on operations, as will changes to international trade policies. CFOs will be challenged to understand how these changes will affect their businesses in the future and use scenario-planning exercises to help mitigate them.
In 2020, New Zealand introduced The Financial Services Legislation Amendment Act (Code of Conduct/ Disclosures), altering licensing requirements, setting industry wide standards for conduct and competence and addressing the misuse of financial service providers registered by offshore entities.23
In South Korea, The Financial Consumer Protection Act (Customer Protection more generally across Financial Services) was introduced in 2021 to reclassify financial products and sales channels so that the same regulations apply and enforce stricter consumer protection standards.24
These provisions were just two of many introduced in the APAC region over the last few years. Finance is a heavily legislated area across all APAC countries and CFOs need to be aware of the location-bound implications of their activities, as well as those of their teams, in order to stay compliant no matter the region they’re operating.
Make Your Job Easier With ERP
Clearly, today’s CFOs have a lot on their plates. Modern software solutions are built to handle many of CFOs’ toughest challenges. ERP systems, for example, deliver multiple integrated modules that support financial management and planning, order management, production management, supply chain management, warehouse and fulfillment and procurement. A modern ERP system with financial management capabilities can go a long way toward helping CFOs close the technology gap, while consistent, robust data combined with real-time speed and powerful analytic tools help CFOs and their teams deliver the right information at the right time for strategic decision-making.
CFOs are positioned to lead innovative strategies for businesses in the furture. Their toughest challenges include building the right teams, supported by the right technology and data to ensure they mitigate risks, achieve compliance and lead their organisations to innovative growth. It’s no small task — even for those accustomed to fast paced, far-reaching responsibilities.
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CFO Challenges FAQs
Q: What did CFOs care about in 2020?
A: CFOs anticipated that they would be focused on three key initiatives in 2020: finance analytics, organisation structure and finance technology optimisation. The COVID-19 pandemic shifted that focus toward whatever each individual company needed to do to support remote workforces, keep employees safe and survive the most uncertain economic period since the Great Depression.
Q: What does a CFO care about?
A: CFOs are one of the few C-suite executives who have companywide responsibilities, and therefore they care about all facets of operations within a business. They are involved in strategic partnerships, evaluating technology, risk mitigation and advising the CEO, in addition to leading the finance organisation.
Q: What are good questions to ask a CFO?
A: Universally good questions to ask CFOs of business of all sizes and industries include:
- What key performance indicators are most important to you?
- Where should investments be directed in the short, medium and long term?
- How can we increase productivity?
- Is the company structured and staffed for success?
Q: What keeps a CFO up at night?
A: CFOs are likely to be up late at night thinking through the following issues: talent acquisition and training, managing and mining disparate and big data, expanding technology, preventing fraud and expanding cybersecurity, empowering their remote workforces, compliance, innovation and accelerating growth and managing tax and regulatory changes.
Footnote:
1 https://www.netsuite.com/portal/assets/pdf/wp-brainyard-fall-2020-cfo-insights-survey.pdf
2 https://www.netsuite.com/portal/assets/pdf/wp-brainyard-fall-2020-cfo-insights-survey.pdf
4 https://www.pwc.com/gx/en/ceo-agenda/asia-pacific-business-leaders-survey.html
6 https://www.fm-magazine.com/news/2021/apr/data-quality-stresses-for-finance.html
7 https://www.gartner.com/en/articles/4-data-analytics-trends-cfos-can-t-afford-to-ignore
9 https://www.pwc.com/gx/en/ceo-agenda/asia-pacific-business-leaders-survey.html
10 https://www.pwc.com/gx/en/ceo-agenda/asia-pacific-business-leaders-survey.html
12 https://aifs.gov.au/media-releases/two-thirds-australians-are-working-home
13 https://www.ipsos.com/en-sg/singaporean-workers-want-flexibility-employers-post-covid-19
14 https://www.mercer.com.au/our-thinking/wealth/cfos-struggle-with-the-work-life-balance.html
16 https://www.ifrs.org/news-and-events/updates/iasb/2021/iasb-update-february-2021/
21 https://cfomagazine.com.au/new-horizons-supercharging-digital-transformation-during-covid/
23 https://www.fma.govt.nz/compliance/role/fap-new-regime/about-the-changes/
