Alif Yahya, DigitalCFO Asia | 17 December 2021
What does 2022 hold for the role of CFO in terms of portfolio, technology adoption and creating value drivers for organisations?
Is COVID still a factor? What kind of impact will the new Omicron variant cause in 2022?
2021 was supposed to be the comeback year for all. The plan, the vision for many companies this year had been mapped out perfectly under one goal – to overcome the ongoing Covid-19 pandemic. However, along the way, companies realized that this roadmap had even more twists and turns than any Grand Prix in the world.
Let’s not forget that 2021 also gave us a quick crash course into the Greek alphabet – Delta, Mu, Nu and Omicron being the latest kicker. According to CNBC, it would not be surprising to see new variants being introduced in 2022 knowing the unpredictability of the virus itself. Without a shadow of a doubt, covid-19 will still be a mainstay in 2022 and that could be a harbinger of things to come.
For executives such as CFOs, the challenges that lie ahead could prove demanding as we look into 3 of the most prominent changes that CFOs could face heading into 2022.
For financial departments, CFOs do see the need to reassess their priorities in 2022. In a report by The Institute of Management Accountants (IMA) , companies are taking a more risk-averse approach and are placing a heavier emphasis on the area of Risk Management as compared to other financial functions. Naturally, CFOs realized the economical toll the pandemic has caused and managing the risk space is critical in preventing further losses and also to ensure business continuity in 2022.
Figure 1: Financial Department’s Priorities Since Covid-19
“The CFO needs to continue focusing on providing value added insight by being that Trusted Business Partner. Also, the pace of technology change will continue to accelerate and it is important that CFO’s are working with the CIO and CEO to implement this change across the entire organisation to ensure silos don’t pop up”
– Paul Lennie, Chief Financial Officer for Asurion
As companies allow their staff to gradually return to their offices in 2022, they have to ensure that they stay as flexible as they can – in the form of hybrid work. Hybrid working models could deceivingly pose several issues for CFOs. Thus, CFOs need to balance the right amount of technology to support on-premise and off-premise working environments. As a result, CFOs will have to ponder on the added amount of spending required to support this additional layer of technological adoption.
One way for CFOs to approach this is to consider virtualizing their finance departments completely. By streamlining menial tasks through digitization, cloud storage and automation, finance teams are able to work efficiently and garner a stronger return of investments. In addition, virtualizing this function is a great complement to the hybrid working model as teams do have the added flexibility to execute ledger tasks without the pressures of heading into the office.
Finance teams are also relatively easier to virtualize as compared to other departments such as HR or IT. Therefore, this could be a realistic KPI for CFOs to set for themselves for the new year.
Finance and Accounting Functions – A commentary by BlackLine
Victor Ng, Regional Vice President in Asia for BlackLine believes that more Finance & Accounting (F&A) operations will embrace a hybrid work paradigm, in which CFOs offer finance professionals with the tools they need to work efficiently from anywhere.
Increasingly more Finance & Accounting (F&A) functions will adopt a hybrid work model in which CFOs provide the tools to finance staff to productively work from anywhere
Finance staff at many organizations pulled off the impossible during a period of pronounced uncertainty in 2021. They were able to effectively close the books on time and even take a stab at earnings forecasts—from their homes. Having proved their mettle, finance staff (and other knowledge workers) in the future will continue to seek employment opportunities that adhere to the “work from anywhere” model.
One of the biggest challenges business leaders and finance professionals in Singapore face when it comes to recruiting future talent is not offering remote or hybrid working (30%) per BlackLine’s latest survey. As the “work from anywhere” model takes firmer hold in 2022, organizations will have to build up their remote working offerings. This could involve investing in tools and technologies that help their F&A employees execute work tasks and better manage their time, whether it be automation for repetitive, time-consuming tasks, or collaboration tools that help teams find more productive and enjoyable ways to connect.
At the same time, finance staff will have a greater voice in their company’s positions on issues like diversity, equity, inclusion and belonging (DEIB) and environmental, social and governance (ESG). In these regards, CFOs will seek people with traditional financial skills, in addition to interpersonal skills like leadership, empathy, and adaptability, and cognitive skills like critical thinking, project management and decision-making.
Multiskilled F&A teams will become higher in demand as corporations seek more insightful business intelligence for decision-making
CFOs will look to recruit talent with a combination of both traditional finance & accounting (F&A) proficiencies and broad-based software and technology skills. The same BlackLine survey saw that financial systems integration (43%), intelligent automation (38%) and finance automation solutions (36%) were the top three technological skills business leaders and finance professionals in Singapore mentioned their companies required beyond traditional F&A qualifications. It’s increasingly pertinent for F&A professionals to have a multidisciplinary approach in their jobs as one without the other is ineffective to reach or surpass their desired standard of performance.
The next stages of digital transformation will drive this growing demand for multi-skilled talent. Finance teams will be tasked with advising colleagues across functions on the strategic meaning of real-time financial metrics like revenues, capital availability, liquidity and net profit, as well as more subjective metrics like pipeline aging, on-time deliveries, days sales outstanding, customer satisfaction and employee engagement. Our survey saw that CFOs in Singapore believe future finance leaders will need to possess a wide range of skills to keep the function thriving. Here are the five most important skills identified:
- A strong understanding of risk management
- The ability to use new software or technology
- The ability to communicate complex financial information to different stakeholders
- A strong understanding of financial best practices
- The ability to collaborate with colleagues from other functions
Since each function produces its own data, finance organizations will be tasked with using machine learning and other cognitive computing tools to assess this data in relation to real-time financial information. To convert wide-ranging performance data into insights for each function’s decision-making needs, the finance organization will increasingly encompass individuals with broad business knowledge and technology skills.
CFOs will have an expanded role to include ESG oversight
It’s vital for Singapore to embrace global movements to remain competitive as a global financial hub. The rising interest in ESG investments is prompting the Monetary Authority of Singapore (MAS) to actively pursue sustainable finance in a bid to drive long-term sustainable economic growth. This includes having all financial institutions make climate-related disclosures from June 2022.
This can affect non-financial institutions too and will require CFOs to help drive the sustainability imperative. As the business and strategic partner to the CEO, CFOs will step up to become the executive sponsor of their organization’s ESG initiatives. These include developing the governance structure and control environment for the company’s environmental, social and governance factors and risks, while providing ESG oversight, monitoring and accountability.
CFOs are the logical candidate to lead the ESG initiative. Their responsibilities already entail ensuring that the financial report is accurate, complete and verifiable, according to GAAP accounting standards and disclosures. Given their knowledge of GAAP and how to prepare a financial statement, CFOs will ensure that ESG data receives the same attention and care as other financial data reported in the financial statement.
The CFO Evolution
The role of a CFO is widely expected to evolve should companies undergo their own digital transformations in 2022. While many companies out there are in the midst of a digital shift, CFOs will realize that managing larger amounts of data is no longer a role for CIOs only. According to Forbes, CFOs do need to take on the responsibility of transforming live data into business and financial insights that could accelerate efficiency and growth. This new role is a step ahead of conventional CFO roles, as CFOs now are able to leverage on data analytics and artificial intelligence to execute financial decisions.
“While nobody can predict the impact of the new Omincron variants in 2022, it is reassuring to see initial signs that Omnicron represents less of a threat than Delta. All things considered, assuming that our existing or new vaccines can handle Omicron, I am confident in the global economic outlook for 2022. In particular, I expect that industries that suffered the so-called “K-shaped recovery” — such as travel and hospitality — may see signs of recovery.”
–William Foo, Chief Financial Officer for Everise
The role of a CFO could also be expanded into ensuring compliances that span further than just financial compliances. Besides financial audits, CFOs may involve themselves in security audits to ensure that customer’s data remain protected and the trust between the company and their stakeholders remain well-guarded. Security compliance is a major business need that companies have to prioritize in order to avoid heavy fines and penalties from regulators. CFOs are highly capable in accessing any forms of risks and their experience will be needed in preventing any potential penalties from local regulators.
The road ahead may appear daunting for executives today, but it is inevitable that they need to take these roads at some point in their careers. They are the leaders that young professionals look up to and their leadership may constitute important career lessons that can be taken away for years to come.