25 May 2023
Lee Thompson, Senior Vice President, Asia Pacific & Japan, BlackLine addresses the challenges faced by Chief Financial Officers (CFOs) in 2023 and explores the strategies to safeguard financial data in an uncertain global economy.
It comes as no surprise that Chief Financial Officers (CFOs) have had their hands full this year, amid turmoil in the financial sector, persistent high inflation, ongoing effects of Russia’s invasion of Ukraine and the pandemic. Many had to create value and drive profitability, contribute to the strategic vision of their organization, and predict the future – all while navigating a volatile global economy fraught with uncertainty.
The first quarter of 2023 saw CFOs having to deal with the following challenges:
Cash Is King, Now More Than Ever
One major challenge is ensuring that the organization has access to working capital. In today’s volatile economic environment, the age-old adage of ‘Cash is King’ is more relevant than ever. Monetary needs can arise quickly and unpredictably, and it is important that businesses have access to working capital to meet their short-term financial commitments and fund future growth investments.
A study by BlackLine found that two thirds of Singapore C-suite and Finance & Accounting (F&A) professionals say visibility over cash flows will be key to surviving the economic storm. Despite the importance of cash, many companies do not have visibility and insight into their existing cash flow. In fact, less than 4% of the Singapore respondents in the same survey have complete confidence when it comes to visibility over cash flow – suggesting that many organizations may be making decisions without an accurate, up-to-date view of the company’s liquidity.
Having full visibility and ensuring good credit management will be critical to protect the cash flow and working capital. CFOs will need to invest in digital transformation and scale automation, with the aim of optimizing their accounts receivable function to increase working capital. They need to find ways to speed up customer insight to understand which customers hold the most value and which hold the most risk to generate a predictable cash flow. This ensures stability to plan, invest and grow the business.
Shortage of Talent Continues to Plague the F&A Industry in Singapore
The F&A industry is facing a dearth of talent. Many CFOs are finding it difficult to hire people with the right skills and experience to take up positions in their departments. Gartner predicts that hiring and retaining staff will be the most difficult task CFOs face over the next 12 months, owing to the tight labor market.
This is a growing concern in Singapore where university cohorts of accountancy graduates have dropped significantly in recent years. The intake of students across all years in accountancy degree programmes in autonomous universities here has fallen to 5,182 students, down from 5,650 in 2017. Worse still, not all accountancy graduates go on to take up roles in the F&A function and industry, which makes the talent shortage even more dire.
The F&A industry has been finding it difficult to attract new blood for multiple reasons. On one hand, there is the perception that bookkeeping as a profession is boring and unrewarding. On the other hand, the lower starting pay and heavy workloads can be a drawback, in comparison to glitzy roles in other sectors which offer highly competitive compensation and welfare perks.
Unsurprisingly, automation of repetitive financial processes, such as account reconciliations and intercompany transactions, can help address the F&A labor crunch faced by organizations. By taking over repetitive, mundane tasks, automation gives F&A professionals more time back in their day, allowing them to take up more meaningful, strategic and in-turn, better-compensated roles.
F&A Functions Are Big Targets for Cyberattacks
Today’s distributed working arrangement in many organizations inherently extends organizational network perimeters and entry points for threat actors, making them more vulnerable to cyberthreats. When employees use personal, unmanaged devices or unsecured networks to access business-critical platforms, this can risk credentials being compromised and sensitive data exposed.
With the average cost of a security breach reaching US$4.35 million, no organization can afford to let their guard down. Those dealing with sensitive financial data in particular, can have an especially big target on their back.
A proactive approach to safeguard the organization’s network and data will be essential, and this begins with investing in cybersecurity solutions. Advanced data collection and analytics solutions like security information and event management (SIEM) and AI-driven user entity and behavior analytics (UEBA) can help organizations gain full visibility of their IT operations to address security threats as they arise.
Employees play a critical role in protecting an organization’s data, which is why organizations will need to invest in cybersecurity awareness training for employees across all levels of the organization. By learning how to recognize security threats and handle a data security compromise, employees will be better equipped to detect, prevent and protect the business from malicious activities early on.
The ongoing impact of the pandemic, coupled with other economic and geopolitical uncertainties, means that CFOs must remain resilient and proactive in their approach to risk management, financial planning and decision-making beyond Q1. Those that are able to take bold action and adapt to the new circumstances with agility, will be able to navigate the uncertainty and emerge stronger ahead.