Businesses could face challenging times in 2019, as trade conflicts, an unstable political environment, and tightening financial conditions hamper global economic growth. That’s according to IHS Markit’s Chief Economist Nariman Behravesh, who was speaking from the World Economic Forum Davos 2019 meeting.
Behravesh made a number of predictions for the coming year, including that while he expects U.S. growth to increase, there will be a decline in Eurozone expansion and slower growth for emerging market economies.
In addition, there is uncertainty around interest rate increases from the U.S. Fed, with central banks in a number of other countries to raise rates. With such turbulence forecast, managing risk seems to be a key focus for CFOs in 2019.
How are finance professionals preparing? We dug into the research and also asked Workday global customers, executives, and partners for their take on how CFOs and other finance leaders are thinking about the biggest trends and challenges this year. Here’s what we learned.
Uncertain Times Require Data Insights
Finance leaders are feeling all this uncertainty and thinking about how to best manage risk. One of the most powerful tools they have is great data.
“Many CFOs are a bit pessimistic headed into 2019, and I recently read some survey results where almost half of them expected some form of recession to occur by the end of the year or into 2020,” says Betsy Bland, vice president, corporate strategy at Workday. “That kind of uncertainty makes finance leaders nervous, and it’s during these times that they need not just reliable information, but also real-time data — both from inside and outside of their organizations — that can help them manage risk more effectively and adjust as things unfold.”
Political uncertainty abounds, including what will happen in the run up to the 2020 U.S. presidential election. More immediately, the UK’s proposed departure from the EU on March 29 could have a knock-on effect to the global economy.
“We’re living in a period of great instability, and businesses are holding off on making major decisions until Brexit is resolved,” said Rob Bloor, group financial controller at British-based financial services company Equiniti. “There’s a real need to be able to have the data on hand to make faster decisions as things change and I think that is the cornerstone of resilience — that ability to react. In terms of compliance, in 20 years in finance I don’t think I have ever seen such a tight focus on accountability and that is only going to intensify.”
Having the right technology to support your business is critical, says Tim Wakeford, vice president, financials product strategy, EMEA at Workday. “Uncertain economic conditions and potential subsequent changes in regulatory environments will force CFOs to evaluate their existing technology to ensure they can accommodate regulatory and reporting changes, and take advantage of commercial opportunities that are presented from limited economic growth,” Wakeford says. “You have to be ready for change, and that means being built to change.”
An example of this in the UK is the forthcoming Making Tax Digital for VAT legislation, which requires VAT-registered businesses with taxable turnover above the registration threshold to keep records in digital form and file their returns using software—not something all businesses are equipped to do.
“This year is going to be important for finance to really move the dial in terms of finance talent.”—Peter Elkins, group editor, Longitude.
The pursuit of big data and capturing all metrics across the enterprise is evolving to a need for better analysis of the information, and how that data is then used to drive finance decision-making.
“We’re seeing a data break-out. With cloud ERP technology now capable of seamlessly combining finance and operational data, finance professionals have a great opportunity to become more analytical and data-driven to help their business make better decisions. In 2019, CFOs will need to broaden their scope and start to take responsibility for organisational data,” said Workday’s Wakeford.
Reassess Finance Talent
The shift to a data-driven finance team will not happen overnight, and requires a rethink around how the CFO recruits talent and shapes the culture of the entire function. Will 2019 be the year this happens?
According to an EY survey, intangible assets now average 52 percent of an organisation’s market value (up to 90 percent in some sectors), and part of that capital can be attributed to a company’s workforce. Talent is playing a much greater role in driving value, and talent strategy is taking a front seat as human capital becomes increasingly critical to competitive strength.
“This year is going to be important for finance to really move the dial in terms of finance talent,” says Peter Elkins, group editor at research firm Longitude, a Financial Times company. “This will mean abandoning preconceived notions of what constitutes ‘talent’ for the function, challenging the orthodoxies that have governed recruitment processes over many years, and spreading the net to bring in people with different skills and backgrounds.”
“As we move forward many existing processes will be automated,” says Brian Furness, global consulting finance lead, PwC United Kingdom. “CFOs will need to be recruiting from different talent pools as they seek to find the right talent. Many CFOs talk about how they are now attracting and recruiting candidates from a data scientist and analysis background; people who are from a business rather than traditional finance perspective.”
“Finance leaders will need to add analytical and data science skills to the function.”—Betsy Bland, vice president, Workday
Rob Bloor of Equiniti believes that changes in the working culture will mean finance needs to adopt a new mentality when it comes to its workforce. “I think we’re entering a new, more analytical age and that needs to be reflected in the skills we bring into the function. Finance needs to be more than a number cruncher and our recruitment policy reflects that need for analytical talent.”
“I also think changing patterns in the way people want to work are important,” adds Bloor. “Those coming into finance now expect everything to be mobile, they expect that social interface, and they just expect things to work. Patience goes out of the window to some degree, but these standards will drive businesses to put the right systems and processes in place.”
Workday’s Bland believes that bridging the skills gap and finding the right talent will be top-of-mind for CFOs in 2019. “To support today’s business requirements and future growth, finance leaders will need to add analytical and data science skills to the function. That means closing the skills gap that currently exists through both recruiting new external talent but also developing and reskilling the existing workforce,” says Bland.
Embrace Emerging Technology the Right Way
From artificial intelligence and machine learning to blockchain, there are a myriad of emerging technologies cited as the next big thing in finance, while real-world adoption is at different stages.
Peter Elkins of Longitude believes that the reality is somewhere in between, but that finance leaders who leverage innovation will gain an advantage. “This year, the high-performing finance functions will be those who really embrace a cloud-first mindset. They will be the ones who will succeed in driving deployment — at scale — of a range of smart technologies, from intelligent automation to blockchain, and who will be in the best position to exploit their data,” he says.
“To accelerate deployment of advanced technologies such as artificial intelligence and machine learning, finance functions will need to build a comprehensive view of relevant use cases,” he adds. “This will allow them to focus on the solutions that are most relevant to their priorities and allow CFOs to understand the cost-benefit pay-off and the potential difficulty of the implementation journey.”
PwC’s Furness believes there is an appetite amongst CFOs to embrace new technology, yet economic and political uncertainty, in addition to legacy technology, has prevented many of those looking from clicking the switch on innovation.
“We ran a workshop with the ACCA on the future of finance recently, and what was interesting was that 90 percent of finance leaders saw a direct need to transform and shift to digital, yet many are paralysed by current technology and data models,” he says.
Tighter Collaboration in the C-suite
In the recent EY CFO report “Partnering for Performance,” which surveyed finance and HR leaders, 80 percent of those said their relationships are becoming more collaborative. Similar ties with other business leaders must be a key priority for CFOs in 2019.
Lena Shishkina, head of finance, EMEA and APJ at Workday, is convinced that the relationship between finance and HR will become increasingly important in what could be a turbulent year. “Given the challenges facing businesses everywhere today, finance collaboration with HR is absolutely crucial. People are a company’s number one asset, so a business must have a single view of their most important asset and how that fits into the broader financial picture,” says Shishkina.
Referencing the findings of a recent Workday and Longitude study, Bland concludes that tighter collaboration between finance leaders and CIOs is now an imperative given the emergence of game-changing technologies, such as machine learning, artificial intelligence, and blockchain.
“CFOs and CIOs should be working even closer together than ever before as innovative technologies change the way finance acts and operates as a function,” says Bland. “Yet, the Longitude study showed that in many cases this still isn’t happening. I think 2019 will be the year where CFOs really try and bridge that gap to build a more collaborative relationship with the C-suite.”