Challenging Times Ahead: 2024 is the Year of the Digital CFO
With record-high inflation, the pressure is on to do more, with less. The role of the digital CFO has never been more important.
The year may be young, but one clear trend is emerging: across many industries, organisations are faced with the prospect of decreased purchasing power and doing more with less, even as the pressure to deliver on ambitious strategic agendas and serve target markets remains high.
Following two years of record-high levels of inflation, the International Monetary Fund expects global growth to slow to 2.9% this year. The world’s two largest economies are leading the way. It’s looking increasingly likely that the U.S. will fall into a mild recession sometime before the middle of 2024. Meanwhile, China is facing its own set of economic challenges, underpinned by sluggish growth and a disrupted property market.
While recession is not certain across the board, any country in Asia-Pacific that has close trade and financial ties with one or both of these countries is likely to be impacted to some degree (and that means most of us). For many organisations, the pressure is already on to do more with less (or to put it another way, make the most of what you’ve already got). We anticipate that pressure will only increase over the course of the year.
What does this mean for CFOs?
In the past, CFOs had a few key tasks: managing cash flow, balancing the books, setting forward budgets, reporting on the financials and ensuring statutory compliance. The standard approach might have been to run the numbers on the previous year and add 5% for the year ahead (or less if the market were particularly dire).
However, over the past few years, the very nature of the CFO’s role has been evolving in response to an increasingly digital and data-led market. Much has been said about the emerging “digital CFO”: that is, a finance leader who is tasked with identifying areas of strategic organisational growth in addition to the traditional financial management and reporting capabilities. It’s a role that requires a mastery of organisational data, as well as the will to nurture a corporate culture that embraces all things digital.
While the current generational shift will push the move toward the era of the digital CFO, with more Millennials and Gen Zs moving into leadership roles in the next few years, there is no reason why older and more seasoned CFOs cannot adapt and become comfortable with the skills and tools required to be a successful digital CFO. The right mindset is also critical. For example, there needs to be a willingness to explore the potential of new applications of artificial intelligence (AI) and other emerging technologies.
At its core, this represents a shift from a transactional to a strategic CFO – one who not only reports on the past but also supports the CEO to steer the ship and look to the future. And with the headwinds expected across 2024, the role of the digital CFO has never been more important. The rest of the C-suite is increasingly looking for CFOs to not only identify efficiencies but also help lead companies into new areas of growth, armed with new data, forecasts, models and results.
The digital CFO as a “data master”
Most finance departments are already the natural keepers of much of the organisation’s transactional and operational data, collected for FP&A, budgeting and creating predictive models. It therefore seems a natural evolution that the digital CFO at the very least will have a comprehensive view of how data interplays across the organisation. For some, this may even involve assuming the role of “data master”.
Of course, the role should not only be about collecting data, but also analysing and using it for strategic decision-making. Business-wide data usage is generally poor: as much as 73% of available data goes unused, according to a recent Forrester report. But, with a finance team who can harness and show the value in data by harnessing planning methodologies such as IBP, this will change.
This is potentially new territory and more will follow. The digital CFO is tasked with creating a picture of the new finance department. In turn the digital transformation – the people, solutions and strategies – must work together to create the digital finance function of the future.
Owing to its central role, the finance function is uniquely positioned to help define the master data strategy for the enterprise.
Are you ready to become a digital CFO?
As the role of the CFO continues to evolve and weave into the strategic digital transformation of many organisations, there are many practical and strategic opportunities for CFOs to lead their organisations in two critical pathways: culture and collaboration; and resilience and agility.
We believe that 2024 is the year of the digital CFO of the future. Are you ready?
We are enablers of change and transformation in Financial Planning & Analytics, Information Management, Supply Chain, Management Consulting, Project Management, and Managed Application Services. Contact us to find out more about how we work with your teams or call 1300 841 048.
