How risk, technology reshape the CFO role

Traditionally, chief financial officers have spent their time poring over budgets, auditing seemingly everything and ensuring compliance. In today’s fast-paced, technology-driven world, their role is shifting, incorporating strategic planning, risk management and predictive analytics.

To find out what CFOs are facing and how they’re making changes, the survey “The Strategic CFO: Thriving with Risk” compiles the answers from 500 CFOs and global financial executives about their evolving experiences. The survey was prepared by The Wall Street Journal Custom Content group in association with Coupa, a business spend management technology solutions provider. In a webinar, Coupa CFO Todd Ford and Wall Street Journal contributor Rosa Harris discuss finance’s role as it tries to take on risk and other findings from the survey.

While myriad national and global shifts are changing the business landscape and, in turn, impacting the CFO role, risk management has increased dramatically on many fronts, making it the most important new factor for CFOs. The survey found that over the past two years, CFOs must now have “more focus on technology (66%), more extensive participation in strategic business decisions (60%), more diverse types of risk management (59%) and more use of data analytics (57%).”

Figuring out how to manage the risk is a balancing act, the survey found, requiring financial leaders to manage their “backward-looking and forward-looking responsibilities.” The percentage of those covering all of the bases is small — “4% of CFOs say they spend an appropriate amount of time managing all of the risk factors included in the survey.” About half said they are spending enough time on operational and supplier risk.

And the situation is expected to worsen over the next few years, with respondents listing fraud, cyber and supplier risks at the top of the list of concerns. Since financial leaders are still spending the majority of their time on “functional finance” (budgeting, reporting, compliance), they have little time for what they see as the biggest threats to an effective risk management program — “the increasing complexity and scope of regulations.”

Big business, big challenges

Companies with revenue of more than $5 billion, it was found, are “much more likely to be very concerned about the threat many risks pose to their organizations.” They are also more concerned about their reputations.

Amazon CFO Brian Olsavsky said in the survey that while managing risk is no one’s favorite job, it’s essential if companies want to successfully serve their customers and establish long-term trust with “customers, employees, regulators and investors.”

One way Amazon addresses the matter is to identify new risks and processes to address them. For Olsavsky, one solution is being “staffed appropriately to address both tactical and strategic concerns,” with experts and generalists leading teams where their respective skills can be optimized. He added that using technology only strengthens those teams and establishes consistency across a company’s systems and creates efficiencies.

Seeing the problem

Visibility is a major shortcoming for large enterprises, with most responding that they have “very little visibility into transactions.” Gaining more visibility, the survey found, “can help financial teams tackle risks produced by today’s shifting business circumstances.” Companies that self-report as having “complete visibility” also rate themselves as having “more effective risk management” and “greater confidence in both their people and their processes for managing overall and specific risks.”

That visibility comes from more readily available and robust data sources, giving companies ways to forecast need and risk.

Chantal Wessels, VP of finance and operations at NASDAQ, said in the survey that her organization uses data from various sources to establish a baseline and build strategy. She can “analyze current trends and put measures in place to address future risk.”

What sets successful companies apart

The top CFOs, as ranked by survey respondents in risk management and operational efficiency, more often than others, have the appropriate strategies, technologies and skills in place to effectively manage risk. It’s also important to continue investing in “new capabilities — people, processes and technology — to improve our ability to predict, protect, detect and respond to cyberthreats as well as ensure the resiliency and availability of critical systems,” according to Peggy Smith, CFO of National Grid US.

Adopting new technologies that automate systems “identifying and addressing fraud or other operational risks” removes those tasks from employees, giving them more time to analyze available data and generate strategies. And, having leading technologies also gives companies leverage when hiring and retaining highly skilled workers. Bringing in top talent that stays with the company allows internal solutions development. The problem is, though, only 38% of responding companies feel they have that level of technology in place.

As CFOs and financial leaders work to balance their existing and emerging responsibilities, they’re finding that they need to create complete risk management programs that incorporate technology and people into the processes that allow them to successfully manage risk.

In the survey, Coupa offers this overview of how it sees risk:

 

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