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55 (150) 2022

Interviews

All hail the Chief Future Officer!

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Michael Dembinski talks to Dagmara Wojnar, partner associate, head of CFO Advisory, KPMG in Poland

Over the past few decades, the finance function in firms has become vastly more challenging and complicated. The old role of chief accountant has been superseded by that of chief finance officer, from whom there is an increased expectation of strategic leadership; merely being 'on top of the numbers' is no longer enough. What have been the recent biggest changes affecting the CFO's job?

Over the recent years we’re observing the ongoing evolution of the finance function – nowadays, the traditional role of finance (accounting, tax and compliance with regulations) is no longer enough. Recently, we see two types of factors affecting finance role. The first one is related to the changes in macroeconomy and environment (such as the pandemic, war in Ukraine) and its consequences – inflation, broken supply chains, volatility of FX rates on the business activity of an organisation. There is a huge expectation that finance supports and addresses these changes. The second one results from the change itself which started some time ago on the market. The modern CFO is becoming an important partner in organisational development, huge support to CEO in strategic management and important voice for business and IT in business development. Looking on those later expectations, I see the following trends:

  • Processes – speeding up and digitalisation and automation of the business-as-usual finance job, such as financial close and production of financial results, budgeting and forecasting, robotic process automation (RPA) in invoicing and payments
  • Technology – increase use of cloud computing, implementation of reporting and planning portals
  • People – building ‘new’ competencies that join financial technical knowledge and IT, the capabilities to use modern finance technological solutions, but also increasing role of emotional intelligence in finance and capabilities like curiosity, dealing with difficulties, cooperation and building relationship skills
  • Partnership with the CEO, business and IT

Often, we observe that CFO is no longer named ‘chief financial officer’, but ‘chief future officer’, who’s task is increasingly to analyse strategic opportunities of business development. As such, the CFO has increasingly important impact on the value-creation of the company.

Onto the CFO’s agenda currently land such topics which are cross-functional, such as for example promoting digitalisation, agile approach to projects and changes, ownership of strategy and improvement in KPIs, development of employees' competencies and strategic management through partnership with CEO, business and IT. On the top of that, finance still should be the first unit in the organisation which can navigate the company between regulatory changes.

The 'holy grail' for most corporates is true real-time financial reporting, with every transaction captured as it occurs, with data entered once, stored on the cloud, and instantly available for analysis. But while numbers are unambiguous, their interpretation in light of tax law, accountancy practice and reporting are increasingly difficult. How close – or how far – are we from real-time financial reporting being reality?

Currently, real-time is becoming more and more important. I would even say that ‘real-time’ relates to everything. The world is speeding up and we want to have real-time reporting, real-time information, real-time transaction and real-time decision making. There are many IT support tools to deliver that. For example, IT tools such as ERP, RPA, AI and ML help the organisation to store data, process and deliver that data ready for analysis and decision making. Financial institutions are now focused on a real-time offering – it relates to the situations where client can satisfy a purchasing need with the immediate credit or instalment loan proposed based on their creditworthiness. Being a data-driven organisation is a must in today’s market environment. Organisations make necessary investments and changes in their internal processes, to be able to successfully and consistently make decisions based on data at every single level of organisation (in designment of products and services, in customer services, in strategic and financial decisions and many more). We observe that such organisations which are data-driven have competitive advantage, grow faster, take more thoughtful decisions and create shareholder value faster.

But there is one more important factor that is necessary in the data-driven organisation – capabilities of organisations and employees to use such a massive amount of data and their ability to make sound decisions, give the right insight and influence action based on that. That requires also changing the mindset in the finance function itself as well as in the organisation; a partnership of finance with CEO, business and IT, repositioning such a function in the organisation and developing talents with multidisciplinary competencies (which join finance, IT, business and interpersonal skills).

CFOs have to deal with ever-more stringent compliance requirements, ever-more complex derivative products in treasury management, ever-higher levels of uncertainty – what are you doing to help solve their headaches here?

The number of items on CFO agenda is becoming bigger and bigger and that’s why that function is so fascinating as it touches all aspects of business activity. In KPMG we have specialists who can remediate CFO headaches (processes, tax, accounting, M&A, treasury). For example, to assess the maturity of the finance function development, we conduct with our clients a health check of the finance function.  Such projects aim to go through gap analysis versus current best market-practice and to help to build a vision and plan for further enhancement of the finance function. Over the past few years, we have observed a trend to outsource some finance activities to shared-service centres. We help clients make the most appropriate decisions in that area and go through that process to address all the legal, compliance, risk, control and efficiency aspects. Finally, the regulatory environment makes tax processes, calculations and interpretations more and more challenging. In KPMG we have a tax practice who is advising on that. What’s most important – in KPMG we have a group of specialists with advisory and real business experience who can build a multidisciplinary team to propose services which are customised to client needs and can resolve CFO headaches.

Has the sudden jump in inflation – in particular in Poland – had much of an effect on forecasting and budgeting? How are CFOs learning to cope with ever-rising prices and input costs?

Inflation is always present in the economy – the problem is its level. Currently it’s very high and it’s difficult to predict both its maximum level and the peak in time. From my point of view, that situation results in more strategic response of the finance function to the organisation and its impact on the vision and strategy. The support for the CEO and partnership with business is increasing. All budgeting and forecasting processes are now having to become more frequent with the necessity of building of a number of scenarios depending on the changing macroeconomic situation.  CFOs are now more than ever supporting their organisations in their strategic decisions on for example pricing, profitability of products, cost optimisation, purchases, looking for alternative supply chains and many others. On the other side, the automation and digitalisation of finance function is becoming more and more important and is speeding up. Reporting portals, integrated planning solutions, RPAs, data analytics and solution development are getting top positions on CFOs’ agendas. That will further increase in future.

Everyone's talking about ESG – CFOs are mostly having to deal with the 'G'-for-governance issues - what does today's CFO have to watch out for in particular?

Implementation of ESG in the organisation strategy seems to be unavoidable and in the longer perspective might decide about the to-be-or-not-to-be of an enterprise. We observe that usually, responsibility for it is placed under the CFO. ESG starts to have an impact on every aspect of the business model of an organisation, such as reporting and compliance, due to binding regulations; risk management – as some banks limit financing of non-ESG-compliant clients; and financing and ratings – as company external assessment starts to include ESG factors. Finally, all of that (strategy, implementation, and communication) has an influence on the market value of the company, and ESG market leaders will benefit from that. As ESG has impact on running the business and various divisions of an organisation, from my perspective, the CFO needs to watch out for the integrity and consistency of the ESG strategy, implementation and communication in the organisation. It is no longer reporting itself!

Finance personnel more than ever require continual up-skilling as technology and ever-changing regulations mean that the entire team must stay up to date. Training is crucial. How should CFOs and HR work together to ensure professional development is not neglected?

Yes, modern finance function is a mixture of competencies: technical (such as finance technical knowledge, IT skills, use of modern finance tools, etc.), soft (such as communication, strategic thinking, problem solving) but also some character traits – like curiosity, thinking out of the box, perseverance with difficulties. Role of HR and cooperation between HR and finance is crucial. I see both of them working closely on a programme of internal and external training, helping employees to get finance professional qualifications, develop individual internal career paths with clearly articulated steps and promoting culture of self-development that supports finance function vision and strategy. I think also that HR should support finance in getting a proper budget allocation for developing and enhancing the finance function.

Anecdotally, I am hearing from BPCC members that working from home works quite well for purely administrative functions such as finance. How do you see the challenge of remote work from the perspective of the CFO? How do you see hybrid work evolving in the finance function in future?

A few years ago, nobody could imagine remote or hybrid work in finance and in the organisation as a whole. The pandemic has proved that it is possible and can function very well, and now a majority of organisations work in remote or hybrid model. In my opinion, the remote or hybrid model will stay with us for ever. Even now on the market we are talking about a new trend – ‘work from everywhere’. It starts to be an expectation of employees and it increases their satisfaction and at the same time their engagement. However, I observe that in that new environment, some elements still need to be addressed. They can be named as teamwork, creativity, deep connection to the organisation and its purposes and employee relationships. Building all of that via virtual contacts is much more difficult than face-to-face.

 

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