Cognitive Ready Finance – Practical Actions and Insights for CFOs

As if the role wasn’t challenging enough, the CFO now has to adapt to an increasingly cognitive and digital world – all on top of unprecedented increases in demand, volume, complexity and diversity of data. Finance often struggles to meet current enterprise demands for information. But in the cognitive era, these expectations will rise dramatically. CFOs who don’t prepare for this reality will fall farther behind their peers.

How can a CFO begin to prepare their organization for the coming challenges of cognitive?   There are five imperatives for Finance to better prepare:

  • Transactional: Rapidly transform the Finance Operating model to reduce cost, re-allocate resources and fund needed IT and Analytical investments
  • Architecture: Implement a scalable and flexible Financial Systems architecture with “fitness for purpose” and Cloud enablement
  • Analytical: Empower FP&A through improved data supply chains, advanced data science/analytical capabilities and more effective business alignment
  • Risk: Move from manual detection to automated preventative risk and counter fraud measures capable of handling high transaction volumes
  • Opportunity: Leverage regulatory mandates as opportunities to further transform finance

I’ll explore each of these a bit more deeply in this and subsequent blog postings – beginning with the Transactional and Architecture imperatives.

  1. Transactional Imperatives: Continue to Transform (and Reinvest Savings): Most Finance organizations devote 80-90% of total spending to traditional controllership and compliance activities. However, controllership activities are increasingly viewed as minimum “table stakes” by internal stakeholders. CFOs won’t earn recognition for spending a penny more on transactional, reporting and compliance activities than is absolutely required to perform them accurately, timely and in compliance with regulatory requirements.

This cost allocation needs to be significantly reduced to fund needed investments in analytical capabilities. Cautious improvement programs spanning many years and generating single digit annual productivity gains are no longer sufficient. CFOs must now strive for rapid, controlled and transformational change to all facets of the global Finance operating model. For example;

  • Appoint global process owners to establish standard process designs
  • Challenge and eliminate business unit deviations from the standard
  • Focus on source data quality, consistency and governance
  • Use robotic process automation, ERP automation and mobile enablement (e.g. SAP Fiori) capabilities
  • Divest activities that can be performed more efficiently and effectively elsewhere
  • Challenge whether some finance activities should be performed at all (e.g., low value adjusting journals or allocations)

 Time is no longer on the side of the CFO. All facets of the Finance operating model need to be examined and all transformation levers considered. This requires courage and the willingness to challenge long-held Finance structures, practices and beliefs

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  1. Architectural Imperatives: Finance “Fitness For Purpose”: You don’t use a shovel to drive a nail, and financial applications also shouldn’t deviate from their intended purpose. For example, don’t use the corporate consolidation system as a de-facto data warehouse and engine for management reporting. Instead, use dedicated BI tools for analysis and management reporting – and work to ensure that these BI tools draw on common sources of certified data. To take advantage of unstructured data, consider technologies such as IBM’s Watson which can help bring structure to chaos and drive new insights from unstructured data such as contracts, market intelligence and social media.  Although adoption of Cloud ERP and G/L is emergent, Cloud is making significant inroads in mission sensitive applications such HRIS and CRM, as well as some peripheral Finance applications. Eventually, Cloud will find wider adoption for core finance applications. The savings and opportunity cost benefits associated with Cloud require objective, serious analysis – free from unchallenged fears and biases. By simplifying and standardizing your finance systems architecture, Finance will be able to better respond to the dynamic reporting, predictive analytics and cognitive needs of the enterprise.

Cognitive business demands for reporting and analytics will place unprecedented demands on applications, particularly those that are heavily customized and rely upon effort intensive and inflexible ETL disciplines. Deferring investment is no longer a workable strategy – a cohesive, scalable and fully supported Finance applications architecture is essential. Objectively evaluate Cloud applications to reduce total cost of ownership and maintain current application functionality

 I will touch on the other three imperatives in a post next week. In the meantime, I look forward to continuing the dialogue either publicly here or privately. Either post a comment below or feel free to contact me at thfisher@us.ibm.com.

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