More than 60 percent of chief financial officers (CFOs) plan to make major changes in response to the new economic climate.
Those were the findings of a major new study conducted by IBM of more than 1,900 CFOs and senior finance executives from 81 countries and 35 industries worldwide, which revealed that they believe the already intense pressure on reducing the enterprise cost base, making faster, more accurate decisions and providing more transparency to external stakeholders will increase dramatically over the next three years.
The study, which is the largest sample of CFO sentiment during the worst economic downturn in decades, also disclosed that as part of the impetus for change, participants ranked 'providing inputs into enterprise strategy' as their number one issue of concern.
Surprisingly, cost reduction was not at the top of the CFO agenda. However, they also displayed a major gap in organisational effectiveness, with only 50 percent reporting that their finance organisations were currently effective in providing the necessary business insight to support these broader enterprise priorities.
"Never before has the importance of strong finance capabilities been highlighted more than during the recent global economic downturn," said William Fuessler, global leader, financial management at IBM Global Business Services.
"Our study shows that CFOs are expected to provide fact-based leadership and strategic decisions grounded in sophisticated analyses to help navigate the enterprise through these new economic waters."
Since IBM's first CFO study in 2003, finance executives have continually stated their aspirations to shift more focus to analysis and decision support, however few have made significant progress in shifting the workload. Among finance's effectiveness gaps, the largest was in the area of driving integration of information.
CFOs' responses also indicate that was a major enabler for practically every area of business insight, but, at the same time, show just how difficult this kind of integration is to accomplish.
One group of CFOs, dubbed 'Value Integrators', were found to consistently outperform their peers in all key financial metrics by driving two key qualities across their organisation - finance efficiency (the degree of common process and data standards throughout the organisation) and business insight (the maturity level of finance talent, technology and analytical capabilities dedicated to providing business optimisation, planning and strategic insights).
The study indicated that enforcing process and data standards, integrating information and applying business analytics were key capabilities that enable improved business insight and risk management.
In fact, when compared to their peers, their enterprises outperform on every financial measure assessed, including return on invested capital, revenue growth and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
Furthermore, the study revealed that many CFOs felt their finance organisations were more comfortable providing 'tail lights' rather than 'headlights', with the appropriate analytical capabilities spanning process, technology and talent, the results indicated that finance can turn this wealth of financial and operational information into business insights, where decisions were no longer made on intuition, but were fact-based.
