No doubt every executive will report increasing data analytics and planning challenges in today’s ever-changing, digitally driven economy. Recent reports highlight the top challenges CFOs are currently facing, and they all follow three overarching themes – you guessed it: mounting pressures, digital disruption and external forces. We call the intersection of these challenges the CFO Paradox – essentially that finance executives are increasingly a part of strategic business decision-making and are relying on advanced analytics to drive those decisions, yet very few trust their data.
A closer look at data analytics and forecasting challenges
In its 2016 report, The DNA of the CFO, EY found that CFOs are increasingly unable to focus on strategic initiatives because of operational responsibilities and time spent on compliance, controls, and costs. At the same time, they report that their teams lack the skills or capabilities to meet future strategic business needs. These pressures are compounded by the fact that CFOs are increasingly involved in strategic functions, with 71% reporting that they expect to be increasingly involved in strategic functions and ethical decision-making. Ultimately, with time-consuming operational duties and talent that is unable to meet these demands, CFOs need to find more efficient ways to fulfill their strategic roles. Read the full playbook here >>
The same EY report revealed that finance leaders recognize the need to better understand technology and analytics. They do in fact believe that advanced data analytics are key to improved strategic financial planning decisions, especially as they anticipate risk management to be a critical finance capability in the future. However, these same executives don’t trust the data and analytics they are presented, leaving CFOs in a paradox. How do they make informed, strategic financial planning decisions based on data they don’t trust?
One of the reasons that CFOs don’t trust their data is undoubtedly that in many companies, few if any, external factors are taken into account.
An article in CFO notes that executives are becoming more and more concerned by “intangible” geopolitical risks. These CFOs listed several other external factors of concern, such as currency volatility, energy prices, and political/regulatory uncertainty, then further noting that accurate forecasting is increasingly difficult.
Luckily, technology is enabling finance teams to overcome these challenges, giving companies the ability to understand very specifically how their companies move with various market drivers. Improved time to insights coupled with more accurate data analytics allow CFOs to focus on strategic priorities and be proactive in their planning processes to better monetize market opportunities and mitigate risk.