At first glance, you might think the phrases “CFO” and “digital transformation” don’t belong in the same sentence.

The former conjures images of a meticulous researcher and mathematician, calculating budgets, meeting compliance standards and developing safe and financially viable strategies based on historical data. The latter implies a separate executive, usually a CTO (chief technical officer), who is responsible for adopting, incorporating and leveraging the best technology available, whether it’s enterprise software, cloud storage or predictive analytics, to support their employer’s future success.

The exception, of course, is the inevitable memo sent by the former explaining whether their company can afford the latter’s suggested technology. And that role gives the CFO more power over digital transformation than either side realizes.

CFO prudency

While earlier studies from Sage and IDC have indicated that 90 per cent of Canadian businesses plan to implement cloud-based and analytics-driven business solutions within two years, present adoption rates are actually much lower: below half. At Sage, we guessed the reason for this was that unlike, for example, marketing, financial reporting is tightly regulated, which means any new technology and data sources used by financial leaders needs to be proven.

So, we were less than surprised when nearly three quarters – 74 per cent – of the 300 senior in-house financial decision-makers we surveyed across Canada told us one of their biggest challenges is modernizing business processes with technology.

In fact, the data indicates that most CFOs are as aware of digital transformation’s benefits as any CTO. For example, 91 per cent believe artificial intelligence (AI) will benefit their workplace in the future and 67 per cent agree that cloud-based, data-driven financial management technologies would be key to their company’s future success. And while fewer than half had adopted cloud software across the enterprise, 90 per cent have automated certain processes to drive efficiency and 93 per cent said that automation had positively improved productivity.

However, while 70 per cent of respondents reported driving overall digital transformation, 88 per cent of CFOs believed their workforce isn’t ready for additional automation yet. Moreover, 82 per cent are concerned that they do not have the skills to operate AI-powered machines to their optimal capacity.

When asked why CFOs had not yet adopted certain technologies, 85 per cent cited competing business priorities, 75 per cent said initial cost of implementation and 65 per cent reported staff training.

In other words, our data indicates that a frequent obstacle of digital transformation is not, as many articles about the subject would have you believe, a lack of enthusiasm. Instead it shows prudency amongst CFOs, whose enthusiasm is often constrained by their companies’ revenue and tempered with holistic views spanning each of their enterprises’ lines of business.

Siloed processes and talent

Many of the concerns cited by respondents in the survey conducted by Sage echo across industries. For example, while 57 per cent of senior financial leaders see digital-first skills as integral to their sector’s future, 69 per cent cite finding, retaining and growing the right talent as a major concern. They’re hardly alone: the Canadian Federation of Independent Business (CFIB) reported 433,000 unfilled jobs in November 2019, often the result of a skills shortage the Canadian government continues to address through its Express Entry program.

Other issues are more easily fixed. For example, the perception that data-driven processes and digital skills are only valuable to the next generation of financial professionals. A full 60 per cent of CFOs and senior financial leaders believe that cloud technology is only for Millennials: likely a key reason many believe their workforce isn’t ready for additional automation and are reluctant to train their workers.

Yet at least one study by staffing firm Robert Half found that job seekers are eager to apply for positions despite not matching all qualifications, and 86 per cent of HR managers are willing to hire and train workers who don’t meet every skill required for a new position. Those managers and the CFOs supporting them would be well advised to start by training the employees already working at their offices.

Another frequently cited drawback is the number of siloes created by existing digital tools, rarely integrated patchwork of legacy systems and software that actively prevents companies from analyzing data and applying them to solutions across the entire business. This is where integrated platforms, and their ability to access discrete sources such as operational and customer data, come in.

Challenges that CFOs and finance leaders face

Of course, owning the digitization journey and becoming the data gatekeeper is a big responsibility. This means the role of the CFO role is expanding.

As well as data and technology, you need to manage employee and stakeholder expectations.

Embrace this responsibility and you can boost the whole business. A failure to grasp the opportunity leaves you at risk of being overtaken by competitors.

To deliver data-driven insights, you’re going to need to upskill your team. More than half (57%) of senior financial leaders see digital-first skills as integral to the future of finance, but are concerned on how to find and retain the right talent with those skills in the next generation of financial professionals. 69% – of financial leaders cite finding, retaining and growing the right talent as a major concern.

Even though there is an obvious awareness among respondents of the skills gap that must be bridged, there is still a perception that data driven processes and digital skills are only valuable to the next generation of financial professionals. As such, 60% of CFOs and senior financial leaders believe that cloud technology is only for millennials.

Furthermore, even though 57% of senior financial leaders see digital-first skills as integral to the future of finance; 64% considered learning new skills or systems one of the biggest reasons to not implement cloud-based services.

Security, Automation, and AI – three Biggest Concerns

The Sage research shows that as today’s CFOs are expected to provide strategic direction for their organizations, they should better understand the potential, limitations, as well as risks that enterprise technologies can bring. The report uncovers that many senior financial professionals face obstacles on the path to digitization – tangible challenges, such as cybersecurity and talent shortages, as well as organizational misconceptions around the perceived benefits and risks of technologies.

Almost three quarters of financial leaders (74%) see data risks, including fraud and cyber threats, as one of the biggest challenges facing the profession, while 72% say fear of a security breach is the leading reason why they have not yet moved to the cloud. Conversely, despite cybersecurity and risk being a major concern amongst financial leaders, only 20% of respondents see ROI in investing in cybersecurity solutions.

Additionally, most financial leaders (90%) have already begun automating processes to drive efficiencies, and even more (93%), say that automation has positively improved productivity. However, they also feel the need to take a staggered approach to automating additional processes as 88% of CFOs still feel their workforce isn’t ready for additional automation.

The study also found that despite most Canadian finance professionals (91%) believe AI will be a benefit to the workplace in the long run, many also express high levels of concern and skepticism, with 82% of respondents are concerned that they do not have the skills to operate AI-powered machines to their optimal capacity.

Towards CFO 3.0

In the report based on our study, CFO 3.0 Digital Transformation Beyond Financial Management, Sage identified three distinct phases of the enterprise financial leader’s continued evolution.

“CFO 1.0” was the traditional role, focused on accurately reporting their organization’s financial performance and using that information to forecast future results, meeting compliance standards and shaping future business strategies.

Today’s CFOs – the technology-savvy executives we call CFO 2.0 – are using the tools at their disposal to capture and analyze data and performance metrics in real-time. Eventually, they will pave the way for CFO 3.0, focused on developing strategies and forecasts using AI-enabled predictive analytics.

This digital transformation of the CFO is part of an overall shift across enterprises over the past decade, with technology reshaping how businesses operate, make decisions and set new return on investment (ROI) metrics. It’s no wonder that 97 per cent of respondents in our survey said their roles have significantly changed in the past five years.

One thing is clear from our study. It’s equally critical for CFOs and CTOs to have clear understandings of the potential opportunities that technology can bring to an organization, as well as the risks and impact on the workforce. And with their cross-enterprise perspective and influence on a company’s investments, CFOs have a tangible advantage when it comes to driving change and shaping the future of their organizations.

As a global business technology leader, at Sage we are passionate and dedicated to supporting
CFOs and senior financial professionals navigate through the risks and opportunities in this digital
revolution. To learn more about the research cited in this article download the free e-book ‘CFO 3.0 – Digital Transformation Beyond Financial Management’ by visiting https://www.sage.com/ca/cfo/