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6 Challenges CFOs in the Financial Industry Are Set to Face

In recent months, the financial sector has faced a number of significant challenges, ranging from disrupted supply chains and rising costs to energy price hikes and stock market volatility. To compound matters, COVID-19-induced economic relief measures are being rolled back at a growing rate, resulting in increased pressure on private enterprises. 

To offset the mounting strain on businesses, CFOs are being forced to adjust their key responsibilities, to account for a range of operational and technical needs, offering cross-departmental strategic input at multiple levels. 

 The increase in expectation on CFOs is highlighted in the following key statistics:

  • VC spend (typically considered a useful general economic indicator) is down 20% from this time last year;
  • McKinsey research shows that today’s CFO task remit is wide-ranging, encompassing both strategic development and digital transformation – not just finance;
  • However, 49% of CFOs state they cannot act upon accurate, timely data to fuel rapid decision-making. 

Expectations and challenges

Though economic instability is producing a myriad of market challenges, and the range of tasks required of senior business executives is varied, there are six primary challenges being faced by CFOs today. 

Budgeting and forecasting 

Budgeting and forecasting are mission-critical processes for businesses, allowing CFOs to plan for the future and identify how capital will be utilised and when. According to IBM, “Its [sic] importance is even more relevant in today’s business environment where disruptive competitors are entering even the most tradition-bound industries.”

Faith Vakil, director of research in the Gartner Finance practice, notes, “The pandemic exposed budgeting and forecasting processes that were not able to handle rapid and unpredictable changes in operating conditions.”. 

Further, industry research shows that leveraging customer insights and implementing data analysis methods can better aid businesses in predicting market behaviour, improving strategic planning and enabling proactive approaches to significant market changes.  

Talent shortages 

A rise in remote employment opportunities has increased competition levels across numerous sectors in recent years, which, when combined with a reported seachange in employee expectations, has altered the hiring outlook for an array of industries, including law, supply chain management and professional services.

Subsequently, the challenge of responding to changing employee values is being met with increases in hybrid work arrangements and the introduction of cloud-based systems, enabling the implementation of non-centralised infrastructures and fostering the recruitment of global talent.  

Lack of digitisation

With the ever-present threat of market instability and changing consumer behaviour, a data-driven approach to service delivery can provide invaluable means to identify saving opportunities and cut avoidable costs ahead of time. And to enable improved strategic planning and cultivate reduced operational costs, a growing number of businesses are focusing their efforts on process standardization, increasing the need for digital transformations. 

PwC underscores the sentiment, stating, “Enterprise digital transformation needs advanced analytics, artificial intelligence applications and cloud technology, the backbone of advanced financial tools.”

While the options for digital transformations are numerous and vary from application to application, industries such as debt collection are being transformed by increased digitisation, with automated multi-channel communication and AI-informed collections strategies, significantly cutting rates of non-payments for businesses.  

Challenges for CFOs in the Financial Industry
Image: Campaign Creators

Regulatory compliance and data security 

The regulatory landscape is becoming increasingly complex; consumer privacy and data protection concerns are driving policy changes globally, and the costs of non-compliance can be significant. As Accenture notes, “Compliance function [sic] and leaders now face a new challenge: Dealing with multiple strands of complex change, happening simultaneously across the enterprise, and at warp speed.”

As a result of the influx in compliance protocols, businesses are required to assess their data management processes and ensure sensitive data is handled in accordance with privacy legislation at the domestic and cross-national level.

To better safeguard data and ensure continued compliance, more businesses are partnering with third-party vendors that operate with strict security protocols. 

Siloed information

Partitioning company information and data can create a number of issues for businesses seeking to fully understand their operational effectiveness and leverage an accurate view of their customers’ behaviour. 

By aggregating data sources into an all-in-one platform, CFOs can benefit from increased reporting accuracy by identifying process inefficiencies and implementing informed strategic planning that better serves both clients and stakeholders. 

Cash flow challenges

A steady cash flow can provide opportunities for businesses to improve technology, make infrastructural changes and invest in research and development. Conversely, limited access to capital can result in a loss of suppliers, lenders and vendors, causing reputational damage, inhibiting growth and preventing opportunities to scale.   

A recent study by Ormsby Street finds 40% of small businesses fail within five years due to cash flow restrictions.

To reduce these risks, access to improved customer insights and a robust, data-driven collections strategy can help businesses recoup over 100% of monthly recurring revenue (MRR), serving to offset lean periods. 

Mitigating the challenges of a shifting economic outlook 

Rising costs, threats of recessionary periods and increasing energy prices will continue to influence global markets in the immediate term, creating a number of challenges for both startups and established businesses alike. But a data-centric approach to business can aid CFOs in safeguarding profitability and successfully navigating an uncertain trading landscape.

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