The chief financial officer is now the chief reinvention officer, charged with overseeing integrated ... [+]
In the face of ongoing volatility and near-perpetual disruption, companies are working harder than ever to remain competitive. That means transformation, and, in many cases, outright reinvention. The chief financial officer is now often the chief reinvention officer, charged with making everything happen as quickly as possible while managing the associated risk.
This is no easy task, as CFOs in this role find themselves overseeing integrated business and technology initiatives to transform everything from environmental sustainability to the company’s business model. This requires making complex, interrelated decisions at speed. In our research, 68% of CFOs said that their organizations are undertaking three or more significant initiatives in parallel, and 86% said that the speed of decision-making has also increased.
It is no wonder that CFOs now face what business psychologist Barry Schwartz calls “the Paradox of Choice.” Multiple options regarding scale, pace, technology and approach can hinder decision-making; in fact, more than two-thirds (67%) of the CFOs we surveyed said they feel paralyzed at times by the number of decisions they need to make and the number of options from which to choose.
Yet another complication is that, as their roles expand, CFOs may lack the necessary information and talent to make the right decisions. The risk function, often represented by the chief risk officer or CRO, can help tremendously here by bringing in additional knowledge and perspective. CROs have access to high-quality, in-depth information and can help the CFO identify potential impacts and evaluate strategic choices.
Cloud is a good case in point. Cloud is typically a key enabling technology for transformation initiatives. But organizations (and finance functions) often lack the necessary cloud skills, security and related infrastructure capabilities.
In a digital environment, no transformation will succeed without defining and implementing the appropriate controls and security. The risk function can help keep the organization’s cloud strategy on track by recommending effective controls related to concerns such as data privacy, security of ecosystem partners, and protection of data in physical as well as virtual locations.
Risk can also help the CFO set priorities and identify interrelationships across a transformation program. For example, the organization’s digital core must meet many needs. Finance is a key customer, but digital capabilities should support product development, the customer experience, third-party relationships, and many other groups and functions.
Risk’s experience in looking at the impact of technology throughout the organization can help the finance function make the right decisions in terms of the architecture and solutions beyond the required security and controls. While there are risks associated with the implementation of new technologies, there are even bigger risks associated with the organization’s ability to make effective use of the solutions chosen.
Furthermore, risk can concentrate on organizational resiliency and the challenges associated with transformation. The risk function and the CRO can help identify common needs in areas such as data, IT and talent while also navigating interactions among the different ongoing transformation initiatives. Ideally, the organization will achieve one collective, desired outcome, rather than many disparate or even competing outcomes. Change will be a constant in business, but the CRO can play an important role in pointing everyone in the same direction.
Transformation is necessary for organizations to remain competitive, but multiple, complex initiatives undertaken in parallel, by definition, can dramatically increase the risk of successful outcomes. When the risk function aligns with the CFO on strategy, desired outcomes, and the quality of required data, the likelihood of delivering the intended results for the business are greatly enhanced.
