By Wilhelm Crous
October 15, 2024

From a recent global survey conducted by McKinsey across 32 countries [1], it is clear that finance leaders are facing an increasing challenge in balancing a growing list of priorities: The role of the CFO is becoming more critical to the organisation, taking on responsibilities such as crisis management, functional leadership, and being a thought partner to the CEO. Among the findings, CFOs indicated that they are now looking beyond short-term concerns in a way they haven’t in previous years. Most finance leaders cite strategic planning and long-term resource allocation as top priorities, much more than they did in the 2023 survey. For example, 90% of respondents indicated that they expect the rate of industry growth to be better or similar to a year ago. However, CFOs are 2.5 times more concerned (49% up from 20%) about potential supply chain disruptions that could threaten their companies’ growth.

Focusing on the long-term, CFOs continue to view operational value drivers and KPI management as a top priority—unchanged from a year ago. However, there is a renewed emphasis on the future. Fifty-five percent now say that long-term planning and resource allocation are also top priorities for finance, up from 30% a year ago. Similarly, the percentage of CFOs who report strategic planning as a top priority has grown from 38% last year to 60%. Notably, short-term budgeting and forecasting have decreased from 38% to 21%, and financial risk management has dropped from 41% to 17%. The reduction in inflation and interest rates may partly explain these shifts.

Digital Technology Applications and Migration

Despite the benefits that digital technology, particularly generative AI (gen AI), can bring to finance departments, the survey results suggest that many of them have room to improve their implementation and use of technology. Nearly all respondents (98%) said their finance functions have invested in digitisation and automation. However, CFOs report that only one-quarter or less of their processes are currently digital or automated. Only 33% of respondents indicated that 57% to 75% of finance processes are currently digitised and/or automated. The barriers to digitisation extend beyond tech-related issues. For example:

  • 70% indicated that the already demanding workload of finance teams inhibits progress.
  • 67% cited a lack of relevant capabilities within finance teams as a barrier.
  • 62% reported insufficient resources to invest in digitisation.
  • 56% pointed to inadequate IT infrastructure.

What About AI?

Only one in five CFOs reports the use of generative AI tools, and of those, nearly half are still in the pilot and experimentation phase. More than 80% of CFO respondents believe that AI and gen AI will generate insights that allow employees to spend more time on value-adding tasks and will enhance productivity. Eighty-five percent believe that AI and gen AI will assist in creating insights that reduce manual analysis, and 83% said it would improve employee productivity. Additionally, 58% indicated that it would add value by using existing data to inform barrier decisions.

When asked about the potential gen AI applications that would be most useful to finance, CFOs most often identified strategy and leadership support (49%), such as insight generation and competitor insights monitoring. This was followed by one-third of CFOs who cited uses in controlling and general accounting.

While most finance departments have just started their gen AI journey, these technologies present CFOs, and the broader finance function, with significant opportunities to improve effectiveness and efficiency.

Major Transformation Awaits

It is evident that significant transformation is on the horizon for organisations, with vast implications for finance departments, particularly CFOs. However, CFOs also face substantial obstacles when initiating these transformations, as many peers believe such transformations are beyond the scope of the CFO’s role. For example, an earlier survey [2] indicated that 37% of respondents believed that certain transformations are out of scope for the CFO. A further 21% felt that the finance function does not have a formal mandate to initiate transformations. Additionally, 30% indicated that CFOs lack the time and resources needed to lead such transformations.

With the economic climate and trading conditions starting to improve in South Africa, CFOs should also take a long-term view. This will require more investment in AI and digital applications, as well as significant investment in finance talent. Moreover, CFOs should invest in their own development to enhance their strategic planning capabilities, refresh and upgrade their leadership skills, and, most importantly, manage their own wellness, including mental health.

As these challenges and opportunities continue to evolve, the importance of adapting to new responsibilities has never been more critical. For finance leaders seeking to deepen their understanding and equip themselves with the necessary tools, the CFO Conference 2024 in Cape Town provides the ideal platform. Scheduled for 7 – 8 November 2024 at the Protea by Marriott Hotel Stellenbosch, this two-day event will focus on “The Evolving Role of Chief Financial Officers: Challenges and Opportunities.” With a special focus on strategic planning, AI integration, and leadership development, this conference will offer CFOs the chance to gain invaluable insights from their peers and industry experts. Following the success of the recent Johannesburg event, this Cape Town edition promises to be an enriching experience, empowering CFOs to navigate the complexities of their roles in today’s rapidly changing business landscape. CLICK HERE for more information.

References:

  1. Agrawal, A., Grube, C., & Herranz Bayo, J. (2024). Toward the long term: CFO perspectives on the future of finance. McKinsey & Company. [Survey]. Published July 18, 2024.
  2. Agrawal, A., Grube, C., & Hill, M. (2022). In conversation: The new CFO mandate. McKinsey & Company. [Interview]. Published April 8, 2022.