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4 Key Trends for the Finance Industry in 2023

2022 was another unpredictable year. For businesses in the UK, political instability, including the fallout from Brexit, three Prime Ministers and four chancellors, has set the stage for continued uncertainty in 2023. Rising levels of inflation and ongoing fears of a recession have left fear in the markets, with foreign investors turning away from unpredictability and risky investments around international growth.

Posted: 28th February 2023 by Katina Hristova
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Throughout 2023, businesses will continue to be confronted with challenges, but many will still be looking for growth opportunities. The ability to deal with unpredictability is more crucial than ever for the finance team. Run efficiently, they are at the centre of strategic leadership, ensuring businesses are making the correct and most responsible investments, while recognising that the funding market and growth-at-all-costs agenda has changed significantly. Below we explore four key trends we can expect for finance teams to see success this year.

  1. Businesses will be balancing growth and efficiency to survive

The expectation that the post-pandemic boom would continue unabated has left many business leaders at a crossroads. The macroeconomic factors and fallout from geopolitical events has meant that business models established while the going was good need to be course corrected. Many businesses, especially in the software and technology sector have proactively taken measures to ensure business continuity, shifting priorities from all out growth to sustainability.

During the economic turmoil, businesses will need to ensure they are making the right investments and at the right time for such growth to be sustainable. After all, despite the economic slowdown, many businesses are still actively seeking growth. But to protect reputations and manage sustainable growth, businesses will need to plan their futures in a much more careful way.

Throughout 2023, successful businesses will be focusing on their core proposition and doubling down on the segments of the business with the best productivity and economics – essentially those that provide the best ROI for sustainable growth.

Unfortunately, this may mean divesting from longer term and experimental projects in a bid to reduce risk and cost for some companies will be required. International expansion will likely only be prioritised in areas where environmental factors allow for sustainable growth.

  1. Finance will take on a larger leadership role

Our research from 2021 found that a fifth (20%) of UK CFOs say they’ve seen a greater demand placed on them by the CEO and C-suite – this trend will be amplified throughout 2023 as finance takes on a larger leadership role.

Finance should be at the centre of all strategic planning as businesses become more numbers-driven amid economically challenging conditions. New investments will need to be strategically timed and nuanced with different sensitivities at play. This requires focus and crucially, balance. The finance team cannot purely be in cost cutting mode; they will need to create a longer term plan for sustainability and profitability.

Now more than ever, finance leaders will need to modernise with technology to remove manual processes, whilst increasing visibility and control. For example, automation can avoid duplication and wasted spend by approving purchases before they are made, helping businesses tighten their budget control. In addition, automated spend forecasting can help increase accruals accuracy and provides pre-paid data for accounting and FP&A. This will allow for the identification of opportunities for innovation and will free up time for the crucial strategic relationship with the rest of the C-suite.

  1. The global economic outlook will impact investments and IPOs

The technology industry faced significant headwinds in 2022 due to rising interest rates and global economic instability. According to Innovate Finance, globally, FinTechs attracted $92bn in venture capital in 2022 - a decline on $103bn invested into the sector in 2021. UK FinTechs secured $12.5bn, of which $8.9bn was invested in the first six months of 2022 - an 8% drop on 2021 investment.

With less funding available and tech companies losing their appeal somewhat as VCs began to prioritise lower-risk investments, 2023 will see IPOs continue to fall. This will impact businesses’ ability to grow at rates seen previously. Unfortunately for UK companies, they will need to take a more cautious approach to international expansion if they choose to pursue growth during times of uncertainty. To ensure resilience, it is crucial that finance leaders are equipped with the right insights for strategic advisory - placing them at the heart of expansion conversations.

  1. Regulators will need to sit up and take action

The cryptocurrency industry has been more volatile than other financial markets. Macroeconomic factors, the high-profile collapse of FTX, and now fraud lawsuit against founder Sam Bankman-Fried, has forced financial regulators to sit up and pay more attention to the needs of the industry.

In the wake of the FTX collapse, CFOs and finance leaders will become more discerning about where their funds are being held. In tandem, regulators will prioritise compliance and clearer rules for operating in financial markets, such as the European Union’s Market in Crypto Assets (MiCA) legislation which is due to be moved into law and the Financial Services and Markets Bill here in the UK.

A lack of clarity in crypto regulation has been bubbling away at this stage for a long time. In order to see real movement, policymakers and governments need to turn their words into action. Turning regulatory criticism into marked regulatory rules will be key to preventing – otherwise it will continue to be a pipedream.

According to research from AutoRek, 63% of payment firms believe their regulatory burden will increase over the next two years, and UK firms will spend considerably more (£325,000 on average) compared to the US to ensure compliance. We expect the regulatory landscape to shift substantially in the wake of the volatility in 2022. But to keep efficiency high and costs low, businesses will need to be ready to adapt, using technology tools to negate the sudden impact of change.

As the finance industry considers what this next year will bring, one thing is for certain: sustainable growth will be a top priority. Uncertain economics and a lack of funding has meant that growth trajectories have changed substantially. However, with the right data led insights to support key business decision making, the time for finding new opportunities is still here. This can only be done successfully with a strategically savvy finance team in tow; their visibility and control is critical to reacting to new challenges and leading the business towards the best possible outcome.

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