This figure marks the Bounce Back programme as easily the most popular form of COVID-19 support offered to SMEs by the UK government, more than doubling the combined total lent under HMT’s two other support programmes.

Launched last month following complaints that the government’s coronavirus business interruption loans (CBILS) were being issued too slowly, the Bounce Back loans application process features only minimal background checks against money laundering and fraud in order to ensure a faster process. Unlike CBILs, which are only 80% guaranteed by the state, Bounce Back loans are backed 100%.

However, the light restrictions of the scheme have come under criticism by some as insufficient to prevent loans from going bad. Senior bankers interviewed by the Financial Times estimated that between 40% and 50% of those receiving the loans may default on the debt.

As these loans are entirely guaranteed by the state, a surge of defaults would mean UK taxpayers footing the bill.

Stephen Jones, head of UK Finance and former CFO of Santander, said: “It’s important to remember that any lending provided under government-backed schemes is a debt not a grant, and so firms should carefully consider their ability to repay before applying.”

Tuesday’s figures also revealed that 700,000 out of the 870,000 applicants to the Bounce Back scheme have been granted loans. A further 45,000 businesses have borrowed a cumulative £8.9 billion under the CBIL scheme, and 191 companies have borrowed a cumulative £1.1bn under the coronavirus large business interruption loan scheme.

Kenta Kon is set to be the new CFO of Toyota as of this week, as the firm aims to eliminate all executive vice president (EVP) roles and streamline the way the company is managed. By doing this, it plans on improving production systems and shrink costs in all areas.

Answering to CEO Akio Toyoda, who has been at the helm since 2009, Kon will be the firm’s no.2 executive. Current CFO Koji Kobayashi is set to remain within his secondary role as chief risk officer. Six of the firm’s EVP roles, which have been in place since 1982, will be binned, paving the way for a new more streamline executive management system. Some of these roles will now become COO roles and the according individuals will manage more niche operations of the firm, though four of these will pretty much continue working as the same role, just without the EVP title.

“I have judged that it is necessary for me to directly communicate with the leaders of the next generation and to increase the amount of time for sharing our concerns, by further reducing the number of layers of management.”

The appointment of Kon as CFO is just one of Toyota’s latest moves in simplifying the way it works internally, in order to compete on a level playing field with rivals, and as one of the world’s largest motor manufacturers, keep up with the latest technology, such as electric vehicles, self-driving cars and more.

According to Reuters, President Akio Toyoda said: “I have judged that it is necessary for me to directly communicate with the leaders of the next generation and to increase the amount of time for sharing our concerns, by further reducing the number of layers of management.”

As John Murdock, CEO of business intelligence experts Centage, explains below for Finance Monthly, this has begun to shift over the past decade due to technology and automation.

Companies like Botkeeper and MindBridge.ai are fully automating tasks like entry and validation of transactions, line items, compliance and auditing corporate books. Other companies offer platforms that streamline budgeting, surface trends hidden in data, and a wide variety of classic financial team functions.

As these functions move into software, one of two things will happen: accountants will lose their jobs, or automation will prompt them to radically transform the office of finance. Even if  CEOs prefer people to AI, they may have trouble finding qualified accountants to staff their financial teams. According to Accounting Today: “Accounting, like many professions, is experiencing a shrinking talent pool as boomers retire and younger generations are opting for other careers.”

This evolution is going to kickstart some serious changes in the industry, which is why the AICPA, through its CPA Evolution project, is working to ensure CPAs continue have the skills needed to support the accounting profession. I see that there are five distinct transformations occurring in the office of finance that are a direct result of financial technology.

1. Finance teams are becoming business partners

Back office automation allows the financial team members to move in a more strategic, front-office role by offering their talents to the managers and department heads who run the day-to-day business. For instance, the financial team of a retailer can help the company optimize revenue per square foot, or understand the profitability of each product in order to tweak the brand’s merchandising strategy.

The financial team of a retailer can help the company optimize revenue per square foot, or understand the profitability of each product in order to tweak the brand’s merchandising strategy.

Personally, I see this as a positive development. I never saw the benefit of sequestering such an important role in the office of finance. The finance team is responsible for ensuring company priorities are funded. How can they do that if they don’t understand how or why those things become priorities to begin with?

2. Finance teams will recruit more graduates with business and operational knowledge, not just accounting degrees

The more the financial office moves to the front-office, the more executives will value people who have degrees and backgrounds in business strategy, market differentiation, and competitive positioning. These are the skills that inform strategic decision-making and can help the business chart long-term strategies.

This is a reversal of a trend that began after the 2008 financial crisis and the passage of Sarbanes-Oxley. According to the executive search firm Spencer Stuart, the number of CFOs with CPA certification rose from 29% to 45%. But now that compliance and auditing can be automated, I believe that CPA certification will be less of a priority for management teams.

The accounting industry itself is undergoing a similar shift. Non-accounting college graduates accounted for 31% of new hires across public accounting firms in the US in 2018. The Journal of Accountancy cites the need for tech skills as a primary driver of the shift: “Increased demand for technology skills is shifting the accounting firm hiring model,”  Barry Melancon, CPA, CGMA, AICPA President and CEO and the CEO of the Association of International Certified Professional Accountants, said in a news release. “This is leading to more non-accounting graduates being hired, particularly in the audit function.”

3. More CFOs will have a non-traditional path to leadership

The other day I listened to a podcast of the Boston Red Sox, Tim Zue, describing his rise to CFO. He didn’t come from a finance background (he studied mechanical engineering in college). But after working for the Red Sox organization for more than 18 years, he developed a keen understanding of the business, which more than made up for his lack of a finance degree. He knew the right questions to ask in order to make strategic business decisions. As a result, he now believes that the only way to gain such a deep understanding is to get into the front office and work with the people who are running it day-to-day.

The only way to gain such a deep understanding is to get into the front office and work with the people who are running it day-to-day.

I agree wholeheartedly with Zue, not the least because I experienced the same trajectory in my own career. I earned my bachelor's degree in engineering and worked in sales and marketing prior to becoming a chief revenue officer. My experiences as CRO positioned me to become a CEO.

4. Technology will increase the demand for strategic thinkers

This may seem counterintuitive, but as AI merges with business intelligence to alert the finance teams to trends inside the business as well as trends within their markets, companies will need CFOs who are highly strategic thinkers. After all, if everyone uses the same software to guide decisions, they’ll all make the same decisions. We see this phenomenon in our everyday lives all the time. For instance, Waze does a great job of informing drivers of traffic congestion and suggesting alternative routes. But if enough drivers take that alternate route, it just creates another traffic jam.

To complete the metaphor, successful companies will need CFOs who can see the out-of-box alternative route to long-term sustainability and growth.

[ymal]

5. Finance and engineering will merge

Financial degrees are already becoming more data and tech centric. This past October, the Pratt School of Engineering at Duke University announced it will offer a masters degree in financial technology. There is compelling reason why these disciplines are merging: both center around data. Fintech is still in its infancy, and it offers significant opportunities for engineers to build out automation around financial rules. It makes sense for engineering schools like Pratt to train their students in the ins and outs of finance. I can’t emphasize enough how radically the coupling of these disciplines will transform accounting and finance over the next decade.

Accountants and finance teams shouldn’t fear technology. It will certainly change the way they think about their roles, but that’s a positive, not a negative development, especially for ambitious people who are eager to play a more strategic role in their corporations.

So, how can you determine the right amount of money to spend on risk management? The answer isn’t a simple numerical value or percentage, but rather a process of thinking that allows you to better grasp the potential risks of the business as a whole. 

Asking preliminary questions to frame thinking is the best place to start when making a determination.  By considering the key questions below, and reviewing the risks of each area of the business in isolation, you can perceive the bigger picture of potential risks.

Ask yourself:

• What kind of industry are you in?
• What kind of personally identifiable information (PII) or sensitive data do we handle?
• What is the current regulatory landscape of our industry?
• How complicated are our risks?
• What are the impact scores of our risks, both individually and aggregated?

Once these questions are answered, take time to dig deeper and examine how security needs vary throughout the company. It is the risk manager’s responsibility to identify these considerations for the CFO to review, but many managers have difficulty articulating and quantifying returns. This is because risk management projects often don’t have end dates or set metrics to report. Working together and communicating is key to understanding the security risks of the company.

As a result of the immense uncertainty surrounding risk management, it’s understandable that many CFOs use benchmarks to compare their spending to others in their industry.

Ask Vital Questions

The process of mitigating risks and interpreting results are both equally important. Keeping costs in line starts with asking the right questions from the very beginning. It’s hard to follow a budget if it ignores essential expenditures that could easily be identified by proper analysis of the risk management program. Asking vital questions about real dollars and business impacts will help to calculate actual costs and anticipated returns from planned projects.

Risks are constantly shifting and changing with business needs and practices. An effective risk management strategy accounts for this need for flexibility. The bottom line is that risk is hard to predict, making it crucial to continuously improve the process.

Create a Comprehensive Plan

Deciding the dollar amount to spend on risk may seem like a guessing game, but breaking it down into categories establishes a clearer picture of where the highest potential risks are. A risk management budget may be broken down differently depending on the needs of the business, but it’s beneficial to first divide it based on technical needs, compliance policies and procedures, and products necessary to run effectively.

Once this basic guideline has been established, more specific expenditures can be laid out. Any good risk management budget leaves room for regular monitoring and constant correction. The spending should be adjusted consistently to account for changing levels of risk exposure.

 Reference Points are Beneficial—But Only as Framework

As a result of the immense uncertainty surrounding risk management, it’s understandable that many CFOs use benchmarks to compare their spending to others in their industry. This gives CFOs the framework they need to prevent the company from falling behind competitors or overlooking security risks that could easily be averted. While these reports can be helpful in getting a general idea of larger industry trends, it doesn’t provide sufficient information to create a plan unique to an individual business.

As reported by CIO.com’s 2019 State of the CIO survey, nearly one-quarter of organisations (23%) are alloting 20% or more of their IT budget to risk management and security measures. This report surveyed 683 executives across a variety of industries and breaks down how this budget is typically spent. The findings suggest that the majority of the budget is spent keeping up with industry best practices (74%), followed by compliance mandates (69%), responding to a security incident that happened to the organisation (35%), mandates from the board of directors (33%), and responding to a security incident that happened to another organisation (29%).

Assessing industry reports can provide insight into how other companies are addressing their security risks, but basing numbers entirely off of industry averages is not an adequate method. CFOs must be aware of how their company may differ due to specific circumstances or goals. Many companies must abide by other factors such as regulatory requirements, customer expectations, and demands of partners.

Don’t Overspend

While it’s important to have a holistic budget that includes every area of potential risk, spending too much on risk management can do little to actually impact risk exposure. It’s crucial that companies identify the defining amount where additional money isn’t justifiable for reducing risk. This point where investing more results in minimal results can be difficult to determine for risk management. It’s impossible to know if a specific risk might be avoided one year but arise next year or in the following years. Not accounting for a specific risk is a costly mistake for any business. Rolling the dice and hoping that something is avoided isn’t a long-term strategy for risk management. Both under-budgeting and over-budgeting for risk can be detrimental. Finding a balance by preparing for the worst while also being careful not to overspend on unlikely scenarios is the best approach to feeling confident in your risk management strategy.

Automation technologies, in particular, are overhauling the way people work by taking over more routine administrative tasks and therefore reducing the amount of back office work needing to be done by individuals.

This is leading to an evolution of the role of the modern-day finance professional – primarily that of the CFO – and here Marieke Saeij, CEO at Onguard, presents finance Monthly with some of the key changes we should expect to see.

The need to develop new skills

As automation technology becomes more prominent in the financial sector, CFOs will be able to dedicate more time to bigger picture issues, such as where they can create business efficiencies, and focus on how else to add value to their organisation. As a result, they will be required to develop new skills, such as analytics, communications and programming. This will ensure they have the knowledge and ability to interpret and analyse data collated within their credit management system, for example, and turn these insights into actions. CFOs should also look to create new KPIs to ensure they are continuing to get the most of their operations and focus more on managing financial processes, rather than carrying them out.

As CFOs spend less time on the monotonous day-to-day tasks, they will also be able to look more closely at customisation and ensure they understand and deliver each customer’s preferred communication channels and payment methods for their invoices. This will allow the business to interact with customers in the way they prefer to increase the chances of invoices being paid on time and to strengthen existing relationships.

Developing new strategies

The use of big data in predictive analytics is providing CFOs with key insights on a wide range of issues, which can be used to drive better commercial decisions and inform decision-making processes. This will enable them to add strategic value by being proactive, rather than reactive, as they can use information from the past to predict the future. For instance, predictive analysis may show that a certain customer has paid his invoices on average within 28 days for the past seven years. This means it is highly likely he will also do the same when he receives the next invoice. CFOs can then use this information to decide how they interact with this customer, chasing for payment only after that time period has elapsed.

The introduction of real-time finance cycles could also change the way CFOs operate as they will no longer be using outdated figures and basing important decisions on potentially inaccurate information. With real-time finance cycles, CFOs will be able to work with the most up-to-date information and be reassured that they are making business decisions with the latest available data. This will allow them to see where possible adjustments need to be made and take action immediately.

[ymal]

Cross-department collaboration

Often, the siloed nature of large companies inhibits the efficiency of a CFO as it means they have a lack of visibility and are not always privy to important information. With more time available to them, CFOs could collaborate with other departments within the company to ensure the organisation gets the most from all of its financial operations. This will help every department to have a better understanding of what other departments are working on, how this may impact them and the financial processes involved. This will stimulate greater openness and understanding between teams and could improve the business’ credit management processes.

The modern-day CFO will be substantially different from the traditional view of the role. However, this is a fundamentally positive thing. Thanks to increased use of more advanced technology, CFOs will be able to move away from the more mundane day-to-day financial tasks needed to keep a business ticking over and take on a more strategic, diverse and value-adding role.

However, not all CFOs are created equal. While there is a wealth of factors that contribute towards a CFO’s ability to make a decision, their personality type can be a crucial aspect, not only in driving innovation but also in contributing towards the business’ bottom line.

To explore these characteristics further, Barclaycard undertook research to delve deeper into the impact of different CFO personality types. The research identified that CFOs fall into four decision-making typologies; Trailblazers, Explorers, Conformists and Resourceful Traditionalists.

But what type of CFO are you? And how might your leadership style be impacting your business?

The Trailblazer – leading from the front to drive business growth

Are you motivated to trial new forms of technology and keen to implement improved processes? If you understand the importance of decisiveness, imagination and ambition when making important business decisions, you’re a Trailblazer CFO.

Trailblazer CFOs pioneer and adopt new technologies to help drive business growth. As part of this, they look to their accounts payable software to help them achieve their business goals. And it pays off, particularly regarding access to ‘early payment discounts’ – pre-agreed discounts for paying suppliers earlier than their standard payment terms.  Our research found that businesses with Trailblazer CFOs at the helm are significantly outperforming their peers; on average, they capitalise on almost 98% of the early payment discounts available, equating to savings of £82,818 per business each year.

The Explorer – searching for new and improved technologies to steer the ship forward

Do you constantly find yourself evaluating your business’ next technology or process? If so, you could be an Explorer CFO. Explorer CFOs are those prepared to consider alternative technologies, and willing to test new software and processes with pilot projects and trials.

Explorer CFOs are those prepared to consider alternative technologies, and willing to test new software and processes with pilot projects and trials.

It’s not all full steam ahead, however. The one thing holding these Explorers back is a degree of caution when it comes to converting these ambitions into action. The CFO has an increasing responsibility for advocating and piloting the new technologies that will help their organisation to achieve its goals. Explorers that do take the leap will find new opportunities to maximise efficiency and make cost savings, with our research indicating that they could tap into as much as £36,200 in unrealised early payment discounts for their business, each year.

 The Conformist – sitting comfortable but reluctant to change

Conformists rely on tried and tested systems and practices and are reluctant to adopt newer approaches and technologies. However, sitting still may mean that their business misses out on upgrades and innovations that could otherwise impact potential savings and support business growth.

 Highlighting this, Barclaycard research found that Conformist CFOs typically take advantage of only 52% of the early payment discounts available, securing an average of £68,478 per business each year – the lowest of all four CFO personality types. Many Conformist CFOs told us that their finance system does not even allow them to take advantage of early payment discounts in the first place.

 The Resourceful Traditionalist – optimising familiar processes   

Do you prefer refining and perfecting tried and tested processes and systems, rather than trying something new? If so, it’s most likely that you’re a Resourceful Traditionalist. Tending to place the emphasis on insights gained from previous experiences, Resourceful Traditionalists are likely to stick to what they know. They are more risk-averse, too; Resourceful Traditionalists are more likely than the other personality types to factor in potential risks and uncertainties when making key financial decisions.

The role of a modern CFO goes so far beyond reporting and managing day-to-day finances – it’s about actively driving profit by exploring new technologies to secure greater efficiencies, such as early payment discounts.

While this may not all be bad news, it does mean that you could be missing out on the many benefits of investing in accounting software that accurately reflects the needs of your business today. In fact, our research identified that nearly half (48%) of finance leaders are frustrated that their current finance systems are not sufficiently digitised, with four in ten (40%) saying that they are too labour intensive.

The impact that your ‘type’ could have on your business

The role of a modern CFO goes so far beyond reporting and managing day-to-day finances – it’s about actively driving profit by exploring new technologies to secure greater efficiencies, such as early payment discounts.

Those that embrace these new technologies, following in the footsteps of Trailblazer CFOs, can not only achieve tangible savings, they can also reduce paperwork and streamline the way their business operates.

Those that are slower to make the shift to new technologies could risk being left behind – and what CFO wants that?

As a result Jason Lin, CFO at Centage Corporation says CFOs are losing sleep over the end result. This is so far from ideal, which is why I’m offering these five recommendations to help financial teams sleep better.

1. Instill confidence in your data

I totally get why finance teams lack confidence in their budget data. Last year’s actuals are typically re-keyed into a budget spreadsheet, and manual data entry inevitably leads to mistakes. Worse, it’s incredibly difficult to spot where, in a series of spreadsheets linked together with macros, a zero may have been left out or numbers were transposed. And once the data is entered, it’s used for what-if scenario planning -- i.e. predicting the future -- which takes the budget even further away from the “truth.”

Finance teams can get a lot more sleep if they ditched the spreadsheet and replaced it with a tool that can pull data directly from their GLs. Not only will the data be accurate (and teams spared countless hours of data entry), the budget will be a replica of how the business is organized, making scenario planning a lot more accurate. Of course, the predictions may still be wrong, but at least the effects of those assumptions on the financial statements will be realistic.

2. Avoid forecasts that have major variances versus actuals

This is a tough one because there are so many external variables that can affect the actuals. What will the economy do? Will interest rates go up? Will new tariffs drive up manufacturing costs? How is that upcoming election going to shake out? In all honesty, attempting to predict market conditions in Q4 2020 in the summer of 2019 is a bit unrealistic. No amount of effort will change that reality.

My best recommendation: move to a rolling forecast that’s updated monthly, or at least once a quarter. Not only will it lessen the variances, but it will also allow teams to spot trends that have the potential to affect the goals set (positively or negatively) much earlier.

3. Test your assumptions for accuracy

I realize what a big ask this recommendation is. This issue of testing your assumptions for accuracy will never go away because, as mentioned above, there are way too many factors that affect performance but are way outside of your control.

While you can’t control what will happen, you can anticipate potential variances and put plans in place to respond to them. Scenario planning and what-if scenarios are your saving grace here. For instance, you can test the impact on your P&L if sales decrease by, say 10%, or if the cost of oil spikes. You might not like what you see, but at least you’ll know ahead of time the potential outcomes so you can warn the executive team upfront, and make contingency plans if your assumptions aren’t correct.

4. Meet your budget deadlines and be boardroom ready

When I hear the concerns of CFOs about meeting deadlines I like to tell people what Steve Player, noted business author and Program Director for the Beyond Budgeting Round Table (BBRT) North America, has to say about it. To paraphrase his viewpoint: starting earlier is a terrific way to build more errors and delays into your budget. Again, in the summer of 2019 you are attempting to predict what Q4 2020 will look like. Do you know the outcome of the 2020 election? Do you know whether we’ll continue to see massive flooding in the South and Midwest? How will either of these events affect your actuals?

The solution is to shift your focus to a continuous process. If you believe in planning, why not do it monthly? It makes no sense whatsoever to start earlier and earlier when it’s not humanly possible to predict what the world will look like 18 months from now.

5. Break down your company silos

It shouldn’t come as any surprise that when budgets are created in silos, they won’t mesh with one another. Marketing will spend the summer months coming up with campaigns to launch the following year, while sales will review their customer and prospect pipeline and make their own plans. There is no connection between the two.

Financial teams have two options to address the issue of silos. First, implement a collaborative budgeting tool so that teams can see how their plans affect one another. If sales is pinning a revenue number of an increase in new SMB logos, marketing needs to know that, and to allocate part of their budget for an SMB customer acquisition campaign. Second, view this as an excellent opportunity to take a more leadership, hands-on role in the business. Bring the two teams together, and help them to create a tighter plan.

I realize that some of these suggestions can seem blasphemous; finance teams have always created budgets, stayed in the back office, and put stakes in the ground in terms of assumptions. But given the pace of business change, the old ways aren’t cutting it anymore. These tips reflect the reality of business planning today.

These very questions are why more leaders, and in particular, CFOs, are turning to smarter technology solutions for help, specifically ERP platforms with embedded AI. CFOs find themselves with ever-expanding job responsibilities, all the while being asked to continue leading the extremely vital finance teams, but they have the same number of hours in a day as everyone else – so something has to give.

Therefore, automating manual processes will enable CFOs to regain precious hours, dedicate time to critical decision making and apply themselves to driving a competitive business.

They need to focus on big-picture decision-making based on strategic insights, rather than simple but time-consuming tasks. Technology enables this shift: AI or chatbot assistants built into ERP applications that handle less strategic work can be a game-changer, helping CFOs focus on driving results.

CFOs are ambitious by nature, they wouldn’t be where they are if they weren’t. However, they do need to keep the finance function up and running. If the majority of their hours are spent doing this, their ambition is not able to reach its full potential. Requisitions, purchase orders and vendor invoicing are not going anywhere. But using cloud-based ERP with embedded automation empowers CFOs with intelligent financial management capabilities that can handle the routine duties that are holding back potential productivity. This frees up the CFOs to focus on innovating and proving to the CEO exactly how valuable an advisor the CFO can be.

CFOs find themselves with ever-expanding job responsibilities, all the while being asked to continue leading the extremely vital finance teams, but they have the same number of hours in a day as everyone else – so something has to give.

The time is now to invest in this technology. CFOs are part of a unique group of people within a business who have access to data from every department, from sales to HR and marketing. In light of increasingly strict regulations and compliance laws, compiling data from all business units can be difficult as teams try to ensure they comply. CFOs are therefore in the unique position where they have complete oversight of the connected data and processes in an age where businesses are driven by data. This is a very important function for a business, and CFOs should be dedicating their energy to driving strategic business decisions from this position of insight, dedicating their productive hours and decision-making to the data they have at their disposal. At the end of the day, these insights translate into valuable guidance CFOs can give the CEO to help drive the business forward.

Becoming a strategic adviser to the CEO and the board by tapping into this ambition and reducing lost productivity can manifest itself in many different ways. For example, Football Club RCD Espanyol implemented a Cloud ERP platform to automate its financial processes. Joan Fitó, Financial Director, saw his finance team become infinitely more flexible by automating repetitive tasks. Productivity went up by more than 20%, while reporting time was reduced by 50% and there are over 25% fewer errors committed by his finance team. The team can now spend time focusing on analysing Club data in real-time to become more strategic in its efforts to become a globally-recognised name in the football world.

80% of an organisation’s transactions are processed in the back-office, the home of the financial team. So, as seen at Football Club RCD Espanyol, the opportunity is there for CFOs to lead the way to digitally transform and change operations for the better, with a clear path to make the most of being data and automation driven. This will make CFOs even more central to business operations, which is why they must be ready to make this jump now. It is an ideal time to showcase their ambition in combination with intelligent process automation to handle the energy-intensive tasks and take full advantage of the opportunities presented to drive the business forward. Taking the leap and implementing an ERP Cloud with a strong automated financial functionality is exactly the way to do this. It will ultimately enhance productivity and agility, allowing the CFO to be laser-focused on making the decisions that really matter – growing a successful business.

Yet according to PwC, this form of fraud is the second-most commonly reported economic crime in the world, ranking above bribery, corruption and even cybercrime. The question is – who should lead counter-fraud efforts? This week Finance Monthly hears from Laurent Colombant, Continuous Controls and Fraud Manager at SAS, to explore the ins and outs of procurement fraud.

Worryingly, businesses seem unclear on the answer. Our latest research report, Unmasking the Enemy Within, found there was no clear leader or common approach to procurement fraud prevention across businesses. Indeed, almost a quarter (23%) of business leaders have no clear owner assigned to the task or can’t say who is responsible.

Finance in the firing line

What’s not in question, however, is who’s held responsible for the damages that fraud inflicts. While CFOs might not be involved in day-to-day anti-fraud operations, they are frequently first in the firing line when procurement fraud is uncovered. In 2014, for example, Sino-Forest Corp CFO David Horsley was fined C$700,000 by regulators for failing to prevent fraud under his watch. Furthermore, he was permanently banned from being a public company officer or corporate director, and was ordered to pay $5.6 million to the company’s investors following a class action settlement.

While they are unlikely to coordinate fraud efforts single-handedly, 31% of companies place ultimate responsibility for fraud in the CFO’s hands - more than any other role. That’s hardly surprising, given that fraud has a direct impact on the bottom line, with over half of businesses (55%) reporting losses of up to €400,000 per year.

While we are not arguing that the finance department should be the command and control centre for anti-fraud efforts, it’s clear that the CFO has a crucial role to play in tackling procurement fraud. They are the ones who guide purchase decisions, who oversee risk management or audits and, ultimately, have the final say in what anti-fraud capabilities a company is equipped with.

Even so, it’s unfair to expect the finance department to shoulder the entire burden themselves. Just as IT security in the organisation is everyone’s responsibility, so too must accountability and responsibility for fraud be embedded throughout the workplace.

Invest for success - modernising the detection process

Yet there is much that the finance department can do to help uncover incidents of fraud – not least conducting regular audits. Around half businesses (46%) claim to hold regular internal audits, but many of these exclude procurement fraud from their remit. More worrying still, more than one in 10 (11%) organisations admit to either doing nothing to audit for procurement fraud or are unable to say what they do. A further fifth (22%) fail to audit for procurement fraud at all.

That one in three companies aren’t actively searching for procurement fraud, or don’t know what processes cover it, suggests a blind spot that potential fraudsters could easily exploit.

Finance needs to look at areas where existing auditing process are letting them down. When we look at how organisations deal with procurement fraud, 29% validate procurement applications manually while a further 30% rely on staff to inform them of any wrongdoing. Both carry a high risk of human error, potentially minimising or masking the true scale of the problem.

Ultimately, the buck stops with the CFO, which is why they should consider a new approach to auditing based on continuous and automated detection. This is only possible with a strong foundation of advanced analytics that assists investigators in pinpointing the needles in the haystack. A company’s ability to identify and prevent fraud rests, to a very great extent, on the good judgment of the CFO in selecting the right systems to prevent fraud from happening in the first place and deterring anyone with ill intentions.

Continuous, data-driven detection represents the best way to fight procurement fraud and identify errors, enabling companies to pre-empt signs of fraudulent activity rather than discover it after it’s taken place. This limits costs, saves time as well as reputation and prevents losses.

Yet only a small minority of organisations are using advanced analytics (14%) and AI (nine%) technologies in their anti-fraud efforts. The most common obstacle to adoption is the perceived cost of the technologies, but this could well be short-term thinking on the part of the CFO. While there is an upfront cost implicit in any implementation, an effective fraud detection tool will quickly make its money back in the losses it prevents and the monies it helps recoup.

The finance department should not be afraid to make the case for investment in the latest advanced analytics and AI solutions. Procurement fraud is too serious and too costly to make short-term capex savings in favour of the long-term ROI offered by analytics-enabled security. After all, the buck stops with them.

Consumer brands are at a crucial point in their competitive journey. Traditional market-leading positions are under threat from all sides. Consumer expectations are changing profoundly and permanently. And a host of new digital-by-birth market entrants are making hay in a rapidly levelling competitive playing field.

It makes for a highly uncertain, disruptive environment. And it means consumer relevance is now the number one priority. Today’s consumers expect brands to know them inside out – and use that knowledge to deliver authentic products, services, and experiences that are entirely relevant when it really matters.

Doing this at scale takes an incredible amount of organisational agility. It also calls for a rethink of the entire value chain, all the way from developing new concepts, through manufacturing, to the store shelf and beyond.

The traditional operating models simply weren’t designed for this level of complexity. Successful companies will be those who achieve an incredible amount of organisational agility – something that many businesses just don’t have yet.

To find new growth, brands must solve these challenges, injecting agility across the value chain, leveraging a wider ecosystem of partners, and delivering relevance at scale for a marketplace of millions of individuals.

Successful companies will be those who achieve an incredible amount of organisational agility – something that many businesses just don’t have yet.

Enter the CFO

Chief Financial Officers (CFOs) are uniquely positioned to help drive this journey forward. They have the necessary insights to build the business case for change, targeting operational improvements and the use of new digital technologies. And they have a crucial role in driving the efficiencies in the core business that will fund the pivot to more profitable growth.

Accenture’s research shows that CFOs see their role is changing. They’re now just as likely to view themselves as “value champions” and “transformation drivers” as their more traditional business functions. For instance, 81% of surveyed CFOs say targeting areas of new value across the business is a major focus, while 78% say they lead efforts to drive business-wide operational transformations and efficiencies through digital technology.

CFOs understand the need for speed and agility today, with over half those surveyed (58%) saying they’re working towards real-time analysis of business performance. Notably, that’s expected to rise to a massive 89% in three years’ time – the highest proportion of all the sectors Accenture surveyed.

New roles, new skillsets

Delivering relevance at scale means adapting the consumer goods supply chain for new levels of personalisation and multiple sales channels. Given the challenges of doing this alone, most brands will need to leverage a much wider ecosystem of partners across the value chain. And here CFOs have a vital role to play. Bringing a data-driven approach to selecting partners, CFOs can ensure this complex endeavour remains focused on the value-adding outcomes the business is targeting.

CFOs themselves say that anticipating and managing risk, long-term strategic thinking, and insight into new technologies are now their most important capabilities.

When it comes to operational efficiency, CFOs are also increasingly looking beyond SG&A expenses to target the cost of goods sold (COGS). Zero-based budgeting is a methodology gaining traction in consumer goods, with Accenture’s research showing the greater visibility it brings can lead to rapid COGS savings of up to 10%.

In addition, consumer goods CFOs are taking a lead in data governance. They understand the value of data and see it as a strategic business asset, with 84% of finance departments taking responsibility for their organisation’s data governance (higher than in any other industry surveyed). In fact, Accenture’s research shows that “inconsistent, inaccurate and inaccessible data” is viewed as the greatest challenge facing today’s consumer goods CFOs.

These new requirements are changing the CFO skills profile. CFOs themselves say that anticipating and managing risk, long-term strategic thinking, and insight into new technologies are now their most important capabilities. What’s more, they know the broader finance function needs to change too, with the ability to innovate now the most sought-after capability for junior finance staff.

Five actions every CFO should be taking today

So what are the immediate priorities for consumer goods CFOs as they drive relevance at scale for their brands? There are five actions every CFO should be taking today:

1.Digitalise finance – then the company.

Finance is an ideal testing ground for digital technology, automation, and AI. CFOs should be using their experience and lessons learned to drive a digital transformation across the business.

2. Harness data for insights.

CFOs know the value of data visibility and should champion the use of real-time analytics and insights across the C-suite and beyond.

3. Develop the future finance workforce.

CFOs should be planning holistically for their future talent needs, including promoting the greater use of AI and other innovative digital technologies.

4. Drive a deep transformation of operations.

CFOs should be considering zero-based budgeting as a means of creating spend visibility, driving the efficiencies that can fund a pivot to new growth.

5. Be the architect of value.

CFOs should be influencing decisions about ecosystem partner organisations, ensuring every move is focused on delivering ultimate value for the business.

Above all, CFOs need to put themselves at the centre of business decision making as their companies pivot to the operating models that deliver consumer relevance and capture new growth opportunities in a highly complex, uncertain, and ever-evolving consumer goods marketplace.

For more information, please go to:  https://www.accenture.com/us-en/industries/consumer-goods-and-services-index

In the UK, 88% of data breaches reported to the Information Commissioner’s Office (ICO) are caused by human error. The most common mistake is sending information to the wrong person. The number one culprit? Email. So what do you do? Peter Matthews, CEO of Metro Communications, knows what to do.

CFOs should not ignore the potential impact of such breaches on a company’s finances and reputation. Research for IBM suggests that the average cost of a data breach in the UK rose to £2.7m in 2018, with health, financial and service sectors most likely to experience breaches.

Few FDs would claim to be immune to accidental data transfer via email. So, what can you do if you inadvertently send a confidential message to the wrong person?

1. Recall or ‘unsend’ it

Email services offer different ways to cancel sent messages. In Outlook it is possible to recall and then delete an email providing it hasn’t been opened by the recipient. Gmail allows you to delay messages from leaving your outbox. If a sensitive email has been sent to a fellow employee then your IT department should be able to delete it, if they are informed fast enough.

2. Contact the recipient

Get in touch with the recipient as soon as you notice the mistake and ask them to delete the email without reading or sharing it. Request that they email you to confirm they’ve done so. Log the incident in an ‘cyber accident book’.

3. Report and act quickly

Report the incident internally and ensure it’s followed through to its conclusion. An employee of SSE Energy who sent a sensitive email in error promptly reported it in accordance with the company’s policies and procedures. However, SSE’s failure to notify the commissioner in a timely manner led to a £1,000 fine and negative publicity. The regulations have since been amended so that directors, managers and company secretaries can be fined up to £500,000.

4. Inform and advise customers

Good customer service goes a long way. Boeing was mocked for failing to use its own data protection software to prevent an accidental breach which compromised the personal data of 36,000 customers. But it was applauded for informing customers about the nature of the incident, taking action to ensure files were deleted, and giving detailed advice about how customers could check their personal data wasn’t being misused.

5. Notify the regulator, if necessary

Inform the regulator within 72 hours if you believe there’s a risk to customers. Even where you don’t feel an incident is notifiable, it is still worth recording, internally. This will help you review incidents as part of a health check and if you ever have to demonstrate regulatory compliance it could prove invaluable.

Once you’ve contained the incident, revisit your strategy and consider the need for other forms of action such as staff training, policy reviews, access rights, restrictive covenants and encryption. Data classification that ‘weights’ the sensitivity of each file and document on your company’s drive and then links highly confidential information to a closed group of authorised recipients, with blocks on copying such information onto memory sticks, can be helpful. Preventative tools like this make it difficult to email the wrong data to the wrong person and they also log user behaviour, flagging up employees who try to reclassify data so they can send it out of the business.

The law doesn’t distinguish between deliberate and accidental breaches, so don’t expect a discount on fines for damaging disclosures caused by an honest mistake, and don’t be surprised to find lawyers queuing up to help those whose financial, personal or health data has been incorrectly transferred.

But let’s look at it positively. Employee error is a significant contributor to data loss, but it is easier to prevent and generally takes less time to control than a malicious hack. Indeed, many accidental incidents can be contained or even prevented by steps so simple that everyone should be taking them. However, if you’ve decided you want to take a ‘belt and breaches’ approach then it’s time to trust yourself less. Preventative measures such as data classification will ensure you send that sinking feeling to your deleted folder once and for all.