Discovering the Current Market Point of View

Objective

After completing this lesson, you will be able to explain how global disruptions shape strategic priorities for the CFO

Key Questions for CFOs

CFOs are navigating a complex and ever-evolving business environment. These core areas and related questions highlight the critical aspects they need to address to ensure the financial health and strategic direction of their organizations:

The areas analyzed below are shown in the figure: cash visibility, ESG reporting & disclosure, inflation & profitability, geo-political impacts, and leveraging technology for automation.
Cash Visibility
Key Question:Why it Matters:
Do I have the information I need to make informed, timely, and confident investment and borrowing decisions?Predictable cash flow is essential for any business, enabling strategic investments and ensuring resilience during downturns. Having clear visibility into cash flow allows CFOs to make informed decisions that can sustain and grow the business.

ESG (Environmental, Social, and Governance) Reporting & Disclosure
Key Question:Why it Matters:
Am I currently making any ESG disclosures that would be considered to have a material impact? How do I anticipate this changing in 5 years?ESG performance is no longer optional. Investors, customers, and regulators demand accountability, linking it directly to a company's long-term viability. Effective ESG reporting can enhance a company's reputation and ensure compliance with regulatory requirements.

Inflation & Profitability
Key Question:Why it Matters:
Do I have real-time visibility into the profitability of my products, customers, and segments?Runaway inflation can erode profit margins and require difficult decisions about price increases, cost-cutting measures, and strategic resource allocation. Real-time visibility into profitability helps CFOs manage costs and maintain healthy margins.

Geo-Political Impacts
Key Question:Why it Matters:
Have recent geopolitical events affected how I screen for and deal with restricted parties? How will these events impact my business?Geopolitical events can create significant volatility, requiring agile responses, diversification strategies, and robust risk management frameworks. Understanding and anticipating these impacts can help businesses navigate uncertainties and mitigate risks.

Leveraging Technology for Automation
Key Question:Why it Matters:
Have I explored enough opportunities to automate repetitive finance tasks within my organization?Automation is key to driving operational efficiency within finance departments, allowing CFOs to focus on strategic planning and value creation rather than manual tasks. Leveraging technology for automation can lead to cost savings, improved accuracy, and enhanced productivity.

Strategies in Focus for CFOs

To answer the pressing questions the CFO leverages various strategic initiatives, prioritizing the current and future needs of their organization.

Innovate with AI, Improve operational effectiveness, Improve analysis, and insights, Increase accuracy and precision in reporting, Improve planning, forecasting & predictive models, Enhance company-wide visibility & collaboration, Increase decision-making agility, Seamlessly integrate and analyze new businesses (M&A, sell-offs, carve-out), Enhance scalability for future growth (new business models, IPO), Minimize regulatory risk, Ensure effective compliance, Improve controls (Cybersecurity and fraud)

Market Disruption and Opportunity

Several key market forces are influencing the strategic direction of CFOs. Understanding the pressing questions, strategic priorities, and market dynamics that occupy a CFO's mind is crucial for actively contributing to your organization's financial success. By gaining insights into these areas, you will be better prepared to engage in strategic conversations and make meaningful contributions.

Along a time-line from 0 to 5 years, AI, automation and analytics, cross application processes & platforms and sustainability efforts are highlighted.

Artificial Intelligence – It is Everywhere (Now)

  • Embedded AI: AI is integrated into ERP systems and other finance related applications with minimal setup making core finance operations highly automated. Financial Planning and Analysis (FP&A) applications leverage AI to streamline the decision making process.
  • Predictive Analytics: Machine learning is used to predict financial trends and events like cost, liquidity, or material shortages, aiding in proactive decision-making.
  • Cash Management and Financial Agility: Embedding AI in cash operations and predictive analytics to manage liquidity and cash flows is key. At SAP, we provide out of the box, user-driven cash prediction modeling, and more.
  • Simulations and Decision Making: Simulations and scenario planning, supported by analytics and AI, guide executives in planning the best strategic paths.
  • Generative AI: Generative AI, used in tasks like HCM and helpdesk, will also automate finance-related tasks like report generation, communication (internally as well as with customers and other business partners), and training.

Automation & Analytics – Speeding Up Work and Saving Money (0-2 Years)

  • Process Automation: Leverages intelligent automation and embedded analytics to perform transactional processes, making these tasks touch-less.
  • Developer Automation: Uses AI to write custom code for Finance/ERP requirements, with AI code generators simplifying the process.
  • Implementation Automation: Speeds up implementation and updates by automatically testing and detecting mismatches, with AI-driven suggestions.
  • Natural Language Processing and Chatbots: Chatbots using natural language processing (NLP) provide quick answers, gathering data and delivering insights for finance, production, and service.
  • Accessible On-the-Fly Reporting: Enhances real-time reporting with NLP, data integration, and visualization tools, enabling more automation and transparency.

Cross-Application Processes & Platforms – Integration, Composability, Tools (0-3 Years)

  • Business Integration Platform: Integrates various applications using modular, API-based, and microservices architecture.
  • Process Tools: Supports core business processes with AI, data lakes, and smart workflows across multiple systems.
  • Compliance Monitoring: Ensures industry-specific compliance using AI, machine learning, and chatbots.
  • Ecosystem Integration: Allows seamless integration of third-party applications using APIs and rapid development tools

Sustainability Efforts – Metering & Analytics (next 2-5 Years)

  • Compliance Adhere to sustainability mandates by using green ledgers, data collection tools, and reporting tools, as well as FP&A tools.
  • Efficiency: Analyze and reduce energy and resource usage without disrupting core business processes using analytics tools and data collection instrumentation.
  • Social governance: Work with HR to achieve social governance goals, plan compliance tools, and integrate third-party applications to meet ESG goals using APIs and application services layer.

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