W-INSIGHTS, CFO Trends 2022

Top priorities for all CFOs in 2022

Finance departments are under constant pressure to evolve in response to the dynamic business environment. Forward-thinking CFOs need to understand what a successful, value-adding finance function looks like now and in the years to come, and what areas need to be prioritised to adapt to future changes. The priority most often cited by CFOs is the digital transformation of finance, where administrative finance functions are automated and artificial intelligence (AI) is used to support decision-making. Digital transformation is bringing a new focus to the way finance operates. CFOs are increasingly establishing themselves as strategic support to CEOs, creating efficiency and value for the business through advanced technologies. Employee retention in finance is also a top priority this year, with turnover ranked as the second highest business risk in 2022.

Digitisation

In a survey conducted by PwC¹, 522 CFOs were asked about their priorities for 2022, and 73% of all respondents consider the digitisation of finance functions to be one of the top priorities. In a Deloitte survey, 92% of respondents said their companies will increasingly automate finance operations.

Many companies have already invested in digital transformation during the pandemic, and most are using dashboard tools for clear and timely reporting. However, there is room for further expansion, as the potential for automating finance management processes is significant. Finance relies primarily on well-defined and standardised processes that can be easily and cost-effectively digitised.

The next step after process automation will be the use of artificial intelligence (AI) in finance. CFOs will increasingly rely on AI in combination with other technologies such as machine learning to make decisions and define actions. ERP, treasury, planning and payment platforms will become modern insight and intelligence platforms, enabling CFOs and finance teams to create efficiency and value. However, AI is still in its infancy in most organisations. Only a minority of CFOs are using cognitive or machine learning algorithms, as few companies have sufficient budget and expertise.

With this development, administrative tasks in financial management will be replaced by value-adding activities, creating new areas of responsibility such as data management in finance. The influence of the finance function will also increase through analytical and forecasting tools, and CFOs will establish themselves as strategic supporters of the CEO. This brings us to our second priority for CFOs in 2022.

CFO becomes COO

As business models become more complex, companies need a "guardian of performance"³ to monitor and manage performance holistically and objectively in the best interests of the entire organisation. Finance will play this role in the future.

In this role, financial management will provide guidelines for the allocation of valuable resources. It's no longer just about forecasting, planning, budgeting, tracking KPIs and reporting; it's about solving the multidimensional problem of resource allocation comprehensively.

CFOs need to broaden their perspective beyond traditional financial metrics and act in a value-driven manner. For example, sustainability and societal impact are becoming increasingly important. To fulfil this role and redefine the focus of financial management, CFOs need the right people, which brings us to the next priority for 2022.

Employee engagement

According to a global survey⁴ of 1,453 C-suite executives, recruitment and retention has risen from 8th to 2nd on the list of business risks for 2022. This year, as many employees return to the office after a long absence and reflect on the crises affecting our world, respondents to a Deloitte² survey are much more likely to cite 'talent and workforce' as a priority for 2022.

CFOs are already responding to increased employee influence over their compensation and competitive wage increases. As a result, CFOs are planning a 3.9% salary increase this year, according to a survey. This would be the largest increase since 2008. In addition, training and mentoring should be on every CFO's agenda. These training programmes should focus on the role of employees in relation to new technologies. As digital transformation progresses, continuous improvement of technical and digital skills will become increasingly important. In general, every finance employee should have a specialised area of expertise, such as a business area, a financial topic or the interface between business, finance and IT.

To successfully engage your people, you need to fundamentally change the way your team works together. Hierarchical departments and organisational silos should be replaced by focused finance teams. A significant change in mindset is required to lay the foundation for flexible and autonomous teams. In addition, digitalisation opens the way to a unique, functional environment that balances remote working and proximity to business units, allowing your employees to perform specific tasks from anywhere in the world.

Other issues CFOs should be aware of in 2022

This year, rising inflation will guide companies in pricing goods and services, setting wages and salaries, and managing taxes. In a Deloitte² survey, more than three-quarters (76%) of CFOs say their companies will increase prices on a significant portion of their products and services to compensate for inflation. CFOs in particular will see price increases and should prepare for multiple scenarios and adjust their plans for 2022 accordingly.

CEOs and boards are increasingly demanding liquidity planning scenarios from finance teams to ensure cash flow. Cash flow will continue to be a critical driver of business growth this year. An IDC⁵ study shows that 80% of companies that have successfully implemented digital transformation are generating cash more efficiently than their competitors. Therefore, it pays to optimise cash planning in 2022.

Cryptocurrencies have established themselves as an alternative form of investment since last year, with high-profile companies such as Tesla, Square and MicroStrategy using bitcoin as a store of value and source of growth. According to a study by Fidelity Digital Assets⁵, 33% of investors are currently invested in digital currencies. However, companies are mostly reluctant to add digital currencies to their balance sheets. E-commerce retailers are picking up on the trend and are already accepting payments in digital currencies. By 2022, cryptocurrencies may also be accepted as liquidity and hedging options. This presents another important challenge for CFOs: to become more familiar with the bitcoins and ethereums of the world. #CFO #Digitalisation #EmployeeEngagement #FinancialManagement

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