Hosted by top 5 banking and fintech influencer, Jim Marous, Banking Transformed highlights the challenges facing the banking industry. Featuring some of the top minds in business, this podcast explores how financial institutions can prepare for the future of banking.
The Exciting Evolution of the CFO in Business Transformation
As part of the digital transformation process occurring at financial institutions, CFOs must increasingly leverage technology and data analytics to become strategic partners to leaders across the organization, driving organizational success.
Beyond optimizing financial performance and streamlining operations, finance operations can now play an instrumental role in the innovation process, sustainability reporting and identifying new growth opportunities.
I am excited to have Monica Proothi, Partner and Global Finance Transformation Lead for IBM Consulting on the Banking Transformed podcast. We discuss how the finance function has evolved from reactionary, transactional work to value-generating roles and strategic engagement.
This episode of Banking Transformed Solutions is sponsored by IBM
IBM delivers technology and industry expertise to the global financial services industry through its infrastructure offering, software portfolio and consulting services. As a trusted partner to banks, insurers, asset managers and other financial institutions around the world, IBM enables modernization and digital transformation of the world’s mission-critical businesses. IBM is a leading provider of enterprise AI and hybrid cloud architecture to banks and insurers and leads a robust ecosystem of fintech partners serving financial institutions.
As part of the digital transformation process occurring to financial institutions, CFOs must increasingly leverage technology and data analytics to become a strategic partner to leaders across the organization, driving organizational success.
Beyond optimizing financial performance and streamlining operations, finance operations can now, play an instrumental role in the innovation process, sustainability reporting, and identifying new growth opportunities.
We discuss how the finance function has evolved from reactionary transactional work to value generating roles and strategic engagement.
Jim Marous (01:10):
The role of finance is transforming as business models are adjusting to the introduction of advanced technologies, the application of data and analytics, and the increased focus on customer experience.
Yeah, absolutely. So, the role of the CFO has changed. It is gone from being counters to storytellers. And what I mean from that is we've gone from this kind of foundational role focused on reporting, reconciling, planning, and it's expanded.
So, it's not that that's gone away, but the actual role and the skills required has really expanded around there because now, finance is playing more of a role of providing insights, partnering with the business.
And finance leaders, they're providing decision support to the business through data and through insight. So, if you think of it as kind of like four layers, you've got data, and then reporting, and then analytics, and then driving insights, which will lead to that kind of decision support layer.
CFOs really need to be ensuring then that their organization can produce that. And their people can be able to understand what is my new purpose, what is my new role, how can I perform in this role? And what are the skills that I then need, require to do that?
But to be honest with you, at least most financial institutions that I deal with, the CFOs have been in place for quite a long time. How does IBM help organizations, help their CFOs and their finance divisions to actually change their legacy thinking?
Because we talk about it often that organizations can buy all the technology in the world, but if the organization itself is not transforming to be more of a change agent, more embracing of what's happening in the marketplace, it all kind of falls flat compared to what it could do.
Yeah. And look, I mean, biggest misconception is that finance people think that they can transform finance. You need that partnership, you need change management. You need to understand how to transform and how to innovate.
And that's the role that IBM is really playing, is helping CFOs to understand that and helping them to understand they now, need to propel business value. And what does that mean and how do you partner with someone for that?
A CFO is a steward of investment capital. They're responsible for the ROI, they're responsible for the decisions that are being made. They may not be held accountable for the project, but they are for what's being invested and the return that they're going to get.
It's interesting because banking traditionally looks at ways to reduce costs, and that was really pretty much the role of the financier. But now, it's, as you mentioned, prioritizing investments to what should be done going forward.
So, really what you're doing is you're putting the context of what is needed from the CFO in the context of what they're used to from the past, but really expanding it tremendously as to what the potential could be in the future. Correct?
That's right. That's right. And think of it this way, the activities no longer just sit within finance. The finance activities actually sit across the entire enterprise. Gartner coined it as xP&A. I mean, we've been calling it Integrated Business Planning.
Like if you think about xP&A or FP&A, what that really means, it's that planning part. But now, with so much around data and insights, we're actually driving and starting the feedback loop where finance can predict and support marketing to support sales, who's then going to drive supply chain.
And there was a recent statistic when companies fostered a strategic focus and alignment to finance functions. Within the company mission, they saw 49% higher revenue growth and 20 times higher in EBITDA growth over a five-year period.
That's interesting because when we work with organizations, we talk about innovation and we talk about change management. Many times, we have to rethink who we include at the table at the very front end.
I was a marker in the banking days when I was a banker, and I remember being really happy about the fact that I had a finance background because I realized that I was all often competing or going against the financier about how we spend our money.
What you're actually saying is that's no longer the case. If you bring financing on the front end, they are much more powerful and add a lot more to the overall business change model than if they're just brought in at the back end to see do the numbers work.
Yeah, that's right. And as I mentioned, CFOs are the stewards of investment capital. They're responsible for the ROI, they're accountable for what a company is investing in and the return that they're going to get.
So, if you think about innovation, innovation could be much more than like a cool new thing like generative AI. It could also, be a service, a new way of working, some type of creating new experiences and driving revenue growth.
So, if you think about it as a flywheel. You've got the one big push, like the big bang, that doesn't work anymore. That's not going to push the flywheel. You have to push little incremental ones and eventually it starts to go on its own.
And you start to have innovation and these little Ts and these little transformation projects embedded into the culture. It almost becomes self-funding as well, because you get the value back and then you can look at maybe something bigger across the organization as it continues to go.
The other big thing as we think about innovation, there's a lot of focus on sustainability in ESG. Finance is even playing a part there. They have to become the masters on quality and integrity and integrity for external metrics, which includes sustainable reporting for finance.
So, a big part of that is going to be around setting up an agile rapid collaboration, rapid transparency to be able to constantly update skills, understand, are we still aligned to the business strategy? It changes every six weeks. And so, innovation really, it's embedded in the culture.
So, the SAP Sapphire Conference in Orlando was also, all about ERPs, especially as we are in a time of economic uncertainty. How does IBM plan to continue leveraging SAP's technology to drive innovation and growth in the future?
So, ERP modernization, SAP, they're long-term commitments. So, one of the ways that IBM is looking at helping to drive is to think about competitive differentiation. Everyone is implementing a core, everyone is moving to the cloud.
That's part of a wrapper. There could be multiple different wrappers. It could be a combination of cloud, data, emerging tech. Everything has to now, be built around the core to make sure that our clients can be competitive and have the advantage.
So, you really have to have the core be flexible, agile, ability to pivot as soon as new technologies take place. When implementing cloud-based ERP systems, how can finance professionals unlock the greatest possible value? How is this different from what has been done in the past and what are some of the opportunities out there today?
And then data is actually like the utility. So, think about electricity and water and how it kind of flows through the house and keeps the lights on. You need data to keep the lights on as part of your electricity.
And then you've got workflows. So, you're not going to create a room that's not connected to another room. Then you walk in and it's siloed. You have to walk out to get into another room. You want to have this open, transparent floor plan, so the workflow flows.
There are a set of things that drive human willingness. So, having the right incentives, believing that the work matters, cultivating this leadership to be coaches and empowering their people, understanding their purpose.
And then there are a set of things that drive ability. So, are we getting the right skills that we need? Have we created the right operating model, the right environment? Do we have the right tools and accelerators in place for people to be successful?
So, you've been singing this tune around finance transformation for quite some time. I talked to you before the podcast started about the fact that there's no lack of information out there about what Monica feels about finance transformation.
What challenges have you seen in the marketplace as we embark upon finance transformation? And more importantly, what challenges do CFOs face as they try to become change agents in their organizations?
I think we've spent so much time on setting up a data warehouse where you have structured data that's been filtered. And then you set up a data lake that becomes unstructured data. And we now, think of it as a little bit of a data swamp. And now, there's data lake houses that has both structured and unstructured in Databricks.
So, it's, like I said, building that core, even building an agile operating model around this to be flexible in order to quickly adapt to the changing environments. COVID, inflation, possible recession.
So, I'm going to throw something your way because my recognition and my awareness of the finance function is they're very specific. And I'm going to say anal in the old way and saying that they really want perfection.
Well, a lot of this is not a perfection game anymore. I mean, if you just look at data and analytics, if an organization's waiting to move forward until their data is completely clean and completely in the right format, they'll never move forward.
What challenges do you see when CFOs really have to change their mindset to not be in as perfection minded and also, maybe building small solutions that can be implemented in a shorter amount of time with a really good ROI and then move forward the iterative process rather than the big bang theory?
Yeah, absolutely. I mean, it's all about that agile iterative process. Looking at small wins, quick wins where you can get immediate value. Because right now, nobody wants to spend a hundred million upfront. They don't have it to spend.
So, you get all these ideas and kind of incubate them, figure out which ones are aligned to your strategic outcomes and initiatives for the organization end to end, and then start to build business cases around them.
Pick one or two that you're actually going to implement, get the early value back. And then self-fund that back into an innovation fund or an innovation council that you have set up and start the process again.
You talked about having to build a platform and an infrastructure that is both very structured from the standpoint of the direction is correct to being very flexible based on new technology that can jump at you with no notice.
If we think about financial services clients in particular, there's a lot of use cases around customer disputes, virtual assistance, dispute resolution, because remember all of that as you reduce that amount of time.
So, we've got a client where they have 3 million incoming calls, 7 million emails. And to be able to answer all of that is next to impossible. The amount of time it takes is impossible. So, it's really freeing up that working capital, being able to generate new revenue streams through ChatGPT and generative AI.
So, again, in financial services, a lot more around fraud, retail examples, wealth examples. We are seeing more coming and we are actually putting together a blog that'll be coming out soon on that. So, I'd be happy to share and discuss more.
Well, it's funny because every day we wake up and we find new ways to use it. I mean, I'm using it every day in one way or another. It goes from finding restaurants to working with me on building contents that I'm developing on a regular basis.
But it doesn't come without threats. What threats do you see on the initial basis? Because we're not even a year old from when it got introduced in November of last year. What threats do you see on the horizon with ChatGPT?
So, I think we need to be cautious of, again, the data sets, what's actually in there and how do we parse through what is good data and bad data. Also, obviously, around cybersecurity is going to be a big issue.
I mean, we think about a private cloud and a public cloud, a generative AI ChatGPT is big data sets from everywhere. How do we make sure that client's data is protected in a way that we can still provide insights to them as well?
We're coming out of the SAP Sapphire Conference in Orlando and a lot happened. So, what do you see as the biggest opportunity within organizations now, going forward in the short term and in the midterm?
So, in the short term, I think it's going to be again, how we align competitive differentiation and as a wrapper around the core. I think that's going to be the biggest thing. How do we take SAP and combine that with AI.
And in the medium term, it's being able to prepare for what's next and doing that ahead of time. So, having that flexible architecture so that six weeks from now, or six months from now, when the new ChatGPT is out, we're prepared for that.
The other really big thing, and I think this is more medium to long term, but it is coming up fast, is ensuring that our clients are quantum safe. Because quantum is coming up on the heels here and as soon as we get quantum to be able to unlock all of the data sets that are out there, just as quickly as we need that, we need quantum safe cryptography to protect everybody's data.
It's interesting because I look at this and think there are going to be some CFOs out there that are honestly scared to death because change is never easy, it's never fun, but it provides opportunity. And if you've been in the business for quite some time, this is a real major paradigm shift.
On the other hand, with the right mentality, with the right partnerships and collaborations around you, there's never been a more exciting time to be in finance because no longer you're the outlier simply saying, "No, no, no," or, "Yes, yes, yes."
You're really embedding yourself within an organization and becoming the spearhead upon which everything else is built. And the more CFO goes out and I'll say literally shaking hands with the other people within the organization and moving forward with them, it's a fun time, isn't it?
It's an amazing time to be in finance right now. I mean, we have taken a sleepy industry and it's awoken. We're at the forefront. We get to be part of the business partnering and the team and setting the expectations up front, setting the standard for how the company is going to run. It's incredible.
Yeah. It's an exciting time for those that embrace change. And again, this is where the collaboration comes in, where it doesn't have to be done completely by a specific CFO. It is really done in conjunction with the partnerships and the collaborations they build across the marketplace.
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