As we prepare to ring in the New Year, it’s only natural to get excited about turning the page and planning for the year ahead. Out with the old and in with the new, right? Not so fast! Let’s first take a little time to reflect on 2015, think about where we’ve been, and consider where we might be headed.
What better way to do that than by taking a look at the results reported in the Adaptive Insights CFO Indicator reports we initiated earlier this year? These surveys began in an effort to tap into the minds of the CFO community, glean the top issues that concern them, and gain a better understanding for what they believe will be the key attributes for a successful, modern CFO.
We’ve seen some thought-provoking trends and ideas emerge in our first three installments and are in the midst of pulling together our Q4 report, which is due out in January. While we can’t wait to share those results with you, let’s first review our 2015 findings. We saw two major themes emerge: a shift from global to regional considerations and CFOs leading with data-driven insights.
- Shift from global to regional considerations
The start of 2015 brought optimism and promise—as the start of a new year often does. Despite global unrest, CFOs still expected to see many positive economic indicators, from lower gas prices to rises in stock prices, IPOs, and the U.S. dollar. At the same time, though, they cited global issues like political unrest abroad and even infectious disease as top financial risks.
As the middle of the year approached, we started to see that optimism fade a bit. While the majority of CFOs still said they had confidence in their regional economies, the vast majority cited economic uncertainty as a top concern.
By Q3, concerns at home came into play. Competition and regional economic uncertainty were cited as the forces posing the greatest financial risk. And with 2016 planning on the horizon, rising interest rates, expected M&A activity, and cybersecurity were all highlighted as top considerations.
- CFOs lead with data-driven insights
While CFOs worried about the impact that global and local factors would have on their businesses, they also recognized a number of business-related opportunities and challenges. They indicated that they intended to take on much more strategic and collaborative roles, and reported that they expected to be the key leaders on the path to business transformation.
Due to their anticipated expanded roles, they expressed the need to garner transformational insights from the data they manage. But with data growing at an alarming rate, CFOs are also concerned about managing the so-called “data deluge.” They reported that data is often spread across the organization, and even siloed, limiting access and threatening integrity. They desire a single source of truth to power data-driven business transformation.
So are they raising the white flag? Not at all. Many understand the value that analytics, technology and cloud platforms bring to their businesses, and are implementing these tools to make strategic business decisions. Through strategic forecasting, planning, and 360-degree visibility, they believe they can compete and build sustainable businesses.
Let’s break down the results and top findings by quarter.
Q1 Survey: Optimism and Evolution
Our first report, the CFO Indicator Q1 2015 report, published in March 2015, revealed that CFOs generally had a positive outlook despite global instability. At the same time, they expressed an expectation that their roles would evolve and expand beyond traditional finance activities.
Respondents predicted a rise in the U.S. dollar (75%), climbing stock prices (61%), and plummeting gas prices (55%). How accurate were they? Certainly, we’ve seen a substantial rise in the value of the U.S. dollar since January, and gas prices have hit their lowest level since 2009, with the national average only one cent away from dropping below $2 per gallon for regular unleaded gasoline (as of this post).
What about stocks? We’ve watched the stock market perform erratically for much of the year, and won’t soon forget the one-day, 588-point loss on the Dow during the dog days of summer. While this may have put a damper on a few vacations, it appears that the major indices will finish the year mostly mixed with the Dow only slightly off, the S&P nearly flat, and the Nasdaq up over 5%. Of course, with the recent rise in interest rates, it’s anybody’s guess how this final week will play out.
Without a doubt, CFOs are navigating uncertain markets in a climate of global unrest. At the same time, our CFO Indicator Q1 2015 report indicated that they are experiencing an evolution in their roles. While they previously focused on being strong financial leaders concerned with financial reporting, regulation and compliance, risk management, and cost control, they believed the modern CFO would be one that partners with the CEO and other business leaders to lead business transformation.
In order to succeed in their new roles, CFOs reported they would need to make data-driven decisions fueled by analytics and the use of cloud technology. According to the report, 40% of respondents considered the ability to leverage analytics to make data-driven decisions as one of their most required skills, and nearly 70% ranked data-based insights as the top influence on strategic business decisions.
Q2 Survey: Moving to a Culture of Analytics
Our second CFO Indicator study received responses from 325 CFOs on their top concerns, priorities, and business strategies. While the majority expressed their intention to take on more strategic leadership roles (69%), they also cited lack of time for data analysis (63%), and complex legacy technology systems (40%) as primary speedbumps to becoming strategic leaders.
Economic uncertainty (84%) and competition (81%) topped the list of concerns, but many CFOs stated that a culture of analytics would be a key competitive advantage in the current business climate (56%). How did they view that business climate? It was a bit mixed. The majority of CFOs (59%) reported having high confidence in their regional economy, but confidence dipped to 37% when global factors were considered. Other top concerns included product obsolescence (65%), interest rates/inflation (64%), and the outcome of upcoming national elections (45%).
Given the impact that technology can have in creating a culture of analytics, it was not surprising that CFOs ranked technology investments as their second highest priority for driving value creation in their companies. In fact, 55% of CFOs said they planned to increase their investment in financial technology, a nearly equal number (54%) said they were targeting analytics tools and dashboards to support finance efforts, 48% required reporting tools, and 39% had their eye on budgeting and forecasting solutions.
Q3 Survey: The Challenge of Data Integrity, Data Silos, and a Single Source of Truth
Our third installment of the CFO Indicator reported on the views of 435 CFOs and focused on data analytics trends, business collaboration strategies, the top financial mistakes most companies make, and 2016 plans and predictions.
The survey revealed that data integrity is a top concern, along with managing growing amounts of data and data silos. In fact, the majority of CFOs reported that keeping data siloed (69%) and having inaccurate data for forecasting and planning (40%) were among the top financial mistakes that most companies make.
Yet, while CFOs said they desire data integrity and a single source of truth, they also see data growing at an alarming rate and are managing that data from myriad, disparate sources. One-third predicted the amount of data they manage will increase over 50% within the next five years and reported that 71% of finance teams are managing data from more than three source systems. Furthermore, 47% of teams are still manually aggregating data. They see these circumstances impeding their quest for truth with over one-third (37%) citing legacy technology as their biggest obstacle.
Still, CFOs are committed to moving their businesses toward a holistic view and a single source of truth, and 45% reported they are actively working toward it to eliminate source system overload and manual labor. Most CFOs (58%) think predictive analytics are valuable for forecasting, but many still aren’t sold. Predictive analytics are virtually impossible to use without a singular, holistic view of the organization that stems from a single source of truth. Thus, getting to a single source of truth and implementing analytics are paramount to business transformation.
Considering all of the above, it appears that CFOs have a good grasp on the future and the expectations that will be placed on themselves and their teams. It also appears that they are actively working to move their organizations toward a single source of truth.
So, with that in mind, let’s pop the champagne, begin the countdown, and say…
Happy New Year!
As you can see, the CFO Indicator series gives us valuable insights into how CFOs think about and manage their businesses. We thank those of you who have participated in our quarterly studies and hope you see the value your perspectives bring to the finance community. As we continue to partner with our more than 2,900 customers around the world and the business community as a whole, we expect 2016 will be another revealing year on the journey to data-driven insights and business transformation.
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