The year 2020-2021 has been the litmus test of financial leadership. Navigating through troubled waters, funding digital initiatives while keeping a check on the organization’s finances has been the mother of all challenges. With the world anticipating the third wave, the role of the CFO and financial leadership has become more critical now more than ever. From just number crunching, the finance function has undergone a tremendous transformation, becoming the custodian of an organization’s performance. 

Why Custodian of Enterprise Performance?

As per Boston Consulting Group and Roche, there are fourfold ways in which finance as a ‘function’ is transforming and they are: 

• Finance as a Hybrid Function focussing on value-added activities- Here ‘Hybrid Function’ refers to a finance ecosystem where analytics, BIG Data, Machine Learning, and AI have a role to play. This amalgamation with digital expertise would enable financial leadership to make data-driven decisions and run simulations related to balance sheets. 

• Finance as a Career Path calling forth flexibility and diverse skills- Every finance professional currently needs to develop diverse skill sets that would enable him or her to bring about a convergence between overall business and finance as a function. Financial leadership is no more just being the master of best practices in finance. With the automation of transactional processes, the upcoming finance leaders need to master digital and IT skills. 

• Finance as a Dynamic System inviting increased cross-functional collaborations- The digitization of finance processes has created the soaring need for it to collaborate with other business functions. This has made the finance function a pulsating one, extracted from silos and merged into a highly networked one.

• Finance as a Holistic Function demanding responsibilities beyond core finance- Currently, the global trends suggest that finance leaders have to collaborate with other functions to etch the technology roadmap of the organization. Apart from this, they also have to support the upcoming business models with financial insight.

 

 

The Pain Points of Financial Leadership in 2021

While the finance function jostles its way to become the custodian of enterprise performance, the emerging leadership continues to face some gnawing challenges, and these are:

• Containing unwarranted expenses- With markets constantly in flux, it is important to have a well-chalked budget for new investments but also a contingency budget to support in case of unforeseen circumstances. For financial leaders, it is very crucial to understand the fine line of difference between cost-cutting and cost optimization. As per Gartner’s analysis, every cost-cutting effort must parse through three filters and these are:

1. New investments that would continue to help the company remain steady on a growth trajectory post-pandemic. 

2. Areas where cost-cutting would not impact the company 

3. Processes that are time-consuming and slow and offer a possibility for optimization through new investment. 

• Adhering to compliances constantly- It’s a constant challenge for the finance leaders to adhere to ever-changing compliance requirements. The leadership needs to put in place, a compliance framework at the enterprise level to eliminate chances of risks. This must be further followed by a robust strategy to address if any compliance breach occurs. 

• Ensuring Data protection- With finance going digital in a big way, risk management and safeguarding data is becoming a major part of the finance leader's role. 

There is increasing pressure to identify security gaps and safeguard enterprise-critical data. As per Gartner's report, IT spending worldwide is projected to reach $4.1 trillion in 2021. This is a good 8.4% increase from 2020. 

These newfound challenges are also opportunities to create robust and agile strategies and create an ecosystem of convergence. To be able to accomplish this, the new-age finance leaders need a solid understanding of the best practices when it comes to leadership and management. For this, they can explore the Executive Programme in Leadership & Management (EPLM) offered by IIM Calcutta in partnership with Hughes Education. Albeit the course covers the different functional aspects of leadership, there is a very significant module on 'Managing Financial Relationships and Expectations' that would benefit the finance leaders in terms of giving a holistic understanding of how the finance function can become a 'custodian of enterprise performance.