Perspective on Future Finance Transformations

Over the years, finance transformations have predominantly concentrated on ensuring a finely tuned service delivery model to 1) Balance the cost of finance 2) Ensure a scalable finance engine. Although this will continue to be crucial, the landscape is shifting. In the future data, digitalization, and insights will emerge as primary investment targets for financial transformations. This shift is a direct response to escalating challenges such as heightened uncertainty, lack of visibility, surging volatility and increasing complexity. Consequently, it requires finance to reassess how enterprise performance management will deliver decision support to navigate these changes. This transition underscores the need for an in-depth exploration of the collaborative dynamics between IT and Finance, as well as between Digital FP&A and Business Finance capabilities. – these are the key conclusions formulated by 16 FP&A and Business Finance professionals across the Danish C25 and large-cap companies.

Data, Digitalization & Insights at the Core of Future Finance Transformations: External Factors are Increasing the Pressure for Re-thinking Enterprise Performance Management (EPM)

For the past 5-10 years, the predominant focus of finance transformations has revolved around establishing a deliberate service delivery model to ensure a scalable, cost-efficient finance engine. While this will continue to be a key enabler for the license to operate it is not a comprehensive response to the underlying market dynamics and the ensuing demands on Finance.

External factors such as unstable supply chains, volatile inflations rates, rising interest rates, geo-political instability and increased sustainability focus have resulted in corporations navigating with reduced visibility as well as increased uncertainty, volatility, and complexity.

Consequently, the answer in Finance should be on improving the EPM capabilities to:

• Improve speed and flexibility of processes to respond to a dynamic business environment.
• Deliver improved foresight to facilitate improved decision-making processes & dialogues

.… which cannot happen without improved data, insights, and digitalization. In other words, data, digitalization, and insights will constitute core investments for future finance transformations, transitioning the paradigm to an EPM-driven finance transformation. However, past experiences have also proven this to be difficult!

It Will Be Difficult: The Key Is to Create a Solid Finance & IT Collaboration Model as Well as Lifting FP&A and Business Finance’s Capabilities Within Systems & Data

Undoubtedly, ‘digital finance’ has been a buzzword on finance roadmaps for many years, yet it has proven to be very difficult. Common challenges include:

1. Mutual understanding – “they do not understand me”: the perception frequently exists, that IT does not understand Finance and ‘our needs’ (and probably vice versa). 
2. Flexibility of technology selection – “best-of-breed vs best-of-suite”: A potential inherent conflict exists between what is best from a global IT standpoint versus what enables Finance to digitalize most effectively.
3. Prioritization – “we are just a number in the que”: there can be a wish for Finance to become more independent, due to misalignment around what is important from an IT vs Finance perspective. 
4. Lack of insights – “It is part of our finance vision, but …”: even though the digitalization piece is part of the finance vision, it often remains more a point of discussion rather than an actionable strategy, leaving it inadequately integrated.
5. Fix it all or nothing- “the project that solves all issues”: Underlying issues in e.g. Master Data management, wrong usage of ERPs, unfit for purposes planning processes etc. needs to be fixed for EPM to be well functioning. 

There are likely more issues that can be added to the list. Despite these challenges, the two main root-causes and thereby also potential solutions, arise around two key themes:

Theme 1: Finance & IT Collaboration Model

Often, the issues arise around the fact that the governance, roles and responsibilities between Finance and IT have not been clearly defined. As a result, the intended enablement of the technological uplift is not achieved, and in some instances the cohesion between Finance and IT is broken.

Theme 2: FP&A and Business Finance’s Capabilities Within Systems & Data (purple people)

‘Purple people’ are a scarce resource. Attracting, retaining and developing these people who possess a combination of (i) modelling & coding, (ii) data & analytical and (iii) business finance understanding, is often very challenging. This often poses a significant limitation in realizing the transformational ambitions within finance.

Points for reflection: Initiating Discussions for Handling the Potential Issues Ahead

One could argue that you could simply ‘go fix’ the previously mentioned themes. However, the fact that these themes are widespread indicates, that there is no universal ‘golden rule’ for resolving these issues. Naturally, as the premise of the construct relies on the overall corporate governance model where particularly the interplay between IT and Finance plays a major role.

Outlined below are two key conversation topics, which serve as a foundation for advancing the conversation around putting in place the right collaboration model between IT and Finance, as well as taking the initial correct steps to enhance the system and data capabilities within finance.

Conversation-point 1: Embrace transparency, seek understanding and accepting the pro’s and con’s of different governance models

Across the continuum of governance models for Finance & IT, we see distinct advantages and disadvantages impacting FP&A and Business Finance’s ability to respond to the new demands. Recognizing and incorporating these into discussions is essential to foster mutual understanding and acceptance for the key decisions to be mandated:

One thing is certain, regardless of governance - Finance and IT are interdependent. Therefore, even though a model might appear simplistic, precision is vital, especially when defining roles and responsibilities within Finance and IT for each of the model. What does it mean in detail, for us to improve on the Finance digitalization journey?

Regardless of the models, there are three no-regret concepts, that can be adopted in FP&A and Business Finance to start improving the foundation for the collaboration model as well as cultivating ‘purple finance profiles’:

• Combine FP&A & Business Finance process ownership with the dedicated finance tool ownership – As global process owner roles have become increasingly important for EPM processes, these roles encompass dedicated finance tool ownership. This ensures alignment among process, people and systems– the degree of ownership will naturally vary dependent on the governance model with IT. This no-regret concept diverges from having a traditional consolidated ‘Finance Systems’ department, which often doesn’t achieve the intended impact and becomes too detached from the actual digitalization of EPM.
  
  
• People at the core, even though it is about data and technology – Define and thoughtfully consider how to integrate these new digital capabilities as an integral part of the rest of the ‘traditional’ finance team. Merely adding the skills in (i) modelling & coding, (ii) data & analytical to the existing strong business and finance capabilities is not enough – it is about fully integrating them in the team, exploring new engagement methods and creating the right ‘sand box’ environments. Even if these capabilities are introduced through an IT business partner concept (where the reporting lines are not solid to FP&A and Business Finance) one must consider how to make them feel like an embedded part of the team enhancing stability and fostering mutual understanding.
  
  
• Start small, fail & learn fast, then scale in close proximity to the business – digitalization and the introduction of new technologies like Machine Learning and Generative AI are about building trust. Thus, consider the critical and valuable user cases where you can start to prove the value. Leverage the existing trust amongst your current financial business partners. Their profound business knowledge is critical to iron out and scope core issues, where modern technologies can make a difference. Embrace failing as part of the learning process, using it as a data point and acknowledging that disproving hypotheses is also part of working with statistics. Furthermore, the ability to innovate the new digital EPM solutions is also a great selling point to attract and develop the mentioned ‘purple’ capabilities, as it is actually being invented to be used by the business. 

Like any endeavor, enhancing the collaboration model and capabilities in FP&A and Business Finance will be a maturation journey. The above points serve as initial considerations for how to start the journey in bringing data, digitalization, and insights to the core of the finance transformations as well as business decision making. 

Article Authors

• David Kowalczyk, VP Business Finance & System – Hempel
• Casper Albæk, VP Performance Management – Danish Crown
• Kenni Østberg Bjergby, CVP Group Finance – Novo Nordisk
• Andreas Bay Rasmussen, VP Head of Integration Performance Management – Novonesis
• Morten Guldager, SVP Global Financial Planning & Analysis – Scandinavian Tobacco Group
• Jeannette Wengel, Director Group Controlling & Reporting – Rockwool
• Jens Bak-Holder, Senior Director Global FP&A – Falck
• Nicolai Bjerregaard-Skytte, SVP Business Finance – Nilfisk
• Rasmus Lund, VP Group FP&A – Pandora
• Philip Lerche, VP Group Financial Planning & Performance – Vestas
• Danni Aakeson, Senior Director Group Reporting and Financial Planning – WSAudiology 
• Mathias Juhl-Hansen, SVP Commercial Finance, Strategy & M&A - Matas
• Jon Østergaard Horn, VP Group FP&A – FLSmidth
• Christian Bækdal, Partner Enterprise Performance Management – Deloitte
• Rasmus Rosbæk, Manager Enterprise Performance Management – Deloitte
• Jonathan Brünniche Schou, Consultant Enterprise Performance Management – Deloitte