Global Finance Leader Study: How finance can transform risk analytics for a data-rich world

This story, written by Christy Sasser, originally appeared in English on the Workday blog. We thought our local readers would also find it interesting, and it appears below in translation.

Organisations face risks on multiple fronts – from regulatory change to cyberthreats – that potentially compromise the value and growth strategy of the business. Finance leaders play a critical role in ensuring the function contributes to enterprise risk management efforts, by putting in place effective and sustainable capabilities, processes and tools. However, our recent research report, "Finance Redefined," found that only 39% of finance leaders are highly confident in their ability to manage their top risks.

We surveyed more than 670 CFOs and senior finance leaders around the world and across multiple sectors to understand what is affecting confidence when it comes to risk. We found that data and technology were seen as the top two barriers standing between finance and better risk management. For large organisations, the top barrier was a lack of data. For medium-sized enterprises, it was the absence of up-to-date systems. Overall, the key barriers for finance leaders around the world are:

Data and information are lacking

With finance leaders concerned that they lack the data and information to better manage risk, there are a number of priorities for organisations that want to improve their risk resilience:

Capitalise on today's opportunities. For many companies, valuable data is trapped in legacy systems and organisational silos, making it difficult for finance leaders to identify risks and gain the insights needed to manage a complex risk landscape. Robynne Sisco, co-president and chief financial officer at Workday, explains that while data has always been important, "the technology hasn't always been there to give us the access and analytics needed to make the most of it."

Today, with increasing computing power brought on by the cloud and new analytical tools, organisations can extract valuable insights from their ever-increasing volumes of data, including:

• Risk analytics tools that draw upon both internal and external data sources can provide a unique opportunity to understand key risks, from real-time portfolio monitoring to using machine learning algorithms to identify high-risk customers.
• Organisations can utilise unstructured data as well as structured data to drive insights from new sources of information, such as social media.
• Predictive analytics can be used to evaluate patterns within different types of data and thereby identify risks. This might include assessing which customers are more likely to pay their invoices on time or identifying fraud indicators.

But, there is still a significant untapped opportunity here. Our survey found that only 31% of finance leaders are making extensive use of advanced data analytics to support risk management. As we have seen, many feel that their current data and systems undermine their efforts. There are also a number of other priorities they must tackle to seize this opportunity, such as finding the risk analytics skills they need and overcoming any organisational barriers or resistance.

Get timely data into the right people's hands. Just as important is the ability to access real-time data and deliver it to the right people. Advances in technology are making this possible, as Sisco explains: "Putting finance in the cloud provides global access to real-time data, enabling both speed of processing and reaction, so finance departments can get relevant and timely data into the hands of those who need it to make business decisions."

Rick Rodick, chief financial officer at TELUS International, is focusing closely on making better use of data within the finance function. Rodick hopes that this data will play a role in helping the company achieve more effective risk management. "My biggest concern is what we don't know", he comments. "The more data we have and the more informed we are, the better."

Of course, on top of getting the data into people's hands, you also need the talent and skills to understand its implications. As Rodick says: "Not knowing is one thing – but even when you get the data, if you're not understanding it properly, then you're making some wrong decisions."

Sub-optimal IT a concern for next generation of finance leaders

Looking at the survey overall, out-of-date technology emerged as a key barrier. However, we found some notable differences based on the profiles of the finance leaders who responded to our survey, in terms of their age and their career background:

• A group we call "next generation" finance leaders – survey respondents who are aged 39 or younger with significant business experience gained in roles outside finance – point to "a lack of systems and technology to simplify the audit process" as by far the greatest issue.
• In contrast, "traditionalists" – those who are aged 50 or more and who have spent most of their career within the finance function – regarded a broader range of factors as barriers to risk management, including knowledge, skills and incentives not being aligned with risk objectives.

This suggests that the younger generation of finance leaders are more attuned to the impact of new technologies – and consequently keener for their organisations to take advantage of the opportunities that these technologies bring to better manage risk. This means keeping up to speed with innovative technologies that have the potential to take risk analytics efforts to the next level, such as machine learning techniques.

Medium-sized enterprises concerned about risk culture

Our research also found some notable differences in the barriers faced by medium-sized and large enterprises. Medium-sized companies made the fact they "lack a risk culture and mindset" a top two barrier. However, for large organisations, it was the least important problem. Finance leaders in medium-sized organisations need to play a critical role in consistently communicating a clear message about the behaviours and values they expect from their people in terms of managing risk.

For a deeper understanding of the top risks on the minds of CFOs, read the companion article to this piece: "Global Finance Leader Study: Finance leaders share the top risks that matter most."

For the full research findings behind the "Finance Redefined" global study, read the report here.

About the Workday Global Finance Leader Study

We surveyed more than 670 finance leaders across the Americas, Europe, Asia Pacific and South Africa covering 10 main sectors from September 2017 to January 2018. Over one-third (38%) came from large organisations of more than $1 billion annual revenues, with 35% between $500 million and $1 billion, and 27% between $250 million and $500 million. Over one-third of respondents were CFOs, finance directors, or chief accounting officers/controllers, and the remaining were drawn from senior finance roles, such as head of financial planning and analysis or vice president of financial operations.