EY Swiss CFO Survey 2018 - Ernst & Young€¦ · Other C-suite leaders, from the operations officer...

EY Swiss CFO Survey 2018Rethink. Reshape. Redefine.

New capabilities 3

Recommendations 4

Study design

Contacts

1 Changing role of the CFO

2 How can CFOs add value to the business?

Executive summary 04

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13

20

27

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Contents

Digital megatrends like artificial intelligence, blockchain and robotic process automation are transforming corporate functions – from marketing, to legal, through to operations, as they ramp up their service levels for the boardroom and for the organization as a whole. However, finance functions have so far been slow to embrace the new paradigm. In order to perform and deliver on future expectations, finance executives must reinvent their domain. And they must do so soon, or risk losing their standing on the board and becoming irrelevant for the business. Indeed, some are already questioning the raison d’être of a CFO in a digital world. For decades, the CFO’s primary role has been to minimize risk, report on the status quo and meet compliance requirements. And little has changed to the present day, with CFOs still spending almost one-third of their time on average on traditional finance activities. At the same time, mounting regulation has increasingly absorbed the resources

of financial functions in industry after industry. Yet, enabled by innovative tools and empowered by unparalleled business insights, CFOs now have the opportunity to render an entirely new value proposition. Some companies are recognizing the value creation potential of this C-suite stalwart. Indeed, there’s no other position with such breadth of organizational touchpoints, from the obvious tax and accounting, to the less intuitive people, processes and business development. With the CFO’s steady fingers always on the pulse of company developments, it is them that the CEO, COO and other key decision-makers should be turning to a strategic partner of choice. Given the ever-shortening tenure of CEOs, this role will become increasingly important as the CFO sustains management continuity both as a guardian of culture as well as a creator of a consistent long-term strategy. CFOs should step forward and get their functions into shape to deliver on the value propositions expected in the digital age.

As the CFO’s role evolves, what about the rest of the finance function? Upskilling the existing workforce is an important first step, especially in light of ongoing challenges around recruiting and retaining the best talent. Yet, in many cases, functions will need more far-reaching right-skilling efforts to close the massive talent gap that has emerged in recent years. In the longer term, educators must keep pace with changing needs in order to turn out qualified graduates with complex skill sets; finance and accounting know-how must be coupled with digital dexterity. EY’s CFO Survey 2018 examines the shifting role of the CFO in the digital age, identifies value creation potential and pinpoints the capabilities that will lay the foundation for sustainable success. We hope you enjoy reading our insights. If you would like to discuss how any of our findings relate to your organization specifically, please get in touch with us.1

Achim Bauer

Managing PartnerLeader Advisory Germany, Switzerland, Austria

Editorial

Stefan Rösch-Rütsche

Managing PartnerLeader Transaction Advisory Services Switzerland

3EY Swiss CFO Survey 2018 |

1 See contact details on page 31.

New role of the CFO

In light of the digital disruption taking place across industries that has significantly reduced the need for traditional Finance functions and has freed up valuable time in the Finance organization, an increasing number of CFOs are beginning to brace themselves for an imminent transformation of their organization’s key tasks and responsibilities pertaining to finance functions. A fundamental shift is expected away from traditional activities (which currently take up almost one-third

of CFOs’ time) toward strategic consulting and data analytics designed to extract value throughout the organization. Finance functions have an opportunity to transform their service offering and become a sought-after partner for the organization as a whole. This will require increased collaboration between finance and other corporate functions – empowered by seamless ERP systems and integrated service delivery.

01

Executive summaryAs expectations on the service delivery of finance functions increase, CFOs will need to rethink the entire finance organization. Other corporate functions have long begun adopting an array of technologies in a bid to lower costs, speed up service and improve quality. Finance functions need to follow suit and free up resources for additional value-adding activities, or risk losing relevance within the organization.

We surveyed over 2,000 CFOs in Switzerland on the changing role of the CFO in the digital age, identified value creation potential and determined the capabilities that will lay the foundation for sustainable success.

4 | EY Swiss CFO Survey 2018


Finance functions as a talent academy

Empowering business value creation

Cyber security

Informing and setting corporate strategy

Organizational agility

CFOs are in a unique position to gauge the performance of their organizations, in fine-grained detail and in real time. They can monitor the organization’s pulse, its potential, its strengths, its vulnerabilities. Indeed, 61% of CFOs expect the importance of strategic consulting to business leaders to rise in the next five years. It is CFOs who should be driving the portfolio strategy of their organizations, informing their CEOs’ strategy decisions and even making high-level choices on the allocation of resources – what businesses to buy, which to abandon.

Another key capability going forward, agile methods and concepts are proliferating across many different sectors and fields of application as they provide an effective response to many of the challenges faced by organizations operating in dynamic environments and in a digital age. Although 21% of survey respondents consider their benefits of going agile, finance functions need to first adapt the agile toolbox to their needs, but just as importantly, they need to engrain agile thinking in their organizational culture.

Tomorrow’s finance function is going to need professionals with an entirely different skill set to what we see today as the focus shifts toward digital acumen, quantitative analysis and collaborative skills. Apart from attracting rare talent, upskilling the existing workforce will be a key determinant of the future performance of finance functions and the broader success of their organizations. Yet, aside from isolated moves to recruit quantitative analysts to deal with risk management, most finance functions have done little so far to close the ever growing talent gap. Educators, too, need to take notice of the changing profiles of finance executives. Universities have to start rethinking their curricula now if they are going to produce finance and accounting graduates equipped with the complex skill sets that will be needed tomorrow.

CFOs should seek to distill from their unique data resources actionable insights for the business and further intensify their contribution to value creation programs. Already, CFOs lead more than half (57%) of all programs aimed at creating value in the organization. Other C-suite leaders, from the operations officer to the digital officer, should be turning to the CFO as the go-to partner for data-driven support in their key operational initiatives. However, there is a real risk that other digitally empowered corporate functions will in future have enough data and capabilities of their own to bypass the finance function entirely. In order to stay abreast of developments, finance executives will need to leverage an array of new digital technologies – from cloud solutions to advanced analytics – firstly to reach and maintain reporting excellence, but also to enable harvesting of valuable insights for the wider organization.

Rapid technology adoption is a key prerequisite for the digital finance function, but it is also accompanied by increased threats to data security and cyber integrity. A striking 64% of CFOs see data security and cyber attacks as the greatest source of risk for their organizations today. It is essential that companies upgrade their risk management systems to address new areas of risk exposure.

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Background

How CFOs add valueLikelihood to implement a value creation program

Risk management

New capabilitiesInitiatives to enhance finance capabilities

Changing role of the CFO

Of those that do not currently have value creation programs, one in two (47%) are likely to implement one in the next five years. However, three in ten (29%) report being unlikely to do so.

Areas important to finance fu nction in the next five years

Traditional finance activities

Cost management

Compliance and risk management

Strategic consulting to business leaders

Data analytics

Talent management

Data management

Cyber security

CFOs predict a change in key finan ce functions. They consider data analytics, strat egic consulting and talent management more valuable for fut ure success.

Difference

Top 1 Top 3Top 2Ranked in…

-13%

-11%

-18%

+10%

+22%

+13%

+2%

-6%

61%

48%

48%

30%

29%

17%

52%

41%

36%

25%

16%

10%

49%

31%

27%

26%

13%

11%

42%

52%

27%

35%

17%

25%

30%

52%

22%

39%

8%

16%

25%

38%

15%

17%

6%

11%

22%

25%

14%

17%

7%

6%

19%13%

11%9%

4%

Today (top bar) vs Next five years (bottom bar)

Drivers to implement a value creation program

47%Likely 29%Unlikely24%Neither

Pressure from international competition

50%High labour cost in Switzerland

27%

Digital disruption22%

External unrest20%

Strength of Swiss Franc13%

Other27%

Data security/cyber-attacks (64%) and compliance (60%) are considered to pose the greatest risk to organisations.

Data security/ Cyber-attacks

64%Compliance60%

Fraud23%

Liquidity16%

Hostile takeover

4% Other13%Don’t know3%

Areas requiring further enhancement over next five years

54% 53% 46%

IT and digital solutions

Business administration and general management

Accounting

Other

Mathematics and data analytics

Law

Engineering

Don’t know

87%

43%

30%

22%

19%

7%

6%

1%

of CFOs have achieved a Post Graduate qualification

66%of CFOs have been in their current role for 5+ years

55%

90%male

10%female

30 - 39

40 - 49

50 - 59

60 - 69

14%

1%

Age

41%

40%

CFOs consider developing current employees’ technical (54%) and function-specific (46%) capabilities as important initiatives to enhance the finance capabilities.

Development of technical capabilities

to support current employees

Sourcing employees with the

right capabilities

Development of function-specific

capabilities of current employees

4%

EY Swiss CFO Survey 2018

Rethink. Resh ape. Redefine.



Background

How CFOs add valueLikelihood to implement a value creation program

Risk management

New capabilitiesInitiatives to enhance finance capabilities


Of those that do not currently have value creation programs, one in two (47%) are likely to implement one in the next five years. However, three in ten (29%) report being unlikely to do so.

Areas important to finance fu nction in the next five years

Traditional finance activities

Cost management

Compliance and risk management

Strategic consulting to business leaders

Data analytics

Talent management

Data management

Cyber security

CFOs predict a change in key finan ce functions. They consider data analytics, strat egic consulting and talent management more valuable for fut ure success.

Difference


-13%

-11%

-18%

+10%

+22%

+13%

+2%

-6%

61%

48%

48%

30%

29%

17%

52%

41%

36%

25%

16%

10%

49%

31%

27%

26%

13%

11%

42%

52%

27%

35%

17%

25%

30%

52%

22%

39%

8%

16%

25%

38%

15%

17%

6%

11%

22%

25%

14%

17%

7%

6%

19%13%

11%9%

4%

Today (top bar) vs Next five years (bottom bar)


47%Likely 29%Unlikely24%Neither


50%High labour cost in Switzerland

27%

Digital disruption22%

External unrest20%

Strength of Swiss Franc13%

Other27%

Data security/cyber-attacks (64%) and compliance (60%) are considered to pose the greatest risk to organisations.

Data security/ Cyber-attacks

64%Compliance60%

Fraud23%

Liquidity16%

Hostile takeover

4% Other13%Don’t know3%


54% 53% 46%



Accounting

Other


Law

Engineering

Don’t know

87%

43%

30%

22%

19%

7%

6%

1%

of CFOs have achieved a Post Graduate qualification

66%of CFOs have been in their current role for 5+ years

55%

90%male

10%female

30 - 39

40 - 49

50 - 59

60 - 69

14%

1%

Age

41%

40%

CFOs consider developing current employees’ technical (54%) and function-specific (46%) capabilities as important initiatives to enhance the finance capabilities.

Development of technical capabilities

to support current employees

Sourcing employees with the

right capabilities

Development of function-specific

capabilities of current employees

4%

EY Swiss CFO Survey 2018

Rethink. Resh ape. Redefine.



1


Figure 1: Breakdown of CFOs’ time schedules by main task areas

CFOs are still largely occupied with traditional tasks

Finance functions are still largely burdened by tasks that add a limited amount of direct value to the business. Figure 1 below presents a breakdown of the time spent by CFOs on different task areas over the course of a year. CFOs spent most of their time last year on traditional finance activities (29%). If we add to this the amount of time spent managing compliance and risk (13%) and managing costs (12%), little time remains to help create direct value for the organization.

We are already seeing much of the traditional work performed by finance functions being automated, streamlined and outsourced. So what will the CFO’s job description be five years from now? If they fail to take an active role in shaping the finance function, CFOs risk losing their relevance within the organization, particularly compared with other functions that have long recognized the value they can tap by building new data-driven capabilities and offering high-impact value propositions for the organization.

Yet, new and emerging technologies hold huge opportunities for the CFO of the future. The right tools can transform the finance function into a sought-after partner for the organization in crucial fields ranging from strategy to finance excellence.

Still largely preoccupied with traditional and other transactional tasks, CFOs are increasingly expected to take on new responsibilities. Evidence points to dramatic changes ahead for the finance function in the coming years, as the organization begins to exert entirely new demands on its service delivery.

This chapter examines how priorities, tasks and responsibilities have shifted for CFOs in recent years – and what developments we can expect in the near future.

Looking back at last year, how much of your time did you spend on each of the following areas?

Time spent on activities

54% of the tasks only have a limited amount of direct value for the business

Traditional finance

activities29%

Strategic consulting to

business leaders

13%

Compliance and risk

management13%

Cost management

12%

Data analytics

9%

Data management

7%

Talent management

7%

Cyber security

4%

Other4%


How important would you consider the following finance tasks to your organization compared with five years ago?

Figure 2: Importance of finance function areas compared with five years ago.

Although CFOs are still weighed by with traditional and other transactional tasks, they are increasingly expected to take on completely new responsibilities in the digital age. We found that 57 percent of finance executives believe that traditional finance activities are as important today as they were five years ago, while one in three (33%) state that they have actually become even more important (figure 2). At the same time, 84% told us that compliance and risk management have increased in importance. This growing burden of traditional activities and compliance has left finance

functions with few resources to deal with the new tasks that are increasingly being expected of them, including in potentially value-adding areas like data management (up 76%), data analytics (up 72%) or strategic consulting to business leaders (up 61%). Cyber security is another area that has grown in importance in recent years. This trend reflects the increased threats on the one hand, but also the increased exposure as new technologies are adopted (see “New defenses” in chapter 3). Given the magnitude of the tasks they are faced with, CFOs need to rethink the entire finance organization. Other

corporate functions have long begun adopting an array of automation technologies in a bid to lower costs, speed up service and improve quality. Finance functions need to follow suit and free up resources for other value-adding activities, or risk losing relevance within the organization.

More important

Less important

Cyber security 85% 2%

Compliance and risk management 84% 2%

Data management 76% 4%

Data analytics 72% 2%

Strategic consulting to business leaders 61% 10%

Cost management 57% 7%

Talent management 50% 7%

Traditional finance activities 31% 11%

58%

50%

34%

32%

36%

30%

23%

11%

27%

34%

43%

40%

25%

26%

27%

20%

11%

14%

18%

21%

27%

37%

43%

57%

3%

6%

7%

5%

10%

4%

4%

A lot more important A little more important About the same A little less important A lot less important Don't know

Importance of finance function areas compared to five years ago


Figure 3: Task areas of relevance today vs. five years from now.

CFOs expect fundamental change in their role

CFOs do, however, acknowledge that their role is going to fundamentally change, and sooner rather than later. We asked them to look ahead to the next five years and tell us what changes they anticipate in the key task areas of the finance function. While traditional finance activities, cost management and compliance and risk management are still a high priority at present, their importance is expected to decline sharply in the near future (figure 3). Instead, CFOs view data analytics (expected to increase 22% in the ranking

of priorities in the next five years) and strategic consulting to business leaders (up 10%) as more critical for future success. Talent management is another area they expect to rapidly gain in importance going forward (up 13%) (see “Talent management” in chapter 3).

In your opinion, how important are each of the following task areas for your organization’s finance function today and in the next five years? Please rank the top three.

Today In the next five years Change in Top 3 ranking

Traditional finance activities –13%

Cost management –11%

Compliance and risk management –18%

Strategic consulting to business +10%

Data analytics +22%

Talent management +13%

Data management +2%

Cyber security –6%

48%

41%

31%

52%

52%

38%

25%

13%

30%

25%

26%

35%

39%

17%

17%

9%

17%

10%

11%

25%

16%

11%

6%

4%

Areas important to finance function

61%

52%

49%

42%

30%

25%

22%

19%

48%

36%

27%

27%

22%

15%

14%

11%

29%

16%

13%

17%

8%

6%

7%

4%



Which of the following responsibilities are most important to your finance function today and how important will they be in five years? Please rank the top three.

Figure 4: Responsibilities of relevance today vs. five years from now

This fundamental shift in priorities within finance functions is going to be accompanied by a corresponding reallocation of responsibilities, away from transactional tasks and toward services with a higher direct value contribution to the business. For instance, almost every second CFO in our survey expects corporate strategy

to increase in importance in the coming years (figure 4). Another enabler of value creation, digital technologies are already a salient topic in finance functions today, and will remain so in the medium term. In contrast, transactional tasks like external reporting will slip down the priority ranking, particularly as automation at scale becomes the norm.

Talent management is another area that is set to gain critical importance in the future (up 29%) as the target profile of finance function staff changes entirely in response to the new skill sets that the digital finance function will need (see “Talent management” in chapter 3).

In general, finance executives agree that the role of the finance function is changing fundamentally, although there is less consensus as to the exact direction the change is taking. Below we take a closer look at three distinct ways in which finance functions can add value to the organization at both a strategic and an operational level.

Responsibilities important to finance function

Today In the next five years Change in Top 3 ranking

Corporate strategy +6%

Introducing digital technologies to the finance function +4%

External reporting –42%

Capital investment allocation +1%

Talent management +29%

Inorganic growth through mergers and acquisitions +2%

71%

64%

61%

43%

36%

25%

59%

39%

42%

29%

17%

14%

39%

20%

20%

12%

4%

5%

77%

68%

20%

43%

65%

27%

66%

47%

11%

25%

38%

14%

47%

21%

4%

7%

15%

7%



How can CFOs add value to the business?

2


Figure 5: Growth strategies expected to impact organizational success in the next five years.

Optimizing the growth strategy

CFOs are in a unique position to gauge the performance of operational units throughout the organization, in fine-grained detail and, increasingly, in real time. This presents a valuable data resource for monitoring the organization’s pulse, its potential, its strengths and weaknesses. It is the CFOs who should be driving the portfolio strategy of their organizations, informing decisions on the allocation of resources, screening what businesses to buy and which to abandon, managing merger integration. The list goes on.

We asked CFOs which growth strategies they expect to deliver the greatest impact for their organizations in the years ahead. Increasing market share, both in current markets and expansion into new markets are seen as equally good growth strategies (figure 5). Almost 70% agree the expansion into new markets will have a strong impact on their organizations as a growth strategy. That said, most are cautious about using M&A as a tool to this end, with only 14% stating that they strongly agree that it could have a marked impact in the coming years. This reticence is understandable in view of

the difficulties experienced in the past in picking winners and integrating targets. The good news is that new digital tools and methods can eliminate much of the uncertainty, both in the transaction phase and in the subsequent integration (see “Excellence in deployment of new technologies” in chapter 3) The vast majority of survey participants are also unanimous in their view that future success depends significantly on securing the right talent for critical positions. We delve deeper into this topic in chapter 3 (“Talent management”).

There is broad consensus among an increasing number of CFOs that their roles and the responsibilities of their functions are on the cusp of wide-reaching change. Based on our experience in different regions and industries and across organizational functions, we anticipate a shift in the focus of finance functions at a strategic and operational level.

At one level, we expect to see finance executives increasingly making key contributions to the strategy agenda by delivering data-driven strategy advice. Deeper down, at the level of operations, CFOs should seek to distill from their unique data resources actionable insights for the business and intensify their contribution to value creation programs.

In this chapter, we take a closer look at three fundamental ways in which finance functions can add value to the organization: (1) optimizing the portfolio strategy, (2) extracting better insights from available data and (3) intensifying their contribution to value creation programs.

To what extent do you agree or disagree that each of the following potential growth strategies will have a strong impact on your organization’s success in the next five years?

Data management

Agree Disagree

I am responsible for data governance in the finance function 79% 12%

The ever increasing volume of data is a challenge for my organisation 68% 8%

Our systems allow for clear and real-time access to data 41% 31%

My organisation’s reporting system delivers data that supports the real-

time transmission of complex messages

34% 37%

32%

21%

7%

4%

47%

47%

34%

30%

8%

23%

27%

28%

9%

7%

28%

30%

3%

3%

7%

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know


Distilling actionable insights

Reporting excellence is key to the ability of finance functions to deliver value for the organization in the form of actionable insights. That requires an effective and efficient setup that addresses the full gamut of operational considerations from cross-business-unit integration, to outsourcing, to digital deployment, to streamlined governance and risk compliance, through to talent management.

CFOs face many challenges as they shape up their financial reporting to best-practice standards, whether they are dealing with the ever-increasing volumes of data or coping with fragmented and peripheral reporting systems (figure 6). Many finance executives struggle when it comes to extracting deeper levels of meaning from their data. Indeed, three in five CFOs see one of their greatest challenges in transforming raw data

into actionable insights (58%) and understanding what information is most useful to the business (57%).

What are the greatest financial reporting challenges facing your organization today?


Figure 6: Challenges to reporting excellence.

Finance functions need key technologies and capabilities to overcome the multiple challenges they face in their efforts to capture emerging opportunities

Opportunities Challenges Key technologies/capabilities

• Inform corporate strategy

• Manage M&A and investment portfolio

• Manage performance throughout organization

• Be forerunner in digital empowerment

• Turn finance function into talent academy

Transforming raw data into actionable insights

Quants, visualization, predictive analytics, structured data processing

Understanding what information is most useful to the business

ERP, cross-functional collaboration, organizational agility

Dynamic regulatory requirements Natural language processing, machine learning, automation

Fragmented and decentralized reporting systems

ERP, connectivity across jurisdictions, blockchain

Ever increasing volumes of data Big data, cloud solutions, advanced analytics

Transforming raw data into actionable insights

Understanding what information is most useful to the business

Dynamic regulatory requirements

Fragmented or decentralized reporting systems

Ever increasing amounts of data

Other

Financial reporting challenges

58%

57%

45%

34%

32%

3%

Figure 7: Data management in the finance function.

currently use a single Enterprise Resource Planning (ERP) system

do not currently use a single Enterprise Resource Planning (ERP) system

63% 34%

Enterprise resource planning (ERP) provides a tried and tested foundation for solving many of the problems that hinder reporting excellence. Yet one out of every three CFOs (34%) cannot currently draw on a uniform ERP system company-wide

(figure 7). Moreover, only two in five (41%) agree that their systems allow clear and real-time access to data, and an even smaller number (34%) have a reporting system that delivers data suitable for real-time transmission of complex messages.

Does your organization currently use a single ERP system? To what extent do you agree or disagree with the following statements about data management in your organization?

Data management

Agree Disagree

I am responsible for data governance in the finance function 79% 12%

The ever increasing volume of data is a challenge for my organisation 68% 8%

Our systems allow for clear and real-time access to data 41% 31%

My organisation’s reporting system delivers data that supports the real-

time transmission of complex messages

34% 37%

32%

21%

7%

4%

47%

47%

34%

30%

8%

23%

27%

28%

9%

7%

28%

30%

3%

3%

7%



Figure 8: Number of organizations that have implemented or are likely to implement (within the next five years) value creation programs.: Task areas of relevance today vs. five years from now.

Finance functions that achieve reporting excellence are well placed to contribute toward, or indeed take a leading role in, value creation programs.2 Half of the organizations we surveyed have implemented such programs (figure 8). Among those that are not currently running a value creation initiative, one in

two (47%) are likely to implement one within the next five years. Only three in ten (29%) report that they are unlikely to introduce a program in the medium term.

Does your organization currently run a structured, centrally steered value creation program (i.e. program to increase revenue and optimize costs)? How likely is it that your organization will implement a structured, centrally steered value creation program in the next five years?

Organisation has implemented a value creation program

Yes48%No

51%

Don’t know1%

Likelihood to implement a value creation program

15%

32%

24%

23%

6%

Don’t know

Very unlikely

Unlikely

Neither likely orunlikely

Likely

Very likely NET likely: 47%

NET unlikely: 29%

Contributing to value creation programs


2 An initiative designed to increase revenue or optimize costs.

Figure 9: Drivers underlying implementation of a value creation program.

Despite the clear payoffs to organizations from value creation programs, exogenous pressure from international competition is the driving force behind most initiatives (figure 9). In Switzerland, high labor

costs are also an important consideration (27%). Surprisingly, digital disruption appears to be making less of an impact on our survey respondents than one would expect.


High labour cost in Switzerland

Digital disruption

External unrest

Strength of Swiss Franc

Other


50%

27%

22%

20%

13%

27%

What were the key drivers for your organization to implement a value creation program?


Figure 10: Leaders and owners of value creation initiatives

Value creation initiatives are typically introduced top-down, with the CEO usually sponsoring the initiative, and often even directly taking ownership (figure 10). However, the CFO is also often entrusted to lead programs, a choice that makes perfect sense for initiatives with

major performance management and cost monitoring components. Even when the CEO is the main sponsor, we typically find that the CFO and the controlling department have an important role to play in large-scale programs

In order to pursue the realignment outlined in the preceding discussion, finance functions will need to build up key capabilities. Next, in chapter 3, we narrow our focus on some of the capabilities that will lay the foundation for sustainable success.

Leaders of value creation initiatives

71%

57%

21%

8%

7%

5%

CEO

CFO

COO

CIO

Other

Don’t know

Primary person responsible for value creation initiatives

58%

22%

8%

2%

4%

6%

CEO

CFO

COO

CIO

Other

Don't Know

Base: Total sample (n=122)

Q12. Who in your organisation is responsible for leading value creation initiatives?

Base: Total sample (n=122)

Q12a. Which of these has primary responsibility for leading value creation initiatives?

Who in your organization leads value creation initiatives? Who in your organization takes ownership of value creation initiatives?


New capabilities

3


Figure 11

Excellence in deployment of new technologies

Effective and efficient deployment of the right technologies is key, not just for reaching reporting excellence but also for adding value to the organization. Of all the new technologies surveyed, big data and predictive analytics are most likely to attract investment in the near future, with two in three CFOs (64%) reporting that their organizations are

likely to invest in this area in the next five years. Open innovation is also attracting considerable interest (57%). Almost every second finance function (44%) is likely to invest in robotic process automation (RPA), although 35% are still unsure or state that they are unlikely to do so.

Distributed ledger technology (blockchain) ranked lowest in our survey, with respondents who are unsure or are unlikely to invest (51%) outweighing those who would (18%).

We have seen that finance executives generally agree that the role of finance is facing fundamental changes. We expect to see finance functions increasingly making key contributions to the business and distilling actionable insights for other organizational functions as valued partners. So what capabilities do finance functions need to pursue to achieve these added-value objectives?

Finance functions will need to enhance their ability to adopt and integrate new technologies effectively and efficiently. Organizational agility will also prove invaluable. In addition, talent management is set to become a critical capability in the future. Last but not least, increased digitization will require a corresponding strengthening of digital defenses.

Below, we drill down deeper into four key capabilities that born-digital and early-adopter organizations are drawing on in the digital age: (1) excellence in deployment of new technologies, (2) organizational agility, (3) best-practice talent management and (4) new digital defenses.

Likely Unlikely

Big data and predictive analytics 64% 14%

Open innovation 57% 9%

Robotic Process Automation (RPA) 44% 32%

Artificial Intelligence (AI) and advanced machine learning 37% 27%

Distributive ledger (Block Chain) 18% 41%

25%

20%

16%

16%

4%

39%

37%

28%

21%

14%

19%

29%

20%

30%

31%

10%

7%

21%

18%

25%

4%

11%

9%

16%

3%

6%

3%

6%

10%

Very likely Likely Neither likely nor unlikely Unlikely Very unlikely Don't know

Likelihood to invest in new technologies

In the next five years, how likely is your organization to invest in each of the following areas?


Figure 12:

Organizational agility

Originally an innovation introduced by software engineers, agile methods and concepts are proliferating across different industries as functions and wider organizations recognize their benefits in dealing with the complex challenges of dynamic markets and the digital age. But what exactly does the agile organization look like? Figure 12 below lists the indicators that are most commonly associated with organizational agility. The three

indicators most commonly cited are having enough liquidity to push promising initiatives (72%), the ability to adapt to new technologies and digital solutions (68%) and having enough flexibility to turn decisions rapidly into actions (67%). By contrast, almost 60% of finance executives believe that committing only to short-term initiatives is not a sign of agility.

Agree Disagree

Enough liquidity to push promising initiatives 72% 11%

Ability to adapt to new technologies and digital solutions 68% 15%

Enough flexibility to turn decisions rapidly into actions 67% 16%

Right competencies and skills available to adapt to environmental

changes61% 12%

Enough structured real time data to make fast decisions 52% 21%

Only commit to short term initiatives 17% 57%

25%

22%

33%

15%

9%

48%

46%

34%

46%

43%

16%

16%

16%

15%

26%

25%

24%

8%

11%

12%

11%

18%

41%

3%

3%

4%

3%

16%


Agility

To what extent do you think each of the following phrases describes what agility would look like in the context of your organization?


Figure 13:

There is broad consensus across different industries as to what the agile organization should look like, and as to the benefits of getting it right. With this in mind, we asked finance executives to render a high-level self-assessment of their organizations’ agility based on their definition of agile (figure 13).

The self-assessment reveals a clear trend toward agile thinking across all industries (albeit with some differences in the interpretation of agile). What is remarkable is that one in five companies do not appear to be showing any interest in this mass movement. It remains to be seen how organizations with rigid

management structures will fare in the future. So far, the evidence strongly suggests that they are going to struggle to keep up with the pace set by their agile peers.

21%

58%

17%

3%

Don’t know

Not agile at all

Not very agile

Somewhat agile

Very agile

Degree of agility

Taking those aspects into account, how agile do you consider your organization?

EY Swiss CFO Survey 2018 | 23

Figure 14

Talent management

As we saw in chapter 2 (“Setting the portfolio strategy“), the vast majority of CFOs (73%) agree that pursuing a personnel strategy that attracts the best talent for critical positions is going to have a huge impact on the ability of organizations to pursue their growth ambitions in the coming years.

We asked finance executives which policies are most important for enhancing their organizational capabilities in the next five years. Attracting employees with the right skills is considered extremely important by most respondents (53%). In addition, CFOs view developing current employees’ technical (54%) and function-specific (46%) skills as important

initiatives to enhance capabilities in the finance function. This finding is consistent with our market observations. The ability of finance functions to upskill their current staff is going to prove critical in future, especially in view of current constraints in the labor market for key profiles like quantitative analysts and data scientists.

Development of technical capabilities to support current employees

Sourcing employees with the right capabilities

Development of function-specific capabilities of current employees

Development of an improved employee education and training program that aligns with the organisation’s needs

Establishment of internal and external collaboration groups to foster knowledge sharing

Don’t know

Initiatives important to enhance the finance capabilities in the next five years

54%

53%

46%

34%

32%

3%

Which of the following initiatives will be most important to enhance the finance capabilities in your organization in the next five years? Please select up to three.


Figure 15

Almost half of respondents believe that the current capabilities and skills of their employees will meet the organization’s needs over the next five years. Although this is more than double those who think otherwise, there is still a notable number of CFOs who disagree (21%).

IT and digital solutions is the area that most CFOs (87%) think will require further enhancement or support in order to meet the future needs of their organization. Mathematics and data analytics (43%) will also be sought-after disciplines.

To what extent do you agree or disagree that the current skills of staff in your organization’s finance function will meet its evolving needs over the next five years?

In which areas do you think your staff in the finance function will require further upskilling or support in order to meet your organization’s needs over the next five years?

Employees’ current capabilities and skills will meet organisation needs over next five years

6%

39%

32%

19%Don’t know

Strongly disagree

Disagree

Neither agree nordisagree

Agree

Strongly agree

NET agree: 45%

NET disagree: 21%


87%

43%

30%

22%

19%

7%

6%

1%




Law

Accounting

Engineering

Other

Don’t know


Figure 16: Risks of greatest relevance to organizations.

New defenses

As organizations build up increasingly sophisticated digital capabilities, they are likely to find themselves exposed to new risks. At the same time, more sophisticated and innovative techniques are available for mitigating certain risks.

It is essential that companies upgrade their risk management systems to address new sources of risk exposure. New lines of defense are needed against cyber threats and data breaches. Data security and cyber attacks (64%) are perceived as entailing the greatest risks from the perspective of finance functions, with compliance risks ranking a close second at 60%.

Fewer CFOs are concerned about fraud (23%) and liquidity risks (16%). This possibly reflects rising confidence in new techniques for detecting fraud and managing liquidity based on big data and predictive analytics.

Risk management

Data security/Cyber-attacks

Compliance

Fraud

Liquidity

Hostile takeover

Other

Don’t know

64%

60%

23%

16%

4%

13%

3%

Which of the following are the most relevant risks for your organization today?


Recommendations

4


Recommendations


Three in five CFOs see one of their greatest challenges in transforming raw data into actionable insights (58%) and understanding what information is most useful to the business (57%).

Reinvent the finance function

Digital has to become part of the finance DNA

The existing talent gap has to be closed

Agility has become the core of the finance function

Inform and set corporate strategy

Empower the business to create value

CFOs need to rethink the entire finance organization. They need to capture the full potential of current and emerging technologies to lower costs, speed up service and improve quality in their transactional tasks to become a true partner for the boardroom and the business.

In order to maintain reporting excellence and harvest insights for the wider organization, corporate finance functions need to leverage the right technologies effectively and efficiently. Digital needs to be engrained into the finance DNA.

Finance functions will need a new breed of professionals in the future, equipped with a combination of traditional acumen in accounting and controlling, digital dexterity, quantitative analysis and collaborative skills. CFOs need to close the talent gap and ensure their functions have the right skills by attracting rare talent and upskilling their current workforce.

Finance functions should embrace agile design. To this end, they would need to first adapt the agile toolbox to their needs, but just as importantly, they would have to engrain agile thinking into their organizational culture.

CFOs should drive the portfolio strategy of their organizations, informing their CEOs’ strategy decisions and making high-level choices on the allocation of resources – what businesses to buy, which to abandon.

Finance functions have to be at the heart of all data resources and should distill from their unique data resources predictive and actionable insights for the business and intensify their contribution to value creation programs.

01 04

06

0502

03

Study design

Figure 17: Survey respondents by revenue bracket and industry.

Study scope and methodology

This study presents the results of an online survey of over 2,000 CFOs (or equivalent financial decision-makers) in Switzerland conducted between

November and December 2017. Figure 17 below presents a breakdown of the organizations of survey respondents by revenue bracket and industry.

Company industry

14%

14%

11%

9%

9%

7%

5%

4%

3%

3%

3%

3%

2%

2%

2%

2%

1%

6%

Consumer Products & Retail

Diversified Industrial Products

Insurance

Banking & Capital Markets

Real Estate, Hospitality & Services

Health

Automotive & Transportation

Power & Utilities

Media & Entertainment

Professional Firms & Services

Technology

Wealth & Asset Management

Government & Public Sector

Life Sciences

Oil & Gas

Telecommunications

Mining & Metals

Other

Company annual revenue (CHF)

5%

23%

12%

6%

10%

10%

4%

9%

19%

2%

Up to CHF 10 million

Over CHF 60 million and up to CHF 120 million





Over CHF 800 million and up to CHF 2 billion

Greater than CHF 2 billion

Prefer not to answer



A breakdown of survey respondents by professional background is presented in figure 18 below.

Figure 18: Survey respondents by professional background.

Career background

71%

57%

55%

26%

21%

17%

1%

I have spent the majority of my career within the finance

function

I have worked in more than one sector

I have significant experience working in different

international environments

I spent part of my career in one of the major global auditing

firms

I have significant business experience gained in roles

outside of finance

I was an internal appointment to my current role

None of the above


Contacts

Achim BauerManaging PartnerLeader AdvisoryGermany Switzerland and Austria

[email protected]

Helmut RattenbergerAssociate PartnerAdvisory Switzerland

[email protected]

Stefan Rösch-RütscheManaging PartnerLeader Transaction Advisory Services Switzerland

[email protected]

Raphael MaccagnanExecutive DirectorTransaction Advisory Services Switzerland

[email protected]


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EY’s organization is represented in Switzerland by Ernst & Young Ltd, Basel, with ten offices across Switzerland, and in Liechtenstein by Ernst & Young AG, Vaduz. In this publication, «EY» and «we» refer to Ernst & Young Ltd, Basel, a member firm of Ernst & Young Global Limited.

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This publication contains information in summary form and is therefore intended for general guidance only. Although prepared with utmost care this publication is not intended to be a substitute for detailed research or the exercise of professional judgment. Therefore no liability for correctness, completeness and/or currentness will be assumed. It is solely the responsibility of the readers to decide whether and in what form the information made available is relevant for their purposes. Neither Ernst & Young Ltd nor any other member of the global EY organization can accept any responsibility. On any specific matter, reference should be made to the appropriate advisor.

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