Cost cutting might be the first thing that comes to mind when there's economic uncertainty. Lee Thong Tan (pictured), CFO Practice Lead, Asia, Workday explained in an interview with FutureCFO why cost cutting is not an effective way to deal with that and what CFOs could do to combat existing challenges.
Future CFO: How can risk management help organisations build business resilience and ride through economic uncertainty? Why cost cutting isn't the best way?
Lee Thong Tan (LTT): Global reports and headlines have been pointing towards potential economic downturns. CFOs are being met with an increasing range of challenges to tackle, ranging from supply chain disruptions to soaring levels of inflation.
With such challenges, it might be tempting for CFOs to adopt cost cutting measures including shrinking discretionary spending and cutting back on digital transformation efforts.
However, these challenges also present opportunities for CFOs to make strategic business decisions that when executed well, will enable organisations to outpace their competitors. Research has shown that a partially offensive business growth strategy in the midst of a downturn can prove beneficial in the long run .
Such tactics include planning for the end of the downturn by establishing clear guidelines for actions that will be taken as growth returns.
Companies can also seek to invest in the right capabilities that will help fuel growth such as investing in digital technologies that will accelerate efficiencies and agility.
Finally, companies should also leverage the opportunity which economic downturns bring to invest in their people. By leveraging employee and skills data, companies can better informed in enhancing the employee experience and create more engaged employees.
Future CFO: How can APAC business leaders continue to attract and retain top finance talent during this economic downturn? How are APAC business leaders adapting to the tighter labour market by turning to more skills-based hiring, along with tapping into remote work?
LTT: Global developments like the pandemic have prompted a rethink to the way employees work and live. Many employees have reassessed their priorities and are making steps to pursue jobs that align with their personal values and priorities.
In Singapore, hybrid work arrangements have become a way to improving work-life harmony. In the same way, business leaders will need to maintain connections with their employees to cultivate a healthy, positive organisational culture as this will be key to capturing and acting on employee feedback.
It might be tempting for CFOs to adopt cost cutting measures when they face challenges ranging from supply chain disruptions to soaring levels of inflation.
To do so efficiently, companies can leverage employee listening programmes to capture feedback in real-time, allowing them to proactively analyse employee sentiment and take targeted actions support employees and reduce turnovers.
Enhancing the employee experience and engagement will help build strong connections and enable employees to become successful in their roles as it gives them the ability to collaborate effectively, gain diverse perspectives, and generate ideas and get feedback on projects or initiatives.
Most importantly, strong connections will also enable employees to feel excited to come to work every day, spurring on productivity and innovation for greater success.
For finance professionals, we have observed a progressive pivot towards skills-based hiring. Research has also shown that hiring for skills is five times more indicative of job performance than hiring based on education alone.
A skills-based economy is important as it allows individuals to acquire the skills and know-how needed to succeed in the rapidly evolving world of finance.
For finance professionals, the ability and skill to extract valuable insights to make data-driven decisions has never been more important. As with the exponential growth in enterprise data, having a common data platform will be essential to creating better, more efficient, and faster cross-functional collaboration across the organisation.
Legacy financial solutions such as ERP alone will not be sufficient to drive optimal business growth. Enterprises of today will need to assess and analyse data at scale, and establish a strong data governance.
In this regard, developing best-in-class finance talent will be essential in navigating the downturn. As such, we expect businesses to ramp up their efforts to retain and upskill their talent for them to remain at peak performance.
Strong emphasis will be placed on upskilling employees to ensure they perform at their best, while concurrently meeting personal ambitions to be challenged professionally.
FutureCFO: What are some megatrends that will impact the finance function this year? How can CFOs address them effectively? Why is there an increased need for the finance function to integrate with technology?
LTT: Automation presents an opportunity to reduce the burden on finance executives, particularly around the foundation of traditional but repetitive tasks such as transaction processing, audits and compliance.
By enabling automation and AI as well as remodelling machine learning (ML), the finance function is primed for change, becoming a strategic, value-adding function that plays a key role in the decision-making processes and the overall strategic growth of an organisation.
For example, closing the books is a critical yet incredibly time-consuming process which take thousands of man-hours to ensure that the accounts are balanced and that the relevant financial statements can be prepared.
By using ML and AI automation capabilities, this time-consuming process can be alleviated with technology, enabling a zero-day close. This allows organisations to close their books quickly, while ensuring the relevant departments have continued access not only in real time but from anywhere to live financial information.
In the fast-moving world of business, any reduction in time taken to make decisions result in an opportunity to focus on more strategic tasks.
A zero-day close will provide organisations with the competitive advantage in creating greater business efficiencies to unlock new growth milestones.
The pandemic has taught organisations a valuable lesson in the importance of being agile and resilient in order to succeed in uncertain markets.
This has led to a shift in the role of CFOs, who are moving from their traditional responsibilities as guardians of finance and capital allocation to becoming key decision makers in the enterprise. With access to real-time and detailed insights, finance leaders are better equipped to make informed decisions that will drive business growth in this digital-first world.
Legacy financial solutions such as ERP alone will not be sufficient to drive optimal business growth. Enterprises of today will need to assess and analyse data at scale, and establish a strong data governance.
In addition to their traditional responsibilities, finance is also playing an increasingly important role in promoting sustainable business growth. This includes supporting environmentally and socially responsible projects to ensure that businesses can balance profitability with sustainability.
We are also observing how finance practitioners are playing an essential role in the production of corporate ESG reports, which are quickly becoming the new annual report and norm in corporate reporting and procurement processes.
Finance teams already have a deep understanding of communicating and assessing financial performance, and the accurate analysis of data on corporate carbon emissions and the impact of green taxes play right to the skills of finance professionals.
Cloud planning solutions such as Workday’s Adaptive Planning solution, supports the centralising of ESG and financial metrics in one platform. This allows finance teams to have a comprehensive overview of all ESG functions and activities, enabling improved deployment, tracking, and subsequent forecasting of business operations, ensuring sustainable and responsible business growth.
In addition, Workday’s Strategic Sourcing digital solution is one of those solutions that help enable finance and procurement teams to better manage supplier engagements.
The collaborative, cloud-based solution provides enterprise-wide visibility into sourcing projects that are aligned with principles of industry-recognised science-based transformation targets and emissions tracking. This best allows teams to be able to monitor and compare their suppliers’ environmental footprint in a transparent and competitive environment.
Corporate sustainability and corporate climate action are fast transitioning from voluntary to mandatory in many markets globally.
However, through effective and sustainable financial management, underpinned by cloud based digital solutions, organisations can pave the way towards more sustainable and prosperous futures for all.
