CFOs in China need to take up a bigger role when it comes to digital transformation, said Deloitte recently when releasing results of a survey.
According to the company, Deloitte China CFO Program conducted the survey in September with the theme "CFO leadership in the age of digital intelligence” and the respondents are CFOs from the Chinese mainland, Hong Kong SAR and Macau SAR from a wide range of industries including energy, resources, and industrials; financial services; technology, media, and telecommunications; consumer; life sciences and healthcare; and government and public services, with annual revenue ranging from less than RMB1 billion to more than RMB40 billion.
While respondents were more cautious about the outlook for China's economy at the time of the survey, CFOs in China still believe the country is better positioned than other economies to recover growth, as other major economies are showing signs of a slowdown similar to recessionary levels, said China CFO Program Leading Partner Norman Sze.
Indeed, more than 40% of respondents feel optimistic about China’s economic outlook over the coming year, he noted.
Major external and internal concerns of CFOs in China
According to survey results, below are the major external and internal concerns of CFOs in China.
- The proportion of respondents concerned about recovery rom the pandemic has surged from 49.0% in the previous survey to 71.9%. The recently announced pandemic prevention and control optimisation measures are expected to help ease market concerns in the long-term.
- From an industry perspective, the pandemic and the subsequent economic recovery is the top external risk in all sectors.
- More than 80% of respondents from the consumer industry, the life sciences and healthcare industry, and the technology, media and telecommunications industry consider post-Covid recovery to be a major concern – an even higher proportion than the overall 71.9%.
- Supply chain challenges have more impact on the consumer industry, and inflation has a greater impact on the energy, resources and industrial sector.
- Therefore, respondents in these two industries regard these external risks as the second most worrying, respectively.
- The percentage of respondents who consider inability to drive growth to be the most concerning internal risk factor has increased to nearly 60% from under 40% in the previous survey.
- The second most worrying internal risk factor is cost pressures.
- In addition, inability to drive growth is a concern for more than 80% of respondents from the consumer industry, the life sciences industry and the medical industry – a high level compared with the overall response.
Digitisation still at a preliminary stage
As digitisation is transforming how businesses operate and grow, more than half of the respondents believe that their organisations are making progress in the area of digitisation and more than 30% say that they have achieved a significant acceleration of progress toward digitisation since the year before, Deloitte said.
However, many believe their digitisation journeys are still at a preliminary stage, the firm added.
Electronic invoicing is now widely used by finance departments, although more leading edge technologies, such as process mining, data-oriented process analysis, and machine learning, are still being explored, Deloitte pointed out.
"Roughly half of respondents view siloed information systems and databases within their organisations as the biggest challenge in driving digitisation,” Sze observed. “At the same time, CFOs are also facing challenges arising from inadequate awareness and a lack of skilled digital talent among employees."
In the face of a new wave of technological and industrial revolution, enterprises need to accelerate accounting digitalisation and the expansion of their accounting functions, he advised.
When it comes to digitisation, finance departments need to adopt innovative technology to further automate processes and embrace a new mindset that drives digital transformation across multiple areas — from institutional processes to organisation-wide talent and information systems, he added.
What CFOs in China should do
To this end, Deloitte suggest enterprises establish integrated systems for their finance functions.
When supported by a sound, integrated system of processes and procedures, organisation and talent, and information management, finance departments can be clear about their priorities and focus on implementing digitisation, Deloitte said.
An integrated system comprises business finance, operational finance, and finance expertise, according to the firm which define these functions as follows.
Operational finance: This includes orders, procurement, payments and receipts, account closure and consolidation, and other bookkeeping matters.
Transformation should focus on achieving a high level of process automation and using multiple technologies to streamline processes and realize automated finance control.
Business finance: This includes performance management, planning and budgeting, reporting and analysis, and decision-making support.
Transformation should focus on generating data-driven business insights that can be accessed anytime, anywhere, and on creating a platform with strong analytics capability that provides professional finance advice to inform business decision-making and establishes itself as a partner for internal stakeholders.
Finance expertise: This includes expertise in tax, funding, professional accounting, external relations, and risk compliance.
Transformation should build a forward-looking expert team to provide insights and strategic advice across different areas of finance, which drives internal process and system enhancement to continuously empower other operational and business finance functions.