CFOs in today’s banks and insurance organizations must navigate challenges from inflation to supply chain constraints and regulatory demands while competing and growing revenue in a dynamic global market. According to a new IDC survey sponsored by Oracle, these challenges are driving investments in advanced finance technology.
The recent IDC Business Brief, Road Map to Driving Finance Transformation in the Office of the CFO, found that 84.5% of survey respondents agree that modernizing financial operations will be an essential element to compete in volatile local, regional, and global markets. Another 77.8% of leaders believe the finance function within their organization needs to change and over 75% said they are investing in finance modernization.
“The IDC findings showed a vast majority of financial institutions are hungry for integrated financial technology systems and access to near real-time reconciled data across all aspects of their financial operations,” said Jason Wynne, group vice president, risk and finance, Oracle Financial Services. “To truly modernize finance operations, CFOs and CIOs will need to be aligned, and view the transformation journey as a lifecycle rather than a one-way ticket to a single destination. They need to make the investment now in digital technology that takes advantage of the latest innovations and enables effective use of their organization’s data.”
The survey confirms that the CFO and finance office requires more advanced and innovative technology today, but the market is also reflecting that need. The worldwide financial applications market reached $37.5 billion in 2021, with investments primarily being driven by enterprise movement to the cloud for more efficient and effective financial management processes. Technologies such as artificial intelligence, machine learning, and robotic process automation can provide the flexibility, cost savings, and strategic insight into the organization’s business that the CFO requires.
Several other factors influence the desire for this finance technology investment. Organizations have weathered recent market volatility and global disruptions due to the pandemic, which has also highlighted the need for more connected planning and processing. As a result, 72.9% of CFOs surveyed have increased their focus on business resiliency. Forty-four percent of respondents said the lack of visibility into financial data is a challenge, and 70% of banking leaders believe their lack of reconciled data is a major hindrance to delivering timely insights. More than one-third (36.7%) of those surveyed are also investing in digital transformation to address regulatory rules, such as IFRS 17 and Basel, faster and more cost-effectively.
Respondents also cite environmental, social, and governance (ESG) issues as a driver for the finance function to have a more-strategic role. New sustainability standards aim to help organizations manage their entire ESG impact, including a transition to a Net Zero operating model. Moreover, there is mounting pressure from investors for organizations to consider ESG factors in their operations. Both have brought to the forefront the impact of ESG on financial performance. Finance transformation can help improve visibility into ESG impacts across an organization and accelerate reporting that supports new regulatory compliance requirements while informing ESG-related business decisions.
Finance teams that are nimble and have access to modern data management tools and processes can accelerate time to insight and take action to address some of these challenges.
DEEP CRACKS WITHIN FINANCE AND RISK DATA MANAGEMENT
It’s evident that complex and siloed data management in the finance function is inefficient and drives up operating costs. More than half (56%) of respondents said they urgently need to reduce the cost of current data collection, correction, and reconciliation. Another 44% of financial leaders said they see significant room for improvement in how finance data is managed, and 38.2% cited inconsistent data and hygiene as a barrier to improvement.
Financial institutions revealed they seek automation and machine learning to streamline key financial processes such as reconciliation and auditing. A vast majority (81%) of financial leaders reported they would be willing to pay more for cloud-native architecture featuring microservices and containers. This technology helps to make it easier to transfer data between cloud providers, deploy services independently, and in different languages and frameworks, and avoid downtimes. When modernizing finance to a cloud-native architecture, financial institutions can drastically reduce their total cost of operations and be more flexible to meet highly dynamic market demands.
But data and profitability management can’t be done without the right talent in place. Organizations also emphasized the importance of talent acquisition. Over one-quarter (27.5%) of financial leaders cited the desire to attract and retain top talent as a driver for finance modernization. A significant 27.5% of respondents are investing in finance modernization technology to do so as it can help make an organization more attractive to prospective employees.
“As financial institutions view their post-pandemic outlook they continue to seek cloud-native applications that can have a transformative effect on their bottom line,” said Kevin Permenter, research director, financial applications, IDC. “The CFO and overall finance function will need to drive finance modernization in their organizations to meet the macroeconomic changes that will continue to shape this dynamic industry.”
Oracle Financial Services and Oracle ERP businesses teamed with IDC to survey more than 200 finance executives from 19 countries at financial institutions with annual revenue of $1 billion or more; the majority have assets greater than $100 billion. The principal business activity of these organizations include insurance, investment banking, corporate banking, retail banking, or wealth and asset management, and a majority of respondents were C-level executives (CFO, chief risk officer, chief compliance officer), directors, or above roles.
Learn more at oracle.com.