Aptitude recently hosted roundtables, focused on finance transformation in the Banking industry. We welcomed senior leaders across banking and insurance including representatives from Bank of Sydney, Challenger, Prudential, AIA, HSBC, Raiffeisen, Westpac, and Citi. The conversation covered a variety of topics around digital finance. Below is a summary of the perspectives shared. Thank you to all those attendees who shared their perspectives!
Making the financial case for change
The business world is abuzz with talk of digital transformation. Research firm Gartner found that 82% of CFOs report that investments in digital are accelerating ahead of supply chain, business services, talent, and fixed assets (source). But according to our roundtable participants, the reality is not as straightforward.
All finance leaders in attendance agreed that securing budget for finance change programs is often a challenge, especially when competing with revenue influencing projects raised by front-office departments. There is still a view of finance as a back-office function that will only receive investment when it is completely necessary.
There has been some movement. Recent regulatory requirements have helped CFOs obtain needed budget and allowed them to make incremental changes targeted at achieving compliance and modernizing certain systems.
But funding is only part of the challenge.
Many of the attendees also mentioned finding it hard to justify their needs to the business. Established CFOs and their teams are already used to the existing way of working – even if it is heavily manual. For an externally hired CFO, the case may be a bit easier if they were brought in to make changes but there is still a strong aversion to risk – from the business and the board – that makes it hard to rock the boat and drive substantial change. Some attendees mentioned that even after a preliminary study to outline the benefits of a finance transformation project, C-level execs will push it out due to cost and complexity fears.
Interestingly, attendees voiced that it’s not just the executive buy-ins that are important. Getting middle managers on board is also critical. It’s the middle managers who may resist letting go of their business as usual routines or are unsure how the finance team will accommodate the additional workload of a transformation. Some roundtable attendees mentioned that concerns over job security can be a main reason for technology resistance. Leadership needs to establish the right change culture, communicate the vision, and ensure sufficient resourcing to getting middle management on board.
This aligns with a recent discussion with Sara Dickinson, CFO at BSI, as she talks about shaping a transformation case as one of the biggest challenges for CFOs. “Everybody is looking to their finance functions and saying how do I get better? How do I improve my unit economics? How do I get the insights which mean I hone down and use every single pound or dollar to really deliver value? Your compelling business case as the CFO is that this transformation is how I help you drive that insight.”
When CFOs are successful in making the case for change, they were unanimous that they want to move away from short-term, temporary solutions. They want to see modular and scalable options and a pathway to progressive, incremental change that doesn’t overwhelm the business with risk.
Finance is unwilling to embark on a multi-year program event when clear milestones are established. They are looking for quicker implementations, faster returns on investments, and go-lives that take months not years.
This aligns to a recent comment from Peter Penning, IT Lead at ING, during a webinar on the most common digital finance transformation pitfalls. In the webinar, he cautions against making the big bet when it comes to finance transformation. “This is essentially saying that against so many millions in so many years, I will change the world completely,” describes Penning. He advises charting a path where you can make changes almost every day, or at least every sprint to continually move toward the overall vision.
Roundtable participants frequently mentioned taking a subledger approach to allow finance to access granular transaction detail and identify the source of problems relating to reconciliation issues. This is seen as a critical capability as there was wide agreement that finance does not trust their numbers and still relies on old-school gut and intuition.
Vendor Selection and Measuring Success
When the conversation shifted to vendor selection, the attendees stuck mostly with a standard RFP process but acknowledged that part of the evaluation was looking at who they feel they can work with the best and which vendor will be willing to ‘bend over backward’ when critical issues crop up. The solution capabilities are important but finding an organization that can provide a high level of expertise and a willingness to go the extra mile counted for all organizations present.
Another interesting point raised was the difference in how vendors are measured based on the success of the project and timelines, but clients are measured on the value the project brings after completion. This can lead to a conflict and serves as a reminder to vendors to ensure there is a clear understanding of what the client wants to achieve with the solution.
Thank you to all our Banking roundtable participants!