The Aptitude Blog

New year, new CFO insights

January 30, 2023
Posted by Sarah Werner
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As we enter 2023, we spoke to Aptitude Deputy CEO and CFO, Philip Wood, on his predictions for the year ahead. Wood has been CFO of Aptitude Software since 2007 and serves as a Non-Executive Director and Chair of the Audit Committee of SmartSpace Software Plc.

CFOs will be hypersensitive to market changes

Every year brings unique challenges, but 2023 is beginning under a cloud of high inflation and the very real potential of recession. The latest McKinsey Global Survey notes the biggest concerns for CFOs heading into 2023 are rising interest rates followed by high inflation. While understanding the impact of these macroeconomic trends on their business is not always possible, CFOs will be highly alert to any dampening of demand on the part of customers and looking to adjust investment decisions accordingly. They will be consistently reassessing and trying to get a sense of how best to use the financial levers they have at their disposal.

Wood observes, “In this environment, real-time data access is especially important. CFOs will need to rely on pipeline trends, real-time cash forecasts, closed recognized revenue reports and more while using both financial and business data to help support decision making.” Scenario planning will also be critical to CFOs success. “It’s not necessarily the breadth of scenarios a company can prepare but more the speed at which teams can tweak assumptions and data points and advise the business on the best course of action,” says Wood. This need to react in real time will expose the companies who don’t have the data infrastructure in place to provide reporting and analytics that considers constantly fluctuating market movements.

On ESG, CFOs will need to balance stakeholder desires with cost concerns

ESG regulatory requirements are continuing to evolve following some big decisions made in 2022. As progress continues to be made in this area, the task of sourcing data, building accounting rules, modeling scenarios and producing and explaining reporting and disclosures will fall to finance teams – and these efforts will require investment.

“I think CFOs will need to have open discussions with their boards and other stakeholders to determine where they want to sit on that ESG reporting continuum.” Wood explains. “Legal compliance is a given – absolutely companies will need to put in place the mechanisms to check that box – but many companies are being asked by their boards and other stakeholders, including consumers, to go the extra mile with regards to ESG reporting. That can have big business benefits such as attracting investors, procuring a lower cost of credit and attracting and retaining talent, but CFOs will also need to weigh the cost requirements and pressures in the short term.”

2023 will bring a mix of opportunities and challenges when it comes to building winning finance teams

According to a recent CFO Dive article, CFOs looking to fill the economy’s 10.5 million job openings may continue to find it hard to staff up well into 2023. “The tight labor market will probably persist for at least the next few months,” according to Cristian deRitis, deputy chief economist at Moody’s Analytics.

However, hiring may differ based on industry and job function. As CFO of a software company, Wood observes, “I’m interested to see how the tech employment world changes following some of the downsizing we’ve seen at big technology companies. Will it be easier to find talent, or will it remain highly competitive as it has been the last few years? I think if we see that talent crunch start to ease and you can bring people on quickly, that will allow CFOs to better react to signs of growth as they happen. But if you’re struggling to find talent, it becomes a challenge to scale up.” A recent Forrester study indicates this may be the case and suggests continued tech redundancies may free up digital talent that may eschew the hot new startups in favor of companies with greater stability and longevity.

Wood also predicts companies may also be challenged to match wage increases if the pace of inflation continues. This may require organizations to get creative and find other ways of offering value to employees through non-financial perks.

The strategic importance of the CFO and the finance function will continue to grow.

Transformation enabler. Business Partner. Strategic advisor. The shift in the role of CFO from business guardian – looking after financial and risk reduction activities – to strategic change agent has been in motion for a few years now.  Surveys indicate that today’s finance leaders are frequently involved in long-term strategy and management decisions, and two-thirds are involved in digital transformation.

“I think we’ll see this trend that was already well underway – the shift in the role of the CFO – become even more pronounced as finance teams utilize their expertise in data, analytics, governance to squeeze every last drop of value out of their investments and guide the company through current and future economic hurdles using this massive trove of data at their fingertips,” predicts Wood.

IFRS 17 still a major focus for the insurance industry

After six years of discussions, delays and a tremendous amount of money spent – likely north of $24bn –  IFRS 17 officially went into effect on January 1, 2023. While the date has come and gone the focus (and pain) for many insurers will linger in 2023. Even for those insurers who successfully implemented compliance solutions and successfully calculated their transition balances, there is work to be done.

“Most insurers are likely to run parallel reporting for at least the next few years as they seek to understand how their key metrics will change in a post Solvency II/IFRS 17 world. The work to understand, optimize and compare these metrics with their peers and then articulate them effectively to a broad set of stakeholders will be a complex and time-consuming process and will be a considerable area of focus for Insurance finance teams in 2023,” highlights Wood.

 

Thank you, Philip! Interested in more predictions from Aptitude? Check out our recent blog, Monetization in media: five key trends & predictions for 2023.

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This blog post was written by:

Sarah Werner
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