Redefining The CFO’s Role In Digital Age

CFOs in today's age face a deluge of responsibilities arising from both internal and external stakeholders as a result of digital transformation. Digital disruption in the current era is creating hurdles for every industry, including the BFSI industry. To successfully overcome these hurdles, the modern-day CFOs have transformed themselves. 

In a recently concluded roundtable organised by BW Businessworld with some of India’s top leaders associated with the BFSI sector, a wide range of topics were discussed, including challenges faced during digital transformation, unique differentiators of the BFSI industry, the importance of achieving a single source of truth, and upcoming DX (digital transformation) trends. 

Navigating through the digital maze:

Chithra Hariharan, CFO at South Indian Bank Ltd. mentioned the impact of the pandemic on the world of finance. She said, "The past few quarters have been challenging. It tested our capabilities to float ourselves in unknown waters and search for new shores to sustain ourselves. The unexpected times brought in new thought processes for business models."

"The pandemic facilitated and added to our comfort. Digital acceptance amongst various stakeholders, including the regulators, was very quick. The demographic divide in digital literacy has also come down significantly," she added.

Hariharan highlighted the steps taken by South Indian Bank Ltd. to empower the adoption of the best technologies and smooth digital experience amongst their customers through increased usage of robotic processes, automation, and AI. 

She commented, "We were amongst the first banks to introduce the concept of e-lock, a concept which is now followed by other banks. We have been able to increase our digital banking percentage to 93 per cent in the past year, a commendable figure given that we are an organisation that has a legacy of 93 years."  

Amrit Singh, CFO and EVP Strategy at Max Life Insurance, discussed in length the three key elements of transformation which they undertook in the past financial year.

Singh underlined that despite a squeeze on spending; they managed to stick to the path of automation within the finance function, successfully transitioned to a state-of-the-art treasury management system, and also worked on the other spectrum of driving automation at process levels too. 

He said, "By embracing RPAs/ Bots/ Macros etc., we tackled it through a more bottom-up approach—wherein not only did we establish an automation CoE centrally but also the finance team members were trained and nudged to learn these automation techniques and apply them to the process. We called this programme a citizen developer program and saw many team members come forward, enhancing the skills." 

Singh highlighted that they also reoriented the finance members (especially FPNA teams) to be more business-sensitive and scenario planning oriented. 

He commented, "Given the uncertain environment of various COVID waves, it was imperative that we up the ante on being proactive on managing financials and, consequently, the intensity of creating scenarios upfront and managing months and quarters more dynamically." 

Singh also focused on the project Gati, which his organisation has embarked on internally. He pointed out, "Project Gati is about speed and simplicity. It entails relooking at various control and authorization matrixes with the lens of saying where additional empowerment can be driven by building intelligent controls and also with higher accountability." 

Innovative measures:

Gopal Balachandran, CFO & CRO at ICICI Lombard General Insurance gave the example of Bharat AXA General Insurance’s merger with ICICI Lombard General Insurance, a merger which took place entirely in the online world.

Balachandran said, "The entire process, right from the initiation of discussion to the culmination of the transaction, took place in the digital forum. By no stature of imagination, one could have possibly thought that an opportunity could take place end-to-end digitally, yet it happened."

"It is not just about announcing the transactions but also making sure that a successful integration of the two entities takes place across multiple parameters, including successful on-boarding of staff, integration of applications, and effective optimisation as far as processes and infrastructure are concerned," he added.

The seamless end-to-end integration of both companies was not an easy feat by any means. The pandemic showed business realities which no one ever thought of in the traditional setup. This included work from home (WFH), and virtual meetings. 

Balachandran remarked, "The pandemic showed us a reality which no one ever thought of, such as working from home and meeting virtually. An innovative measure that we took was encouraging our internal employees to get into the culture of making pre-read documents. This document is distributed to various stakeholders, and is read by all those invited, and relevant points are marked. This helps in wrapping up an hour-long meeting in less than 10 minutes."   

Sumedha Varma, Director, SAP Concur India, discussed the importance of sustainability for businesses. Sumedha said, "In today’s date, investors are looking closely at sustainability and strategy of their investment before they invest into any asset, also a reputation risk exists too."

Sumedha mentioned that as far as the future of business travel is concerned in the post-pandemic world, sustainability is going to play a key role in it.

She explained, “It all starts with making it easy for business travellers to make sustainable decisions, some of the innovative solutions include going paperless and eliminating miles of paperwork by using electronic receipts and invoices. Expense reports automatically include all spending for hotels, taxis, trains, planes, and other preferred suppliers, vendors can send in e- invoices, information can be extracted and invoices can be routed for processing based on workflows set in the system. This prevents resources from being wasted, such as time spent filling out/shipping expense reports and actual office space required for processing and storage.” 

“One can also provide tools to their employees to support sustainability efforts and influence them to make sustainable choices by showing them the impact of the choices they make. For example one can show their employees that taking the train from X to Y reduces emissions by 80% as compared to flying,” added Sumedha. 

The pioneering role of the CFO in guiding the DX journey:

Sumedha Varma highlighted that CFOs play a key role in helping their organisations embark on the digital transformation journey. 

Sumedha said, "With the adoption of new technologies in finance functions, organisations can achieve efficiency gains, and CFOs are becoming strategic partners for business growth. We have observed that CFOs are actively partnering with IT strategy and business leaders to radically transform processes that have hindered decision-making capabilities." 

"CFOs have defined the roadmap for a multi-year finance transformation which aims to modernise processes, redesign technology and also up-skill their teams. This helps finance leaders to focus on creating and developing critical capabilities that are pivotal to providing business insights and innovation opportunities," added Sumedha.

Sumedha underlined that while all spheres of the finance function witness a significant change from the transformation, the greatest impact is seen in transactional dominant sub-functions like accounting, financial controls, and revenue management.

A recently published McKinsey report has suggested that 40 per cent of finance activities, including instant cash disbursement, revenue management, and general accounting and operations, can be fully automated. 

Digital Adoption Priorities:

Venkatraman Venkateswaran, CFO & Group President at Federal Bank, is reasonably confident about the need to collaborate with partners in the digital transformation space. 

Venkateswaran said, "We need fintech partners in this space because collaborating with them gives us a lot of advantages across various products. The technological superiority or the user experience that they bring in is fabulous. Take any mobile platform of any new-age fintech company. It is unbelievable the speed and ease with which they can do transactions."

"This has helped us upgrade our existing legacy systems, and we are now focusing much more on the user experience, an area where we will be investing further on," he added.

Venkateswaran focused that the digital presence has helped them grow at a much faster pace. He underlined, "Earlier if we were on-boarding X number of clients through a physical branch in a year, the potential of digital stands at 4X for the same period, without investing a single rupee in physical brick and mortar. Banks are now heavily investing in technology platforms and upgrading it."

Sumedha Varma highlighted the fact that more than 60 per cent of CFOs are increasingly investing in technological innovation to remain competitive and unlock the value of data through disruptive technologies.

Sumedha said, "As a result of these measures, the speed and accuracy to draw insights from finance and operational performance data have increased phenomenally for the finance functions. CFOs are now able to democratise the business and operational insights, and make the same available to business leaders for easy consumption such that they can capitalise on future growth and innovation opportunities for the organisation."

CFOs should focus on a few digital adoption priorities, including AI tools, and predictive analytics capabilities, to have better control over their cash flow, and create better working capital and cash scenarios upon which finance leaders can take critical decisions. Also, data management and process automation help business decision-makers proactively react to market changes.

Sumedha mentioned, "The real struggle lies with identifying the right data sets, and analysing integrated operational data with financial indicators for planning and forecasting future trends and anomalies. Here, technological tools can help identify and visualise and predict pattern scenarios and behaviour to make an informed business decision while catching any non-compliance within the system."

Sumedha also underlined the importance of having a unified integrated process that helps to create a single source of truth. She commented, " In the new world of digital-first, CFOs will have to support multi-dimensional decision making and embrace digital disruptions, therefore ensuring the future success of the organisation."

Actions taken:

Ramesh Murthy, CFO at Ujjivan Small Finance Bank Limited, pointed out the benefits of using RPA (Robotic Process Automation) tools. Murthy said, "Initiatives are underway with respect to RPA for UPI reconciliation as well as payments related reconciliation. This is something which going forward will help us with process efficiency."

"Around 30 per cent of our SMEs business is done through fintech partnerships, which has resulted in an increase in productivity, which has helped us significantly. Since we are based in the fintech capital of the country, productivity is not only enhanced by us investing significantly in APIs but also partnerships with fintechs for customer sourcing, cross-selling, control and monitoring on an almost real-time basis," he added.

Murthy mentioned that they have a micro-finance legacy, as 60 per cent of their book is still made up of micro-finance; a lot of focus also goes into collection efficiency. He said, "A very exciting initiative is currently underway for a virtual-cum-digital collection process, which will further improve the collection efficiency and bring the cost down."

The importance of streamlining: 

Harvinder Jaspal, CFO at ICICI Securities Ltd. mentioned that digital transformation is an irreversible journey and CFOs will not go back to the old traditional silos, as things are now quite different.

Jaspal commented, "In the past 2 years, we have transformed a lot. Earlier, almost 85-90 per cent of customers came through only brick and mortar channels, and these days 80 per cent of customers come through digital channels. This shift impacts an organisation substantially. Nowadays, we see 70-80 per cent of our customers coming from Tier-2 and Tier-3 cities. Earlier, we got a meagre number of customers from these cities." 

"As a result of these tectonic shifts, it requires our functions to come together to respond dynamically, and to make products very differently and engage with customers differently. As a finance person, it is of utmost importance to understand the causalities, and that is the reason why we have intense engagement, be it technology, analytics, and regulatory aspects too," he added.

Jaspal also pointed out that CFOs will play an important role in the domain of sustainability.

The panellists concluded the roundtable by reaching the consensus that CFOs are going to play a pivotal role in driving the organisation in the upcoming years.