Garreth Hanley:
This is INTHEBLACK, a leadership strategy and business podcast brought to you by CPA Australia.
Christine Gounder:
Welcome to INTHEBLACK, the podcast for business, finance and accounting professionals. I'm Christine Gounder, your host for today.
Today, we have Caroline Edwards from Hays joining us to discuss the findings from their CFO Insights report and the challenges and opportunities facing finance leaders today.
Good to have you back with us, Caroline.
Caroline Edwards:
Thanks, Christine Good to be back.
Christine Gounder:
Let's start with an overview of the report. Why are the findings so significant?
Caroline Edwards:
So to start with, we surveyed almost 300 CFOs across Australia and New Zealand, across a range of sectors. And essentially, the report explores the evolving role of the CFO into a more strategic, and what we've phrased Chief Value Officer role, which is a phrase that we are seeing more and more in articles.
So this emphasises the shift from traditional finance management to driving broader organisational value. And I think that this is particularly significant as CFOs navigate challenges like cyber risk, inflation and data management, while embracing transformative opportunities through AI and sustainability as well.
These findings are critical as they highlight how CFOs must adapt to remain competitive and resilient in today's quite volatile landscape.
Christine Gounder:
Caroline, the report covers a few emerging trends in the finance world. What are the top three trends our listeners need to know about?
Caroline Edwards:
Yeah. So firstly, we found cybersecurity as a critical priority. So 67% of the CFOs we surveyed rated cyber risk as their top concern. And there's a growing emphasis on proactive risk management and collaboration with technology leaders to really fortify those defenses in a business.
The second was AI and automation for strategic value. So over 85% of the CFOs that we surveyed plan to leverage AI for automating routine tasks, which will free up their staff and give them capacity for higher value activities like strategic decision making and innovations.
From the discussions that I had personally, this is really still in its infancy in terms of AI in the finance world. So it'll be interesting to see how AI and finance progresses over the next five years and how it's adopted.
Then the third would be sustainability integration. So ESG is obviously becoming a core component of financial strategy with CFOs having to lead the way in meeting those regulatory demands and aligning sustainability with long-term business value as well.
Christine Gounder:
With advancements in technology rapidly transforming the finance industry, how do you see the role of the CFO evolving over the next few years?
Caroline Edwards:
So it's really interesting. I'll come back to the phrase that I used earlier, the chief value officer. We're finding that that's how the role of the CFO is evolving. And the main points of difference is that rather than being just a traditional CFO role that is all about financial management, the focus is around value creation for a business as well as managing the financial performance. This essentially means that CFOs will need to embrace technology and analytics more to provide insights beyond the traditional financial metrics to act as a strategic partner to CEOs in shaping organisational direction Prioritising the ESG goals to ensure compliance and enhance the stakeholder trust. And then balancing risk management with innovation, particularly as AI reshapes industries as well.
Christine Gounder
The report highlights some important strategic priorities for CFOs. Can you tell our listeners what these priorities are, Caroline, and explain how finance teams can implement them?
Caroline Edwards:
Sure. From the results that we got, the key strategic priorities that came out of it were talent management. So attracting, retaining, and upskilling staff to bridge skills gaps in areas like data analytics and cybersecurity.
The second was data utilisation. This refers to enhancing the quality and governance of organisational data to support innovation and informed decision-making. This obviously has a huge impact on how a business might use AI in finance as well.
And then the third was cost management. This involves mitigating those inflationary pressures through technological efficiency and process improvements. So, finance teams can focus on cross-functional collaboration, investing in training programs, and leveraging digital tools to streamline operations.
Risk management came up as a significant area of concern in the report. What did CFOs tell you about some...
Caroline Edwards:
Risk management came up as a significant area of concern in the report. What did CFOs tell you about some of the challenges they are facing?
Caroline Edwards:
Yeah, it did come up quite a lot. The main challenge that arose was cyber threats. With financial data being a prime target, CFOs are concerned about both the financial and reputational impacts of breaches. This isn't a new thing, but with the increasing adoption of AI, CFOs worry about maintaining the cybersecurity levels necessary to protect a company's information.
And linked to that is obviously data security, ensuring the integrity and quality of the data amid growing regulatory pressures around privacy and compliance as well. The third major concern is inflation and cost control; managing operational costs while maintaining profitability in an inflationary environment.
So In terms of critical solutions, CFOs are mentioning preparation, robust cybersecurity strategies, and collaboration, particularly with CTOs, as being their critical solutions.
Christine Gounder:
Did they talk about how they would address some of the challenges they are facing at all?
Caroline Edwards:
I think for a lot, particularly with the data and the cybersecurity. There are already measures in place, particularly in larger organisations. And it was just about staying ahead of the curve and making sure that they don't take their eye off what they're doing around cybersecurity. You know, I think a lot of companies already have established processes, but you know, with the digital and AI landscape getting more and more complex, they want to make sure that they don't fall behind and leave themselves at risk.
Christine Gounder:
Okay. Sustainability and ESG. These are two really big areas that become so important to financial strategies. How are CFOs dealing with this?
Caroline Edwards:
Yeah, so it's now a financial imperative, obviously, and regulatory requirements like mandatory climate reporting in Australia starting this year, driving CFOs to embed ESG into their strategies. CFOs are tasked with aligning financial performance with sustainability goals, creating robust frameworks for climate risk management, and communicating their ESG impacts to stakeholders.
Many finance leaders do see ESG as a driver of long-term value and a critical factor in raising capital and investor engagement. But I did also find that some CFOs, particularly of more small-to-medium sized businesses, are finding embedding this a little more difficult, particularly with the expectation to report on both upstream and downstream suppliers. They do have a little bit more time to prepare than the larger organisations, but I think they would potentially need support from an expert or a consultant in that area.
Christine Gounder:
So, a CFO to a CVO. That's really interesting. What do the CFOs themselves think about that?
Caroline Edwards:
They, so the CVO actually came from the results of the survey. So, it wasn't a question that we posed to them. But many that I've spoken to since do agree that their role is much more about value creation now rather than just financial management. And I think this is a process that's been happening for the past, you know, good five to 10 years now.
Many CFOs, I think, while they are tracking cash flow and creating budgets and reports and having that executive decision support capacity, it's about integrating those practices with other value drivers to determine business success. So that might be looking at things like workplace morale and culture, employee wellbeing, and obviously then that translates into productivity as well.
And then the other, you know, sustainability, as we've already mentioned, looking at diversity and inclusion, brand loyalty and reputation, and then business relationships and partnerships with external stakeholders as well.
So, it's a more dynamic and wide-ranging set of responsibilities than we've traditionally expected of CFOs.
Christine Gounder:
From all that we know from the report, what then are CFOs doing to make sure they position themselves in the organisations for success?
Caroline Edwards:
Yeah, so the three core areas that we found from the report were firstly upskilling and leadership development. So, 82% of the CFOs that we spoke to are pursuing formal learning to adapt to their expanded roles.
So, leveraging AI and digital tools to enhance efficiency and decision making. And this is both for themselves and for their teams as well. Many of the CFOs that I spoke to are really conscious to improve the skills that their team has around technology.
And then the third and very important when you're in a role like this is succession planning. So ensuring that there are robust frameworks in place to develop future leaders within finance teams. Again, I think a lot of larger companies have this in their mind anyway, and they have teams to back them up and support them with these plans for succession for their role.
However, it's probably the more small-to-medium-sized organisations where they don't have the support where they need a little bit more development around the succession planning. So by embracing those strategies, CFOs are building resilience and they're leading their organisations towards a future defined by innovation and sustainability.
Christine Gounder:
So, in a nutshell, what is 2025 looking like for CFOs?
Caroline Edwards:
Look, in a nutshell, I think for the first half, it will be business as usual. So, same as last year, we're still, you know, battling an inflationary environment but everything I'm hearing suggests that we will have between one and three rate decreases this year, which I think will certainly ease some of the pressure for CFOs.
Again, just coming back to some of the points that I've made before, I think cybersecurity and data integrity will remain a hot topic for CFOs, and they will be working very closely with their technology teams to make sure that this remains a priority.
And then for most, I think the ESG piece is already in progress. So we'll see how that develops.
And, as I said before, for some of the smaller, you know, to medium-sized organisations, I think they will really get their head around what's going to be required from them from an ESG perspective and how they're best going to address that problem. So I think those will be the key things for this year.
Christine Gounder:
Caroline, thank you so much for those great insights. It's been great to talk to you again.
Caroline Edwards:
No problem at all. It's been my pleasure.
Christine Gounder:
If you’re interested in more details, we've included links to the Hays CFO insights report in the show notes. And until next time, stay INTHEBLACK.
Garreth Hanley:
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To find out more about our other podcasts, check out the show notes for this episode. And we hope you can join us again next time for another episode of INTHEBLACK.
