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08/09/2017

Finance of the Future: An Interview with Niels Boudeling – Chief Financial Officer (CFO) Asia at Rabobank

Innovation drives performance and it is no different for the office of the CFO (Finance) function. Cost challenges, changing stakeholder expectations and narrowing margins is forcing Finance to evolve. We sat down with Niels Boudeling, CFO Asia for Rabobank to discuss further what this means for the function. He provided a compelling vision of the future of Finance being a predictive analytics powerhouse backed by a strong focus on straight through processing (STP), standardized, mostly automated, processes and excellent data quality. 

 

1. Sia Partners (S.P.): Could you describe the role of the CFO function (Finance) in the future. How would you contrast that vs. the current role of Finance right now?
 
Niels Boudeling (N.B.):  Currently the Finance position spends a lot of time on In Control activities and Compliance activities. This is logical if you consider the various accounting scandals at the start of century and the Global Financial Crisis (GFC) in 2008. In those early days of the 21st century SOx was introduced and enterprises had to focus on design effectiveness and operating effectiveness of controls. When most companies mastered their “In Control” challenges, the GFC required the Finance function to produce a significant amount of new, more detailed and more frequent reports to prevent a similar crisis in the future. These events have prevented the Finance function to focus on innovation. Many a Finance function has failed to thoroughly research how they could bring more value to the business. This is important as the business faces continuously more (global) competition.
 
In the future Finance needs to business partner effectively and be value managers (e.g. which new clients / markets we can target). To be able to effectively provide forward looking analysis while increasingly automating rule based, repetitive, processes. 
 
2. (S.P.): What do you see as the drivers for this changing role?
 
(N.B.): As the past decade was focused around being in compliance with regulators, the function didn’t really invest too deeply in emerging technologies. However in our current world of cost pressure and also the need to innovate as a differentiator, Finance is playing a catchup game now. If we look now at the marketplace there are various analytical tools available and Finance is not using them to their full potential. If Finance is to effectively business partner we need to start looking into utilizing these technologies. 
 
The business is also expecting more from Finance beyond process excellence and effective transaction processing. Finance needs to reposition itself not only as operationally efficient but also being able to add value to the enterprise. Being operationally efficient alone isn’t enough because the business is not able to see discernable value in this area. Business partnership is the key area of opportunity for Finance to actively engage our business and operate together. 
 
3. (S.P.): How will Finance be leveraged on as a business partner to create value and fulfill enterprise strategic needs?
 
(N.B.): I foresee two main ‘new’ areas beyond the traditional roles of Finance as a transactional processing and process management hub. 
 
1) Support and execution of both enterprise strategy and marketing activities
2) Support in enabling and embedding IT analytics capability within the enterprise
 

One important area where Finance is able to contribute to the enterprise is to be a “value manager”, e.g. to effectively utilize analytics to support the enterprise's wider goals. Finance can work with the business to apply analytics to identify new revenue opportunities within a specific market.

 
Using a working example: Let’s say I extract China income data by region (e.g. Beijing) from Hong Kong regulatory reports, then combine this information with margin information from internal Rabobank management reports. This combined data set allows me to identify which area in China are generating better margins resulting in identification of business opportunities. This way, I no longer use reports as a source of intelligence but I use analytics on data as a source of insight for the business. In the future, the Finance function is not about reporting, it’s about data!
 
4. (S.P.): Do you see any additional capability pillars build into the traditional Finance enterprise model?
 
(N.B.): As highlighted earlier there will be new pillars.
 
1) There will be an expanded focus on marketing & strategy
2) Separately, capabilities will also be built around IT analytics and data management
3) Last but not least I am also expecting presentation, project management, negotiation and influencing skills to come to the fore
 
In the future, there will be less accountants in the enterprise and more specialists in areas like strategy and analytics. Transactional repetitive processes will be replaced by robotics and automation tools. The reporting functions activities will also be minimized. People will spend more time ensuring that the correct data is in place within the data ecosystem rather than spend days preparing reports. Essentially, the reporting function will evolve towards being more of a Data Steward / Champion. 
 
For Rabobank we have a vision to provide both our internal and external stakeholders with access to nearly 1600 data points. E.g. Regulators will no longer be provided with reports but will be authorized to extract the required data from this data set. To produce a report, the only thing that still needs to be done is to generate (and maintain) a mapping table. This will apply to wider stakeholders like management, central banks, statistics agencies, investors, etc. One Single Point of Truth for all data. Again, it will be about getting the data right rather than creating reports. 
 
5. (S.P.): Would you be able to name your top 2-3 priorities for the next 18-24 months to enable this vision? 
 
(N.B.): Of course. We will invest in processes, technology and our people to embed data analytics and automation capabilities.
 
1) Highest priority in our enterprise is data governance and management. We’re really putting in a lot of effort to streamline data flows and quality. Ensuring that the data is right at the source systems. This is really key for putting in place Big Data capability for us to leverage on.
2) We will invest in automation specifically for repetitive processes backed up with workflows. This together with the data governance efforts I mentioned above will provide us the ability to eliminate the need for a long month end closing process. Instead we will have access to daily accurately valued data. We need to move away from the days of taking 20 days to close the books. We aim at getting rid of the monthly closing process all together.
3) Finally, we will also invest a lot in our people through tools and training to become increasingly specialized in specific areas such as developing business strategists and analytics experts.
 
6. (S.P.): What do you see as the main challenges and roadblocks in meeting your objectives?
 
(N.B.): Many of these investments are costly, justifying their business benefits to obtain senior management buy-in is a challenge and requires education. Specifically many enterprises are not keen on investing resources into the back office function. 
 
Secondly, the attitude of the typical Finance function personnel is conservative and risk adverse. Personnel are busy with BAU routine tasks and do not have time for innovative thinking. A mindset change is required if we're to take the next step up. Fear of change is a big trap for us.
 
Separately from that, the Finance community often lacks the understanding of all technical possibilities. I also noted that many Finance functions lack an agreed vision which fully leverages technology. Our roles as Finance professionals will be much more exciting if we would better embrace technology. But letting go of our familiar processes will be a big challenge.
 
7. (S.P.): What additional key skillsets would Finance executives require in the future?
 
(N.B.): Besides the traditional CPA accountant types there will also be more MBAs and Information Strategists within the Finance Workforce. We’re going to be much more analytical and forward thinking. We will be leaner but I don’t foresee a situation in which the Finance function will be fully replaced by Robots / Artificial Intelligence. There will always be a human interface required to make decisions on priorities and strategies. Not all information required to make decisions is captured in systems.
 
There will also be more cross-fertilisation across functions for the average Finance professional. Finance executives will have transferable skills which can be leveraged across the enterprise. The next generation CFO might in fact come from operations or some other part of the business, similarly Finance executives would have opportunities to work in other areas of the business (e.g. operations, risk, or the front office).
 
8. (S.P.): Typically Finance process efficiency is focused around standardization which is performed in a fairly quick manner. Do you see this definition of efficiency changing in the Finance function of the future? Will it be increasingly simplified and standardized?
 
(N.B.): Yes. There will be a lot more automated controls and processing capabilities throughout the value chain and Finance technology stack. Manual controls will be automated (e.g. source to balance checks, intercompany balances, nostro account reconciliations), staff will only be required to deal with exceptions rather than doing those control checks in a labor intensive manner. Data definitions will be harmonized and processes will be standardized at global rather than regional level. This is happening now for all major players in banking - to eliminate discrepancies in interpretation across regions / locations.
 
9. (S.P.): If we focus on the need for Finance to be able to support forward looking analysis are there any internal initiatives Rabobank is currently pursuing in Analytics?
 
(N.B.): Yes it’s important and there are a few building blocks we will pursue:
 
1) Data governance and management initiatives – getting it standardized and first-time-right in the source systems.
2) Putting in place capabilities for straight through processing.
3) Minimizing the need for manual adjustments (freeing up resources for analytics).
 
10. (S.P.): How do you see Finance utilizing the increasingly large amounts of internal and external data available to an enterprise?
 
(N.B.): I see a role for this which leads back to why now many enterprises are actively looking at opportunities within the cloud. Specifically for Finance I can foresee that a hybrid cloud deployment model will be employed where the finance function is able to selectively leverage on external data which is stored in the cloud (e.g. customer, marketing data) and combine that with on-premise data (e.g. ERP financial data) to come up with better insights and decision making.
 
The time is right now to leverage on this large data ecosystem which is available outside the enterprise to create value and drive revenue opportunities.
 
11. (S.P.): In a few years, how would you measure success of the various initiatives you have undertaken to move towards the future?
 
(N.B.): We will be much more technologically enabled in line with other functions. My company will eliminate the need for a month end closing as much as possible and we will have access to data that can be used for decision making on a daily basis, or at the pace the business requires a decision. Finance will continue to be operationally efficient by leveraging on automation eliminating repetitive, rule driven processes and controls. This in turn will free up Finance resources using analytics to provide strategic insights and partner pro-actively with the business.
 
12. (S.P.): Any closing statements for us to ponder over?
 
(N.B.): The future of the Finance function will continue to be bright but it will be different from the traditional Finance function we still see today. It will require us to embrace technology, change processes and replace skills. But if we can do that, we are all looking at a more interesting job, with a much higher perceived value add. The question is not so much if this is the way Finance functions should evolve. This real question is: can we afford not to move in this direction?
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