The financial services sector is no stranger to change. From ongoing regulatory updates to the increasing demands on the CFO role, finance leaders in this sector sit at the forefront of transformation. Yet, for these CFOs, the global pandemic brought into sharp focus the sheer speed and scale of change a business can go through. The questions are, how has COVID-19 spurred shifts in the financial services sector? And how can it prepare CFOs in this sector to best adapt to the next set of changes that are inevitably on their way?
Technology sits at the heart of successful change. CFOs in financial services must practise agile decision-making and build flexible operations to steer a business through a turbulent and fast-changing climate. How? By uniting operational and financial data, teams can generate real-time insights and plan for multiple scenarios. In turn, finance leaders can get a clear view of their business, turn data into actionable insights, and map the best route for success.
The realities of remote work
The sudden shift to remote work, as a result of COVID-19, shone a light on the limitations of back-office functions in financial services and insurance organisations. Many of these companies are still reliant on legacy, on-premises financial IT solutions. This is for several reasons including prioritising customer-facing solutions, inherent risk aversion, or basic corporate inertia. To complicate matters, this infrastructure tends to linger through mergers and acquisitions. And as a result, banks and insurers often use clunky technology to extract data from legacy systems.
IT complications in the finance sector reached crunch time in March 2020 as teams had to operate in a remote setup. Fragmented infrastructure made it difficult to close books. Cobbling together data from disparate sources through integrations, IT service requests, and spreadsheets is difficult under the best of circumstances. But it becomes unmanageable when the entire team is distributed across remote locations. The impact of a poor, disparate IT infrastructure affects a business’s finance books and compromises the wellbeing of team members. Financial leaders had no choice but to put their people at risk, asking them to come into the office to close off books during the height of the pandemic.
For Aon, the sudden shift to remote working was a breakthrough moment for its finance team. Like many companies, Aon’s team was faced with conducting a fully remote close. Despite this being a new challenge, Aon had baked agility into its financial processes by investing in the right cloud-led technology. With live data and transparency across its 120 regions, Aon’s finance team was able to close remotely on time. One region was even closed a day early.
Keeping pace with disruption
Making fast, data-led, decisions form the ‘bread and butter’ of a good financial services leader. But the pandemic intensified the need to take serious action on upgrading scenario planning capabilities. Firms raced to understand the real-time implications of COVID-19 on their workforce, customers and bottom line. But on-premise legacy systems hindered financial leaders from getting to the root of the situation. In turn, CFOs could not undertake the sophisticated scenario planning required to make quick and accurate forecasts for these ongoing changes. Businesses that relied on simple spreadsheet-based scenario planning risked manual errors and version control confusion. Making data-led strategic planning impossible.
Furthermore, as the pandemic triggered market turbulence, companies also faced changing risk profiles and compliance challenges. Increasingly, complex regulatory requirements cannot be met on legacy systems. One example is FR 2052a, a regulation implemented by the U.S. Federal Reserve in 2014. It requires large banks to replace static liquidity reports with dynamic assessments of their cash flows, liquidity risks, and potential drivers of funding vulnerabilities. If they lack a single point of access to consolidated historical data, leaders at these institutions face a huge challenge in meeting these requirements.
These challenges highlight how legacy systems can hamper business agility and outcomes daily. The more CFOs embrace technologies that consolidate organisational data, the more successful financial services organisations will be at keeping pace with disruption. Not to mention remaining compliant with complex regulations.
Leading with data
Finance leaders must manage copious amounts of data. With the World Economic Forum estimating that 44 zettabytes of data existed in 2020 alone, the sheer size of information at their fingertips is just going to increase. CFOs, therefore, need to find ways to increase efficiencies, gain more accurate insights and take more successful actions. But all-too-often banks and financial services companies are trying to manage their data via a byzantine collection of systems, tools, and solutions. This makes data a headache rather than an asset for CFOs. It is causing some firms to get lost in the dark when it comes to understanding the health of their business and turning information into actionable insight.
In fact, Workday’s CFO Indicator report highlighted the need for better data-driven decision making. More than one-quarter of respondents claim not having the necessary data to make critical decisions has led to delayed product launches. While 24% report missed financial forecasts and 17% say they have misaligned resource investments. Put simply; financial services firms cannot keep using legacy systems that are inaccessible, inaccurate, and isolated. In an industry facing more and more regulatory demands and disruptions such as fragile supply chains, data-led agility will determine the sinkers and swimmers in the post-pandemic market.
Financial organisations and insurers need a solution that goes beyond traditional enterprise resource planning systems if they are to become agile organisations that successfully use data. They need a cloud-based platform that:
- Allows teams to break down silos,
- Creates a state of clarity by uniting operational and financial data,
- Produces real-time forecasting and reporting for instant change.
Preparing for post-pandemic success
If financial services firms want to thrive, not just survive in a post-pandemic era, CFOs must embrace the right technologies to support them during times of turbulence. Implementing a unified cloud-based system opens a host of opportunities for financial services firms. Banks, for example, can track and record events throughout loans’ life cycles, such as bankruptcies and credit scores. This enables them to conduct more nuanced risk analyses during tumultuous economic times. It’s time to unchain businesses from legacy systems. Deploy a cloud-based solution that will make use of all the data at their fingertips and enable accurate insights, faster planning and paving a strong path for future success.
Workday is a leading provider of enterprise cloud applications for finance and human resources, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics have been adopted by thousands of organisations around the world and across industries—from medium-sized businesses to more than 45 percent of the Fortune 500. For more information about Workday, visit workday.com.
