THE DATA-DRIVEN CFO

2

James Blessing, Supervisor, RSM US LLP james.blessing@rsmus.com, +1 703 336 6326

Dan Meers, Senior Director, RSM US LLP dan.meers@rsmus.com, +1 703 853 4646

Rich Davis, Principal, RSM US LLP richard.davis@rsmus.com, +1 617 241 1480

PREPARED BY:

3

.

THE DATA-DRIVEN CFOLeveraging data and analytic insights to drive outcomes

It’s been more than half a century since renowned banking leader and Citicorp CEO Walter Wriston observed the value of financial data, noting that, “Information about money is becoming almost as important as money itself.” Credited for helping innovate the banking industry and propel the information revolution—including the introduction of the ATM and ATM network—Wriston was among the first to recognize how credit cards and information networks would serve as the foundation of an information economy. The principles of merchant banking showed him that information conferred power.

Decades later, this concept is no secret to today’s chief financial officer. The financial landscape has continued to evolve, but today’s CFO—armed with the right information—can extract a significant amount of enterprise value from data, assuming that it can be turned into meaningful insights and measurable actions with positive results. In order to compete in today’s digital economy, CFOs must be able to effectively harness their firms’ data as an enterprise asset to derive insight from information.

4

INSIGHTS FROM RSM

The data-driven CFO is RSM’s term for insightful financial leadership. As the role of modern CFOs has magnified and expanded with the digital economy transformation, financial leaders must increase their organization’s data literacy to remain competitive. They must carefully balance quantitative analysis with qualitative judgment and master physical and digital business challenges to blend ever-escalating data flows with business process complexity. Along the way, they help identify unnecessary expenses and effectively allocate costs.

Despite their deep experience and strong attributes, many CFOs continue to struggle with one key issue: their organization’s data is neither reliable nor complete enough to drive consistent results. Often, today’s CFO is forced to make good decisions based on poor or missing data. Hindered by unsustainable levels of cost and impairment in data, they routinely rely on their best judgement to adjust for these gaps in data and reporting.

CFOs must address this challenge by achieving a more authoritative information systems environment, which in turn will create data of higher integrity. Increasing the integrity of their financial data instills greater trust throughout the enterprise and provides more leverage to CFOs as they create organizational value by accelerating transformative change, realizing measurable gains and producing more balanced data-driven insights and outcomes.

In order to advance their strategic data program, it is important to understand the challenges CFOs face as they work to capitalize on their strengths and assets to better leverage their data for analytics success.

“Information about money is becoming almost as valuable

as money itself”Walter Wriston

Chairman and CEO, Citicorp (1967-1984)

5

Today’s CFO knows that since “time is money,”

rapid data integration and analytics are

the key to improving enterprise performance

and mitigating the constantly changing risk

environment.

Day-to-day tasks and objectives may vary among CFOs; however, the role shares a collective struggle in the ability to effectively leverage data. Today’s CFO faces critical challenges in harnessing data, including:

1 NO SINGLE SYSTEM CONSTITUTES THE COMPLETE SOURCE OF FINANCIAL TRUTHWhile the notion of a “single source of truth” is important, CFOs understand that it is

the aggregate of an organization’s numerous and varied financial systems that comprises that holistic information factory. Sources such as data warehouses, big data lakes, rapid analytical tools and streaming data services all contribute to the overall picture of financial condition and performance that the CFO provides.

2 CFOS SERVE A LARGE, DIVERSE SET OF CONSTITUENTS WHO EXPECT TIMELY, ACCURATE REPORTINGCFOs are focused on generating required financial reporting each period while

simultaneously serving enterprise and line-of-business executives who expect to receive analytics reflecting their own specifications, such as key performance indicators, time horizons, levels of summarization and visual formatting requirements. Often geographically dispersed among the company, these constituents expect quality data with attestation-level commitment from the financial office’s leader. Further complicating requirements is having to accommodate business and economic events that mandate material adjustments to reporting, as well as accounting, tax and legal changes that may require months of planning and recasting for comparative analysis requirements.

3 THE OFFICE OF THE CFO FIELDS MORE ENTERPRISE-LEVEL REPORTING AND ANALYTICS THAN ANY OTHER BUSINESS ENTITYAs the central hub for all financial and nonfinancial data, the office of the CFO must

ingest and work to integrate information from every corner of the enterprise. The CFO determines the financial data, reporting and analytics strategy for the firm, complete with key performance indicators to prioritize effort and resources. Credit, liquidity and overall cash flows can change very quickly, sometimes without obvious triggers or forecastable causes, making cash flow and balance sheet projections critical to the entire executive team. Meanwhile, business, legal and economic changes further complicate the rapid forecasting, analysis and insight needed to address emerging trends or changing market conditions.

4 THE BURDEN OF POOR DATA QUALITY RESTS ON FINANCE Without proper technology, savvy finance specialists are forced into being technical clean-up experts who locate and transform data manually to achieve

great accuracy and integrity. Spending countless hours manipulating spreadsheets, these team members are increasingly tasked with aggregating and analyzing disparate data across the enterprise. Tellingly, one retail client that monitored turnover of key analyst and management positions among its business and finance lines discovered a turnover rate 2.5 times higher than that of other business positions. Exit interviews consistently revealed frustration among these employees, who felt they had to abandon their roles as highly qualified analysts to ultimately become data janitors.

5 ECONOMIC UNCERTAINTYWhen disruptions occur at any level of the economy, the CFO is front and center in re-planning and adjusting enterprise resources. Often, these disruptions come

with very little warning and occasionally, every eight-to-10 years, they pack an enormous punch. Over a decade ago, the economy lurched into a deep recession over financial industry excess. While some saw it coming, no one predicted the depth and impacts of the recession. CFOs had to continually adjust every aspect of their firm’s financial position as the economic disruption unfolded. Today, a global pandemic is wreaking recursive economic impact that requires daily decisions over cash flows, budgets and investments.

DATA CHALLENGES CFOS FACE

of CFOs cited accuracy and integrity’ as the most important characteristic of data.

65%

6

INSIGHTS FROM RSM

A data-driven CFO is a digital leader who has the ability to drive information and insight about financial conditions, performance and projections across the enterprise and its external consumers in a mobile universe.

CFOs engrain data and analytical capabilities and controls into their teams to drive understanding of the relationships inherent in corporate data. Financial analysts enforce business and financial logic in complex data and analytics technology to produce and manage reliable results.

7

While CFOs face significant obstacles in their quest to harness and optimize vast volumes of financial data, they are also in the perfect position to empower their teams to enhance the overall data literate culture of the organization.

Data-empowered CFOs drive results through several important actions including:

1 INSTILLING LEADING PRACTICES AND BENCHMARKS TO MEASURE BUSINESS PERFORMANCEBy executing constant improvements in operations, controls, automation and

analytics, CFOs provide the enterprise with essential reporting targets to help identify critical operational data and analytics requirements that drive finance operations forward. They benchmark their organization to identify best-suited processes for automation in terms of increasing volume and improving controls to balance performance and risk.

2 ATTRACTING AND MAINTAINING HIGH-PERFORMING TEAMSAmong the greatest strengths of leading CFOs is their ability to appeal to, develop and leverage high-performing teams in challenging conditions. Financial analysts

can enforce business and financial logic in complex data and analytics to produce reliable results. They understand complicated data relationships, beginning with business event capture through accounting process and summarization. Being able to monitor the lineage of data through these processes that weave into the overall financial system architecture is critical to understanding business performance. These analysts are the backbone of the organization, and essential to a firm’s ongoing business risk and performance management.

3 EMPOWERING TEAMS TO BUILD ANALYTICAL MODELS THAT AFFECT MISSION-CRITICAL DECISIONS The data-driven CFO invests in analysts and technology to create models that

can clearly describe and efficiently forecast outcomes of decisions in ever-changing conditions. Business insights are gleaned from operating revenue, expenses, changes in financial conditions and re-balancing of fixed versus variable costs to forecast performance. Incorporating deep analytical acumen within the office of the CFO provides accurate insight into the financial health of the organization.

4 ENGRAINING BUSINESS AGILITY AS THE CENTER OF THE ORGANIZATION’S FINANCIAL HUB Agile methods, historically the domain of technology, have gone mainstream in

data-driven CFO shops where business agility is the order of the day. Business agility is more than a concept, it is the way the office of the CFO predicts, responds to and adjusts the financial balances of the enterprise in real time with significant economic disruptions. The CFO drives financial agility through timely and authoritative data-driven views of enterprise conditions and external forces.

THE DATA EMPOWERED CFO

8

CFO DATA LEADERSHIP FOR THE MODERN COMPETITIVE LANDSCAPEData-driven CFOs require proven methods and practices that elevate their firms’ ability to drive information and insight about financial conditions, performance and projections. With their influence, CFOs can stay ahead of the curve with the executive team and be a key part of envisioning the future of the firm rather than focusing on its history.

Envisioning the future requires a strategic, data-driven agenda that enables measurable results

To fast-track the data agenda, CFOs must take incremental steps toward achieving a higher quality, digital business environment that advances the data literacy of the entire organization. This creates more leverage for CFOs, allowing them to reliably govern data and provide the disciplined leadership needed for trustworthy financial planning, reporting and analysis. CFOs and their versatile, analytical teams are the keystone to advancing the data agenda to accelerate positive, measureable outcomes.

CURRENT ENVIRONMENT DATA-DRIVEN FUTURE

Access to yesterday’s cash position and working capital

Automated cash flow and liquidity updates

View of margin erosion in the aggregate

Insights into key drivers of margin erosion

Little to no visibility into projects’ return on investment (ROI)

Timely analysis of internal initiatives and their ROI

Spreadsheet-based disparate versions of customer and product profitability

Standard profitability analytics from CFO models using authoritative customer and product data

9

THE POWER OF DATA-DRIVEN STRATEGY IN THE OFFICE OF THE CFO

DATA-DRIVEN GOALS AND INITIATIVES

BUSINESS OUTCOMES

Sponsor data governance at the executive level

Leverage finance data ownership and stewardship

Instill simple, actionable methods and tools for data management

Enhanced data quality to produce authoritative reports and analytics

Assign business and technical data stewards

Clear accountability over data quality and outputs

Validate and improve critical master data for financial reporting (customer, product, etc.)

Standardized reporting, allocations and analytics for profitability results, trends and projections

Standardize financial and enterprise key performance and risk indicators (KPIs and KRIs)

CFO standard performance and risk measures supporting consistent enterprise analysis

Partner with technology executives to sponsor data warehousing and intelligence initiatives

Authoritative, cohesive information ecosystem that meets the needs of all business users

Engrain data analytics into routine decision-making through piloted projects

Better informed strategic and tactical decision-making with more reliable consequences

Expand from modeling potential business impacts into projecting

Enhanced trust in finance as the source for insights into growth and risks

Mount innovative approaches to unforeseen challenges and target potential game-stoppers

Greater business resilience in times of powerful uncertainty

Initiate a new wave of data and analytics governance to establish higher trust and reliability in your data

As trusted leaders whose insights drive enterprise change, data-driven CFOs balance quantitative analysis with qualitative judgement. Armed with the proper solutions to address data challenges in a rapidly evolving environment, CFOs can produce data and analytic results that provide the basis to form business-changing insights and actions. An insightful leader is one who can weigh these analytic results with the benefits of experience and judgement. The better the data and analytics, the faster insightful leaders arrive at solid decisions and drive enterprise performance..

10

CONCLUSION

The reality of the digital economy is that all CFOs are in fact data-driven. The office of the CFO is already recognized and respected as the financial data hub of the enterprise. The differentiation comes when they have the ability to engage in solutions that generate more authoritative, timely data. If data is the driver for the CFO, then these insightful leaders need the highest value, most readily consumable fuel possible to propel the strategic data agenda.

11

+1 800 274 3978 rsmus.com

This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute audit, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. RSM US LLP, its affiliates and related entities are not responsible for any loss resulting from or relating to reliance on this document by any person. Internal Revenue Service rules require us to inform you that this communication may be deemed a solicitation to provide tax services. This communication is being sent to individuals who have subscribed to receive it or who we believe would have an interest in the topics discussed.

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International.

RSM, the RSM logo and the power of being understood are registered trademarks of RSM International Association.

© 2020 RSM US LLP. All Rights Reserved. WP-NT-CON-ALL-0520