Why the future of Nordic TMT sector depends on its CFOs

Unfolding the dilemmas and challenges for Nordic CFOs in TMT 

1. Corporate Sustainability Reporting Directive (CSRD): The CSRD is an important piece of legislation for companies operating in the European Union. It expands on previous non-financial reporting requirements and introduces more detailed reporting requirements on sustainability matters. For CFOs, the CSRD represents a substantial shift in how companies report and think about non-financial matters, with significant implications for internal processes, financial planning and overall corporate strategy.

Firms now must report on environmental, social and governance (ESG) factors in a comprehensive and consistent manner. Although sustainability reporting is non-financial in nature, it has significant financial implications. Investors are increasingly factoring in ESG criteria into their investment decisions. Poor sustainability performance or non-compliance could affect a company’s valuation or access to capital. 

2. Complex regulatory landscape: CFOs in the Nordic TMT industry face the daunting task of navigating a continuously evolving legal and regulatory terrain that includes varying tax laws, privacy regulations like the general data protection regulation (GDPR), network and information security (NIS2), corporate environment responsibility (CER) and the AI Act and country-specific governance structures. Ensuring real-time compliance with such multifaceted laws and standards can prove challenging.

3. Managing rapid technological change: The swift evolution of technologies like gGenerative AI (GenAI), Iinternet of Tthings (IoT) and the transition from 4G to 5G, brings the challenge of significant capital expenditure and strategic planning. Moreover, keeping pace with these advancements and integrating them into existing financial and operational processes can be a difficult task. 

4. Cybersecurity threats: As custodians of vast amounts of data, TMT companies are prime targets for cybercriminals. CFOs must balance innovation and agility with ensuring the company's assets and customer information are secure — a dual mandate that grows more challenging in an increasingly digital world. 

5. Profitable growth amid intense competition: Nordic markets are known for their competitiveness, with companies continually vying for market share. In such a scenario, CFOs face the challenge of driving sustainable and profitable growth while managing customer expectations and maintaining competitive pricing. 

6. Digital disruption and transformation: The shift toward digitization is fundamental in the TMT industry. However, transforming legacy financial systems to cloud and digital platforms and acquiring the right talent to support this is a prominent challenge. CFOs must also ensure that current staff are fully trained and adapt to the new practices and technology.

7. Talent management: The digital revolution in the TMT industry has propelled the demand for new skills. CFOs often struggle to find, retain and nurture the right talent that can thrive in this new landscape. The demand and competition for such niche talents make talent management an increasingly difficult task.

Proactive solutions for today's adaptive CFOs 

1. Effective CSRD compliance management for CFOs: CFOs need to embed sustainability reporting into the financial fabric of their organizations. This involves gaining a deep understanding of CSRD's requirements, developing an integrated reporting framework, and investing in advanced data management systems. Automation technologies and data orchestration will play a crucial role in enhancing the efficiency and accuracy of collecting non-financial data. By promoting a cross-functional approach, fostering a culture of sustainability and maintaining transparent communication with stakeholders, CFOs can ensure thorough and compliant reporting. These steps will not only address the immediate concern of CSRD compliance but also position the organization as a leader in sustainability and corporate responsibility.

The ability to leverage sustainability as a value creator can lead to long-term value, weaving environmental stewardship into the company's growth narrative. Moreover, a strong sustainability framework can provide a competitive advantage, signaling to the market the company's commitment to forward-thinking practices and resilience.

2. Streamline regulatory compliance: A robust compliance management framework with the right tools should be in place. This solution should enable real-time tracking of regulatory changes, help interpret and implement new regulations and ensure proper documentation for audit trails.

3. Leverage technological advancements: CFOs need to incorporate technologies such as artificial intelligence (AI), machine learning, IoT and cloud services into their strategies. These technologies foster the adoption of disruptive tech, like GenAI, automation and analytics, for use cases that automate manual processes and shift human capital toward more strategic tasks. Driving data maturity and data governance, planning budgets and offering continuous training to employees are all essential for effective utilization of these technologies.

4. Cybersecurity measures: Invest in robust cybersecurity solutions to protect sensitive company and customer data. Regular audits, vulnerability assessments and threat intelligence tools can help CFOs understand their security posture better. Employee training and the establishment of a security-aware culture are also paramount.

5. Foster customer loyalty: Adopting a customer-centric approach, coupled with innovative value-added services and flexible pricing models, is crucial. To achieve this, strategic investments should be made in areas such as advanced data management and data orchestration to enable data-driven decision-making throughout the organization. By leveraging analytics and insights gathered from customer data, businesses can optimize interactions and ensure that every touchpoint adds value to the customer journey. A focus on measuring the return on investment (ROI) for these initiatives is important to continually refine approaches that effectively engage customers and build lasting relationships. 

6. Drive digital transformation: CFOs need to identify key areas for digital upgrades, carefully schedule the transformation milestones and prudently manage budgets while maintaining an eye on the overarching financial objectives. Integrating automation promises to significantly reduce manual effort and minimize errors, while GenAI brings the potential for groundbreaking insights and capabilities, driving efficiency and nurturing new revenue streams. These advancements, however, present CFOs with the challenge of mitigating associated risks, including cybersecurity threats and data privacy concerns. To navigate these challenges effectively, CFOs must involve and secure buy-in from all relevant stakeholders and foster a culture that is resilient, agile and prepared to adapt to the accelerating pace of technological change.

7. Talent management strategy: Develop a comprehensive talent management strategy with a focus on retention as well as acquisition. Building a stimulating work environment and offering competitive salaries, benefits and growth opportunities can help retain current employees. For hiring, scouting top talent from universities, integrating a referral system and collaborations with talent search firms can prove advantageous.

Breaking barriers as a strategic CFO

1. Beyond finance: The role of a CFO has evolved from being strictly function-specific to playing a crucial role in shaping the overall strategy of a company. In this contemporary business landscape, a CFO's responsibilities exceed far beyond traditional financial stewardship and include strategic leadership and influence over business operations. They not only oversee financial planning, risk management and financial reporting but also steer decisions regarding capital structure, organizational performance and resource allocation. Their insights on financial viability and growth potential of various business strategies make them key contributors to boardroom and executive meetings. Their unique vantage point of the organization’s financial health provides essential data-driven insights, which are crucial for setting company direction and making informed business decisions.

2. Capitalizing on EU funds: CFOs play a significant role in applying and utilizing the funds provided by the European Union (EU) for innovative developments and initiatives. These financial leaders are not just limited to managing and allocating the company's yearly budget, but are also involved in exploring alternative financial avenues, such as EU funds for innovation. The competent utilization of external funds requires a clear understanding of the organization's strategic innovation goals, the potential return on investment and a robust mechanism to monitor and control the application of funds. By leveraging these funds, CFOs can remove financial hindrances to invest and experiment with the latest advancements, thereby promoting innovation, enhancing competitiveness and driving sustainable growth.

3. Influencing profitability: CFOs have started to play a more strategic role, closely scrutinizing the company's investments and expenditures, with their decisions directly impacting the profit and loss (P&L) statement. In this expanded role, they monitor and shape business activities that reflect on the P&L sheet, aiming to enhance the company's profitability. CFOs are now expected to utilize their financial expertise to evaluate the potential return on investment for different business strategies. This not only involves cost-cutting and optimizing efficiency but also involves strategically investing resources to drive growth and value. By taking an active role in influencing P&L outcomes, CFOs demonstrate their core financial function's broader implications on the company's success.

Beyond the ledger: the modern-day financial maestro 

The role of CFO in the Nordics TMT sector has undergone a metamorphosis in recent years. Amid rapid digitization and changing market dynamics, CFOs are expected to wear multiple hats. They are not only gatekeepers of financial integrity but also significant contributors to strategic decision-making, steerers of digital transformation, interpreters of complex data, communicators of key analytics and leaders fostering a positive organizational culture.

According to the EY organization's DNA of the CFO report, future CFOs will need to take on seven diverse roles to succeed in an evolving finance landscape. These roles are:

1. Strategist: As strategists, CFOs will play a pivotal role in guiding corporate strategy, aiding in critical decision-making and contributing to the development of future business models. They will need to forecast financial scenarios, predict trends and identify growth opportunities that align with the company's long-term goals.

2. Operator: The traditional role of CFOs as operators managing the efficiency of finance operations will persist but will be enhanced by leveraging technology for automation and analytical insight. Clear operational models that drive cost efficiency, accuracy and business intelligence will be a focus.

3. Steward: As stewards, CFOs will continue to protect the organization's assets and uphold immaculate financial reporting standards. They will be responsible for ensuring legislative compliance, managing risks, maintaining internal controls and giving confidence to investors and stakeholders about the financial health and integrity of the company. 

4. Catalyst: Playing their role as catalysts, CFOs will drive transformation across the organization, aiming for operational improvements, profitability and strategic change. Through their analytical insights and financial acumen, they can challenge assumptions, drive efficiency and impact overall business performance. 

5. Behavioral scientist: Based on behavioral economics and psychology, this newer aspect of a CFO's role will involve using behavioral science techniques to understand the motivations and biases behind decisions in their organizations. CFOs will incorporate this understanding to drive better performance and decision-making within their teams and across the organization. 

6. Entrepreneur: CFOs will take a more entrepreneurial approach, identifying opportunities for growth, profit and innovation. This includes potential investment opportunities, mergers and acquisitions, market expansion, or internal process improvements.

7. Technologist: With the rise of digital transformation and cloud computing, CFOs will need to embrace their role as technologists. This involves leveraging IT, data analytics and other digital capabilities to drive a more data-driven organization. CFOs will be at the forefront of adopting new digital tools that can provide predictive insights, improve efficiency and drive greater organizational value.

These seven roles highlight how the future CFO will need to be a multi-faceted leader, with a blend of strategic, operational, financial, behavioral, entrepreneurial and technological skills. By recognizing and developing these capabilities, upcoming CFOs can be better prepared to navigate the evolving landscape of corporate finance.

Ahead of the curve: the CFO's future 

The CFO of the future will transform into a chief value officer, playing a strategic role in shaping the company's future. They will guide the business through operational and technological changes with agility and resilience and will deliver financial insights that drive the company's growth and profitability. The future CFOs will also endorse a culture of innovation and continuous learning amidst disruptions. They will not only be key in identifying and managing financial risks but also in anticipating unexpected operational risks. 

In conclusion, the evolving role of a CFO encompasses a blend of strategic, operational, financial, behavioral, entrepreneurial and technological skills. The modern CFO must be equipped to navigate this dynamic landscape, turning challenges into opportunities for growth and establishing themselves as instrumental leaders in their organizations.