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At the intersection of fiscal responsibility and data-driven strategy

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6 minute read 05 Nov 2024
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Revolutionize your finance strategy: see how CFOs leverage data for growth utilizing EY insights. Ready to lead with data?

Three questions to ask
  • How do you establish a single source of data truth?
  • How do you harness data to drive decisions?
  • How do you safeguard the value of your data?

In the era of automation, where financial data is essential, the ability to manage and govern this invaluable resource has become a cornerstone of successful business operations. However, establishing a unified data governance framework is no small feat. It requires a concerted effort to identify consistent data definitions, implement centralized data repositories for analysis and foster a culture of continuous data practice improvements. Positioned at the intersection of fiscal responsibility and strategic vision, chief financial officers (CFOs) are in a prime position to lead this charge — encouraging collaboration across all departments and promoting a shared understanding of data as a collective resource.

How EY can help

The 2023 Global EY DNA of the CFO Report, drawing on insights from 1,000 finance leaders, underscores the importance of data-driven insights in strategic decision-making. Yet, it revealed that 44% of CFOs struggle with data visibility.

 

As the role of the CFO levels up from balancing the books to helping organizations shape bold strategies for the future, these finance leaders must be ready to steer leading practices in data management — harmonizing data strategies with business objectives and serving as pivotal contributors and value generators within their organizations.

 

Speak a common language

For multinational corporations, data terminology and definitions can go rogue when no one is watching. In the US, you’re selling cookies; in the UK, you’re selling biscuits. They are the same product, but when the profit reports are pulled, discrepancies in branding and nomenclature can become a recipe for errors and ineffective planning.

 

Varied data terminology and business unit data autonomy is a common issue that can lead to significant inconsistencies,” says Jim Deutsch, EY Americas Finance Transformation Data Leader. “Moving towards standardization and away from terminology that’s open to interpretation, can help to avoid situations where the same data leads to different business conclusions. And CFOs are well positioned to lead this effort as financial information is the foundation of enterprise data.”

 

Establishing standards for data literacy is a collective endeavor that extends beyond the CFO’s role, necessitating active participation from the entire executive suite. When all divisions are involved in the collective agreement around data terms and their impact on the operational needs of the organization, a more cohesive and efficient business environment is established.

 

Integrate and automate

Shared definitions of data terms are a critical step, but they won’t go far without centralization and automation. A consolidated data source improves the accuracy and reliability of the information that guides decisions.

 

The CFO survey revealed that a substantial 80% of the data finance departments depend on is sourced from different business segments. Utilizing a collective, credible source of information allows finance leaders to move beyond their conventional role as financial gatekeepers and transform into strategic consultants, providing valuable insights that can propel businesses forward.

 

A centralized approach to data management can also lead to more efficient processing and analysis, resulting in quicker insights. In the CFO survey, finance leaders prioritized advanced data analytics as the second key area for financial transformation in the coming three years. 

 

The adoption of transformative technologies, such as artificial intelligence (AI) and machine learning, can enhance these advantages, automating the analysis to reveal hidden patterns and opportunities, helping companies anticipate market shifts and prepare for what lies ahead.

Champion stewardship

Robust data management is a critical component for organizations aiming to navigate the complexities of today’s business environment. As stewards of financial integrity and strategic foresight, CFOs are well positioned to spearhead the development of these comprehensive frameworks, helping organizations optimize data functions and benefits.

Data governance confirms clarity and consistency in data usage across various departments, which is essential for clear communication and error reduction. Additionally, as organizations expand, a strong, shared governance model safeguards against security risks and provides a seamless data flow by setting clear rules for data access and storage.

“As data dictates direction, a robust data framework becomes the compass for corporate navigation,” says Deutsch. “The process of creating and standardizing this data ecosystem may be gradual, but its role in the continuous improvement of business decisions is clear.”

Data management is not a quick fix

For CFOs, data management is an ongoing demand. There is no one fix-all approach that will last two years, much less five. Flexible thinking, continually updated automation and vigilant oversight are all part of the strategic mindset for finance leaders of the future.

By building a core foundation of collective data literacy, centralized sourcing and analysis, and established governance, CFOs can help create the most advantageous launchpad for an effective data ecosystem. The relationship between business leadership and finance is at the heart of this financial transformation, elevating organizational performance.

“Data has always been a valuable asset to business, but it’s now essential to growth and success,” says Deirdre Ryan, EY Global Finance Transformation Leader. “Getting data management right is crucial. CFOs are well positioned to lead the charge by advocating for standardization and prioritizing the data and analysis required to gain or retain a competitive advantage. Forward-thinking CFOs are reshaping the way data influences strategic decisions.”

Make data work for you

Note: This is the second in a series of articles about the future of finance, based on EY research and insights working with CFOs.

Summary 

CFOs are increasingly responsible for data-driven strategies to boost business performance. They face challenges in data visibility and standardization. Centralized data management and advanced analytics are essential for effective decision-making. CFOs must lead in establishing strong data governance to provide accuracy and security. Continuous innovation in data management is crucial for maintaining a competitive advantage. This is part of a series on the evolving role of CFOs in finance and data management.

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