The FINANCIAL — CFOs are being left exposed as the increasing volume and pace of data impacts their ability to provide meaningful insights to boards at speed with no errors. This is according to a new report by EY Financial Accounting and Advisory Services (FAAS), which finds that 66% of respondents worldwide say this issue is having a significant impact on the effectiveness of corporate reporting, up from 57% in 2015.
How can reporting catch up with an accelerating world?, an annual global survey of 1,000 CFOs or heads of reporting of large organizations across 25 countries in organizations with revenue greater than US$500m, finds that the Americas, Asia-Pacific, Japan and the Middle East all cite changes to technology as their number one external reporting challenge. Dealing with these technological changes, including cloud-based systems, data analytics, robotic process automation (RPA) and artificial intelligence (AI), is also the top issue for 35% of emerging markets respondents and the number two issue for those in Europe.
Peter Wollmert, EY Global and EMEIA FAAS Leader, says:
“CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them. Many are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets. The result is an increasing expectation gap between what boards now look for from corporate reporting and what CFOs can deliver. Until reporting catches up with technological advancements it will continue to be compromised.”
At a time when close to a third (32%) of CFOs surveyed rank their reporting operating model as “average”, it is not surprising that 56% say transforming their model is a major focus of their role. Over the next two years, 54% expect to see a very significant or significant increase in the use of outsourcing, followed by managed services (51%) and captive shared services centers – onshore or near-shore (50%). Captive shared services centers – offshore and centralized centers of excellence are at 48% and 46% respectively.
The top three drivers for what CFOs hope to achieve by these new reporting arrangements are: increased accuracy and effectiveness of reporting (30%); improved data analytics in reporting to drive forward-looking strategic insight (29%); and a more flexible and agile reporting function (28%).
Yet, with all these changes, 42% are concerned about striking the right balance between central control and the need to devolve reporting so it is attuned to local needs. Today, the dominant organizing principle for corporate reporting is one where everything is controlled from head office (33% of respondents). However, CFOs are likely to move towards control residing with head office but significant responsibilities assigned to local markets. Twenty-nine percent of respondents see this as the future model, with just 24% operating this model currently.
Wollmert says: “CFOs are mapping how they see the future of reporting. However, unless decisive action is taken quickly to define a bold strategy and vision for advancing the reporting process, they will continue to fall behind the pace of technology. For CFOs contemplating this journey, the mantras for their reporting function needs to be responsive and streamlined.”