The Future of Finance
David Buley, CFO of the Association of Independent Schools of NSW
What will the finance profession look like in 10 years?
The New Team
More employers will change their approach form “talent acquisition” to “talent access” driven by significant challenges in finding talent. The mission of FP&A will stay the same but the function is likely to be augmented with a blended team. What skills will you need in the future?
Branding Yourself
Informed — You know what is going on. Continuous learning — you are adding new skills and capabilities. Connected — you build relationships. Inspired — you are confident that you will change with the rapid changes in the workplace.
Focus on building these characteristics that show your professional passion:
- Cy Wakeman, leadership expert and former AFP conference speaker
"Your value to your employer is what you bring today + what you bring tomorrow – 3x your emotional expensiveness."
We Are All Data Scientists Now
Analysis
Domain Knowledge
Hover over each section on Venn diagram for more info
- Ask a good business question - Plan the project: define goals, coordinate roles, identify constraints, defines good data - Communicate results to other business users
- Choose a useful procedure to analyze the data - Create, validate, and evaluate the model - Diagnose problems during iterations of review - Develop and improve procedures for analysis
- Gather, clean and prepare data from appropriate sources - Create durable processes
Data & Tech
FP&A is expected to have some level of expertise in each of these areas:
Jargon Watch: Collab
In the world of fashion, collaborations between brands are becoming more common, but recently this focus on “collabs” is bringing unexpected brands together as well. For example, Victorinox is using recycled Nespresso coffee capsules in a limited edition Swiss Army Knife. While the brands come from entirely different categories, they likely share some overlap of customers which makes this a very smart strategic trial.
explore the trend
Done successfully, each partner to the “collab” brings their supporters and exposes/cross-pollinates the other group to their product, music or service. Marketing costs may be lower or shared, but production costs may increase.
Why it matters
Short for collaboration or collaborate. Usually implies collaboration across genres.
WHAT IT IS
Career advancement
Communication differences
Demonstrate you are vested in their future via educational or career planning, such as stretch projects or lateral rotations
Have a reputation for wanting to be promoted quickly.
May be patient, waiting until they have demonstrated competencies before moving up
Establish clear rules that require some compromise for everyone. Define the optimal environment that benefits the organization, and understand that some will need to change in order to adapt.
Prefer text and emails, and are willing to work “off hours” for a flexible lifestyle.
Prefer calls and face-to-face meetings.
Encourage mixing of age groups to blend understanding of past events with a skeptical eye to current methods.
Raised to value disruption and tend to have less reverence for existing methods.
Value current processes, and the history that led to need for the process.
TIP
millennials
incumbents
Process
Working styles will differ and potentially create conflicts. Be aware of the following stereotypical views:
What it means
Generational Shift in Workforce
By 2030, millennials will compose 75% of the U.S. workforce.
What it is
Scarcity of Talent
- VP, FP&A at Consumer Products Company
“I am having trouble finding anyone to hire, and it is even harder to find someone I want to hire!”
Broadly, there is now 1 job opening for each person officially looking for work. This puts a premium on attracting, hiring, and retaining valuable employees.
Low U.S. Unemployment Rate
LEARN MORE
COMING SOON
ManagING TECHNOLOGY PROJECTS
What is Your Personal Digital Readiness?
We are all Data Scientists Now
jargon watch: collab
scarcity of talent
NEW MODELS
NEW CAPABILITIES
MACRO FORCES
Blockchain
Case Study
PROBLEM BNY Mellon’s broker-dealer service plays a pivotal role in the government clearance and tri-party repo markets, so resiliency is a top priority. The goal was to protect itself from tail events that could result in data loss or corruption. SOLUTION BNY Mellon decided to create BDS 360, a third, separate system with which it could reconcile clients’ transactions and balances in its primary systems. BDS 360 is built on blockchain technology. The data structure’s immutable and traceable characteristics provide a separate and correct record of transactions and balances which BNY Mellon can use to cross-validate those recorded by its primary systems. BDS 360 does not replace BNY Mellon’s primary systems, but is used in conjunction with them. RESULTS BDS 360 is used to detect position breaks in the primary clearance and tri-party systems. In addition, it was a cost-effective and quick way to create an additional layer of protection.
PUTTING BLOCKCHAIN TO WORK BNY MELLON LEVERAGES TO PROTECT DATA
A TYPICAL BLOCKCHAIN TRANSACTION PROCESS
Each block has a timestamp and is attached to previous blocks, forming a chronological chain that is permanent and immutable.
HASHING
The verified transaction is combined and linked to other confirmed transactions, forming bundles of records known as blocks.
BLOCK FORMATION
Blockchain’s algorithms of cryptography confirm that the submitted transaction is valid.
VALIDATION
A transaction is submitted and cryptographically broadcasted to all participants on the network.
BROADCAST
A shared transaction database that provides a transparent and secure way to efficiently record and transfer information. Using a distributed ledger, it offers participants a decentralized record-keeping solution that is encrypted, digitally synched and shared across the network.
Click here to view blockchain case study
Artificial Intelligence
Artificial intelligence (AI) amplifies cognitive abilities, providing solutions to problems where the complexity and volume are too great, the information is incomplete, or the details are too subtle and require expert training for the human to manage effectively.
check out use cases for ai
THE SECOND HALF OF THE CHESSBOARD
The second half of the digital chessboard represents the exponential increase in technological capabilities. It can be compared to Moore’s Law about the doubling of digital computing power every 18-24 months.
Jargon Watch: Cobot
The idea of machines replacing us is less likely than machines working next to us, both in physical spaces and white-collar work such as finance. We will see this in business cases (proposed investments) presented to us, and in our finance world, as machine learning becomes a tool that we apply to our jobs.
Short for “collaborative robot,” a robot that is intended to inhabit the same physical space as people and support people; a contrast to industrial robots that work autonomously.
Robotic Process Automation
Sophisticated computer software can automate standard tasks normally performed by humans.
IQ Bots
META Bots
COMPLEX, MULTI-SYSTEM
SIMPLE, REPETITIVE TASKS
Managing through fuzzy rules and using unstructured data
Complex, multi-system dependent processes
Repetitive, rules-based tasks that rely on structured data
BEST FOR
Task Bots
Check out the podcast
How Allianz Life Uses RPA
Pervasive Connectivity
The ability to capture data from anywhere and have it accessible everywhere.
CLOUD + MOBILITY = PERVASIVE COMPUTING
Mobility
Global mobile data traffic will increase seven-fold from 2016 to 2021.
Moving access to data and computing resources from fixed to portable locations.
The more we store and explore data, the more useful it is as an asset. And we are just at the beginning.
Cloud
Multi-tenant solution provided by vendor
Elastic, pay as you go - scale up or down
Modern web based integration
Web and mobile - access from anywhere
Automated upgrades
Automated backups, uptime, SLA maintenance
What is Cloud Computing?
A network of offsite data centers to store, manage and process data that is globally accessible via the internet. This has enabled the collection of increasing amount of data (ie, Big Data) and the rise of 3rd party vendors to manage and run the cloud centers.
Learn More
Lead with and Master Data
JARGON WATCH: COBOT
THE SECOND HALF OF THE cHESSBOARD
Pervasive connectivity
Take a Deeper Dive
Too Many Metrics!
We can now measure and record everything. But just because you can, doesn't mean you should.
To find the right balance, make sure your metrics are SMARRT.
Hover over each section for more info
Rethinking Porter's 5 Forces
New approach: Old walls that once defended industries are falling quickly as it is easier than ever to disrupt technology and scale barriers. The surplus of capital has created an ecosystem where companies create new ideas, products or services with an eye to selling them.
New approach: The lines between new entrants and substitutes has blurred—new entrants may disrupt old industries through substitution—so the response may be similar as well. Internally, consider a venture capital-like approach of funding some risky, potentially disruptive ideas through a stage-gate process to gain learnings and test theories. Externally, consider M&A.
New approach: Customers have more data to share, which allows buyers/customers to integrate into the company processes.
New approach: Development of rival technologies or platforms upon which services can be offered can be a huge risk. Industry consortia can help to set standards to develop an ecosystem where all can thrive.
New approach: Vendors are embedded in the company and often tightly integrated in the supply chain of information and logistics. In some cases, they simply take over what you need.
BUYER’S BARGAINING POWER
SUBSTITUTE PRODUCTS
NEW ENTRANTS
INTENSE SEGMENT RIVALRY
SUPPLIERS’ BARGAINING POWER
Since 1986, companies with the highest capex-to-sales ratios have underperformed the S&P 500 by more than 2 percentage points on average each year, according to Bank of America Merrill Lynch.”
“Shares of the 20 companies in the S&P 500 that spent the most on capex in the first quarter are up 0.5% for the year, trailing the broad index’s 1.4% gain, according to analysis of data from S&P Dow Jones Indices. The trend becomes even more pronounced over longer time horizons:
R&D versus M&A
20%
30%
Corporations provide 30% of startup capital
Participate in 20% of financings
CVCs (corporate venture capital) are major participants in the start-up world
With so many companies getting access to funding and cheap infrastructure (email, accounting, legal), it is easy to set up a company around an idea, develop the product or service, then plan a sale as an exit rather than build and run the company for the long-term. “The market” can test many ideas; companies can invest and potentially purchase the winners. This can also incubate ideas in an external, entrepreneurial culture, and even potentially disrupt the parent corporation’s business model.
Digital laggards (bottom 25% of companies)
37%
55%
Digital leaders (top 25% of companies)
*Source S&P Capital IQ, Keystone Strategy Analysis
3-year average gross margin
Leaders & Laggards
you and your competitors.
Over time, being a leader in digital operations can create daylight between
higher margins and valuations.
better leverage new digital technologies
Companies that for internal operations have
Select an answer from below.
Whoops! The correct answer is Eaas. Examples include This is a new area with minimal sales today, but Navigant Research forecasts the annual global market could reach $221 billion by 2026.
Trick question. All of these are examples of a XaaS Service.
C. Country as a Service (e-residency is available and various citizen benefits as well. Estonia is currently the sole provider).
B. Cars as a Service (you pay a set fee for a car, and choose the model you want from the brand for a period of time. Ownership of the asset remains with car company).
A. Lighting as a Service (a company buys and replaces your fixtures and bulbs with high efficiency LEDs, and takes payment on energy saved. Ownership of the lights and fixtures stays with the service provider).
Which of the following is an example of a XaaS Service?
4.
XaaS: Everything as a Service
Whoops! The correct answer is 38%.
Correct.
D. Infinite
C. 38%
B. 28%
A. 18%
What is the expected annual growth rate (CAGR) for XaaS from 2016-2020?
3.
Whoops! The correct answer is PaaS. Examples include Long Jump, Cloud Foundry and Open Shift.
Correct. Examples include Long Jump, Cloud Foundry and Open Shift.
D. EaaS
C. SaaS
B. PaaS
A. IaaS
Often used in software development, a third-party service to design, build, maintain and monitor the infrastructure.
2.
Whoops! The correct answer is IaaS. Examples include Amazon Web Services and Microsoft Azure.
Correct. Examples include Amazon Web Services and Microsoft Azure.
The setup and maintenance of platforms, applications and software to cloud infrastructure
1.
Take the Quiz
TAKE THE QUIZ TO SEE HOW WELL YOU KNOW THIS SERVICE.
XaaS (prounounced ZaaS) is anything that can be thought of as a subscription service rather than owning the asset, exchanging ownership and up-front costs for outsourced serviced that is usually pay-as-you-go. If you aren’t using a XaaS at work yet, or offering it to your customers, you will be.
Availability of Capital
Capital is available to companies from multiple sources:
angel investor
sovereign wealth funds
corporate capital
crowdfunding
family offices
private equity
venture capital
The velocity of this company creation-build-exit cycle is increasing, which has implications for FP&A. Some companies may build toward long-term investments, others may search for quick exits. New owners may impose new practices, reporting and investment processes. Acquisition is an accepted form of R&D.
Capital is available to start and grow a company.
Low interest rates, even with recent increases, make it easy to borrow.
Global Private Equity has $1.7T in capital ready to deploy.
Corporations have more than $2T on their balance sheet, and this is likely to grow with savings from the tax reform act.
r&D versus m&A
Quiz - XaaS: Everything as a service
What is Agile in Finance?
Too many metrics!
Predictive Modeling
rethinking porter's 5 forces
FP&A staff need the skills and emotional intelligence to work effectively across the business.
Personal & Team Effectiveness
FP&A requires a technological infrastructure of hardware and software to manage data.
Technology & Data
FP&A must translate strategy into a financial plan and support implementation through capital decisions.
Finance & business Acumen
Finance & business ACUMEN
Macro forces lead to New capabilities that lead to New models to achieve goals
Re-arranging the traditional structure of where, when and how work gets done.
New ways of accomplishing tasks.
Changes happening across all industries.
Click each FP&A dimension to explore how changes are impacting your future.
the future of Finance
Your Roadmap to
"Cobots made up just 5 percent of the $14 billion industrial-robot market in 2017, according to research by Minneapolis-based venture-capital firm Loup Ventures. Loup estimates sales will jump to 27 percent of a $33 billion market by 2025 as demand for the robotic arms rises. About 20 manufacturers around the world have started selling such robots in the past decade."
- The Wall Street Journal, "Your Next Robot Encounter: Dinner, Drinks and a Massage."
FP&A
DATA GURU
ROBOT
VENDOR
CONSULTANT
CUSTOMER
- Knowledge of data repositories - Ability to pull data sets, clean data, and run statistical analyses
WHAT THEY BRING TO THE TABLE
- Task deliverables performed efficiently - Quantitative analysis over large data sets or complex calculations
- Supplier of outsourced serves, such as reporting and variance analysis
- Expertise in functional area - Staff augmentation
- Revenue - Data about themselves and the market
- Financial acumen - Domain expertise in the business - Process expertise in “getting work done
TAKE A DEEPER DIVE
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AFP's new survey, Your Personal Digital Readiness, assesses the attitudes of finance and treasury professionals about their readiness for changes in technology and data. This is a great way to benchmark yourself with your peers. Look for the survey invite in your inbox or participate now. Only takes 15 minutes. Participate Now.
What is Your Personal Digital Readiness
Engaging with data goes beyond achieving analytics and delivering reports.
Lead With and Master Data
Finance is uniquely equipped to lead the change and avoid the mistakes of the past.
Check out the Course
- It calls for architects of solutions that combine simplicity with scalability. - It requires an impeccable understanding of data dynamics. - It can’t be delivered without thorough change management and understanding how it affects human relationships. - It must always be focused on efficient and sustainable processes.
Max Your ROI on CyberSecurity
Investing in IT security is hard.
You can spend an unlimited sum of money to protect company assets, and never get 100% security. A tool to consider: ROSI, return on security investments.
Max your ROI on CyberSecurity
Max Your ROI on Cybersecurity
The formula contains many assumptions. With practice, companies will get better at the assumptions , so initially, this is best applied internally to compare IT security investments against each other.
- Business: security is not a “service”, but a series of layered investments that depend on external threats and interactions created to engage the markets. - CISO (chief information security officer): gains a seat at the investment table but needs to explain what level of security is realistic and has to try to quantify risk and opportunities. - Finance: gets a way to quantify its practices and compare options but needs to come up with realistic assumptions. - Everyone: gets to evaluate their risk appetite by examining the tradeoffs demanded by the business.
ROSI is a modified ROI formula.
This should elevate the conversation:
learn more
Origins in IT
Solutions evolve through collaboration between self-organizing, cross-functional teams utilizing the appropriate practices for their context.
Broader Applications
- Individuals and interactions over processes and tools - Working software over comprehensive documentation - Customer collaboration over contract negotiation - Responding to change over following a plan
- Empowered to make decisions - Co-mingle different departments - Short, frequent milestones - Fewer hand-offs/more ownership
Small Teams
- Shareholder value derives from delighting customers and reacting to their needs - Decisions are made close to the customer for faster response - Everyone has line-of-sight to supporting the customer
Customer/Marketplace
- Network of small teams organized around a common goal - Divisional structures and legal entities have less meaning as people redeploy frequently - Bias for action in line with common goals
Enterprise is a Network
Implications for Finance
“Innovation that happens from the top down tends to be orderly but dumb. Innovation that happens from the bottom up tends to be chaotic but smart.” Finance is close to the investment and decision support processes, and needs to manage this top-down and bottom-up process by providing a framework to create, capture and evaluate ideas throughout the year.
Plan Continuously
While ERP and EPM systems provide a new ability to understand costs at a minute level, don’t get lost in the trees. Ask yourself how well is the company executing against goals and the activities that drive value?
Divisional P&Ls Mean Less
Anticipate issues that may arise and consider reactions (scenario analysis). Recognize that reactions to events cannot be slowed by rigid decision hierarchies; develop decision and risk guidelines to clarify span of control and applicability.
Increase Decision Velocity
Introducing agile to your company will require an investment and should be considered a major change management process.
Build Agile Operations
COST: One year cost, to match the one year of anticipated benefit. If you stretch the benefits over multiple years, you must assume corresponding costs.
MITIGATION RATE: The effectiveness of controls that you are investing in, as measured by the improvement gained in either of the above terms (less severity or less likelihood).
SINGLE LOSS EXPECTANCY: Cost to remediate a single occasion of the loss event. In risk terms, this is the expected loss of a single event.
ANNUAL RATE OF OCCURRENCE: The number of times this event is likely to happen in a year. In risk terms, this is the likelihood of loss.
GOAL
NEW
Optimism-and Fear-in Finance's Digital Readiness
2018 AFP Survey - Key Findings
If True - The message of change has finally been embraced by treasury and finance. If False - If finance believes they're already on the leading edge of digital today, they may not see a need for change as new waves of innovation roll in.
Optimism
believe they're already above average in data literacy.
64%
With dozens of new capabilities in the market, it's hard to gain expertise in all of them.
are concerned about becoming obsolete if they can't keep up.
50%
Fear
Be digital leaders in your home life. Digital readiness is a habit, and being open to it in one environment helps to prepare you in another. Be expert on your existing tools. Even if these tools may become obsolete, the habit of becoming an expert and relying on tools is healthy. Have a plan and keep learning. It is important to keep this issue in front of us, and continuous education is the new normal. Be self-motivated. Don’t rely on your company to manage your career; you may be moving faster than your company, thinking further ahead, and have a greater focus on your personal growth than your company.
are self-motivated to pursue digital literacy.
87%
Personal Action
Cover a portion of the educational costs
are getting some help from the office.
75%
Employer Support
HOW SO?
Develop a culture of investing in employees
Provide time for education during the working day
Assist in developing a plan, such a mapping current skills to future requirements
48%
29%
23%
12%
Finance ACUMEN
Finance Acumen
coming soon
Power On-demand: Data Analysis
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