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The finance function post-COVID

Author: ICAEW Insights

Published: 04 Mar 2022

The pandemic gave CFOs confidence in their ability to work in more geographically diverse and virtual ways, which will bring permanent and much-welcomed change to the finance function.

Few areas of business escaped the chaos of the pandemic – and the finance function was no exception. The first national lockdown saw finance functions rapidly shift operations to remote working, with cash management and cash forecasting prioritised to ensure smooth operations in a time of crisis. 

Now, with business confidence on the up and investment returning, CFOs are taking stock of the changes made to the finance function in a time of emergency, looking at whether those reforms can be retained and how efficiencies can be increased as the COVID-19 restrictions end.

What is clear is that the speed of transformation is unlikely to abate. “It is unlikely that any finance function will wholly go back to its former ways of working,” says Simon Hunt, Audit Partner and COO of PwC’s UK audit business. “Changes for individual financial functions depend on their starting point, their journey through the pandemic and where the wider organisation is in terms of its position post-pandemic. There's going to be a variety of different solutions and models that will evolve.”

Although considered slow adopters of newer technologies compared with other professions, finance teams were already stepping up the adoption of digital technology before the pandemic. The difference now is that digital transformation is no longer an option, but a necessity; the pandemic has accelerated the digital journey and given finance leaders confidence that the model can work.

“The pandemic shone a light on how reliant some organisations are on manual processes, as well as on key people in finance functions,” says Ian McBane, a partner at BDO.

While remote working became the default during the pandemic, the lifting of restrictions has seen many organisations – which adapted impressively quickly – offer finance teams remote or hybrid working options. To ensure long-term success in such ways of working, technology is critical – as well as people with the right skills, such as analysis and digital capabilities. 

PwC’s COVID-19 Impact Survey found that greater use of collaborative technologies will remain, such as the video conferencing and cloud-based software tools that enabled finance teams to respond quickly to increased demands for analytic support around scenario planning, cash-flow forecasting and supply chain management during the pandemic.

In the past few decades, many finance functions have shifted to a hub model, with more international businesses moving to more geographically dispersed models, including offshoring, for cost-efficiency reasons. CFOs will currently be questioning whether those previous models are fit for purpose now, with the pros and cons of different models being more sharply articulated by the pandemic.

“There is the resilience question,” Hunt says. “But you’ve also got a concentration question, which perhaps has been highlighted by pandemic risk. That can be dealt with by building resilience – making sure your teams can work in a variety of different ways. Or you can look at whether the function is too concentrated.”

He says that the pandemic has given finance leaders confidence in their ability to work in more geographically diverse and virtual ways – but that will depend on the organisation’s starting point. 

Labour shortages also mean some form of flexible working is likely to remain for the near future. CFOs rate labour shortages as the greatest risk to business, according to Deloitte’s UK CFO survey Q4 2021. Finance functions are also evolving and adapting to the new climate.

Although almost half of the CFOs surveyed by Deloitte (46%) said that their businesses have faced significant or severe recruitment difficulties in the three months to December 2021, things are expected to improve in 2022. For now, though, employees hold all the cards, so business leaders need to retain some level of workplace flexibility.

Transformation, both digital and in terms of upskilling, will continue to flourish in the finance function post-COVID because finance leaders are focused on expansion, too, with a record 37% rating an increase in capital investment as a strong priority for their business in the next 12 months. An overwhelming majority of CFOs (94%) expect to invest more in digital technology, such as software, IT and the application of AI, with 77% investing in workforce skills, such as retraining and upskilling, over the next three years, compared with the years before the pandemic. Recruiting and upskilling for digital, cyber and analytical skills is also an aspect that is here to stay.

“More and more is landing on the CFO’s desk that is about reskilling and repositioning finance roles – whether it’s driving responsibility for people or culture, breaking down silos or environmental, social and governance. I don’t necessarily see finance teams shrinking, but people are doing more strategic and analytical work,” BDO’s McBane says.

What is benefiting the finance function and CFOs right now is the acknowledgment of the value of the function and how crucial it was in keeping businesses afloat during the pandemic. That will serve CFOs well as they adjust, adapt and invest in their finance teams.

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