The benefits of data analytics are undisputed, and the CFO’s role in applying data analytics to enterprise-wide strategic decisions is growing. According to a recent CFO Magazine survey, however, CFOs still face major challenges in rolling out results-focused analytics initiatives.
While most of the more-than 200 respondents see data analytics as increasingly important in business decision-making, they claim a disconnect exists between the desire for advanced analytics and the ability to execute. The survey brought some surprising challenges to light.
Nearly half of the respondents claimed the finance function at their organization does not have an effective data analytics program in place. Many claim the problems with execution stem from data that is not rolled up into a “single version of the truth” and a lack of communication of the data results to business leaders.
The fact that advanced analytics are becoming “table stakes” in the modern corporation and the fact that the analytics function is increasingly the domain of the CFO creates a double challenge: First, the CFO must have the latest skills and capabilities for analytics, and second, he or she must deal with cultural resistance or resentment on the part of other department leaders who may feel the CFO is gaining too much control over their areas.
Though this resistance may be the biggest obstacle to analytics-driven decision-making, it can be overcome. While finance can and should lead the way, leaders across the enterprise must consider analytics initiatives not simply for the benefit of the finance department, but rather as corporate-wide initiatives that are supported by the finance department. It’s a subtle but important difference. Successful CFOs will help other departments see finance as offering vital analytics-driven support to their own missions rather than dictating the terms.
CFOs have long since surpassed the goal of simply analyzing past performance to guide decisions. Today’s predictive analytics implementations have two main goals: To intelligently inform decisions and mitigate risk. It’s the latter that can cause conflict with other departments. The role of the CFO has always been to determine and avoid risk, but avoiding risk can become a risk in itself if it creates a risk-averse culture that resists change.
In reality, the tasks of informing decisions and mitigating risk are highly dependent on one another. It’s up to the finance team to facilitate the discussion on risk during the decision-making process and build in more flexible, analytics-supported mechanisms that can shine a light on both potential risks and market opportunities that will help steer the enterprise toward its ideal future.
I discussed the future of predictive analytics in the enterprise and the finance department’s role in this evolving capability in the CFO Playbook on Strategy: How Finance Teams Can Apply Analytics to Support Strategic Decisions. Listen to the replay and contact us to discuss further.