4 Macro Factors Driving Higher CFO Investment in Fintech Solutions

4 Macro Factors Driving Higher CFO Investment in Fintech Solutions

For the past few years, the Finance function has been impacted by the same global macroeconomic events that have impacted everyone and redefined work as we know it. 

Meanwhile, the CFO role has become far more demanding. Finance leaders are now faced with a daunting (and growing) list of high expectations. They have no choice but to rethink how they approach their jobs.

One of the biggest expectations going forward? The CFOs of tomorrow are expected to roll with the punches. They should be nimble and flexible strategic advisors able to guide their organizations safely through market volatility, economic uncertainty, or even global black swan events like the pandemic.

We have broken these expectations down to the four biggest macroeconomic factors putting pressure on today’s CFOs, and how forward-thinking finance leaders are positioning their organizations for future success.

1. Navigating a potential rollercoaster recession

As 2022 winds down, the Federal Reserve’s rate hiking war still hasn’t put the brakes on soaring, decades-high inflation. But even if Chairman Powell pulls off an unlikely holiday miracle, there’s a host of other factors weighing down the U.S. and global economy. 

According to CFO’s 2022 Insights on Inflation, Workplace Challenges, and Future Plans report:

• 93% of finance leaders believe inflation will remain elevated next year
• 42% of CFOs think inflation will continue to impact the U.S. economy for two years
• 23% are more optimistic and think the economy will right itself within one year’s time

Overall, 75% of surveyed CFOs believe that navigating broad economic disruption will be 2023’s biggest challenge.

While this won’t be the first economic downturn most CFOs have had to navigate in their careers, that doesn’t change the fact that we’re still strapped into a rollercoaster ride with no end in sight that began nearly two years ago. 

And, as with every major economic downturn in the past century, everyone expects finance leaders to have all the right answers. 

Maybe that’s why, according to Bloomberg, “CFOs may have the toughest job in the C-suite.”

“The job just keeps getting harder…The role of the chief operating officer has been disappearing in recent years, so we’re seeing a lot of the responsibilities getting tacked onto the CFO’s job,” said James Stark, a consultant at executive search firm Egon Zehnder.

2. Modernizing supply chains while investing in ESG

The current downturn and potential recession CFOs are facing is also different from every other rollercoaster ride they’ve been on in one fundamental way. In the early 2000s and in 2008, for example, supply chains more or less worked the way they were supposed to.

But that hasn’t been the case since 2020. The pandemic crippled trade and stifled supply chains worldwide, leading to an endless snarl of delays, shortages, and logistical headaches that came with a hefty price tag.

While global supply chains are still better off than they were in 2020–2021, any organization that deals with physical goods and products is still grappling with soaring material, transportation, and warehousing costs, even as the labor market grows more cutthroat and competitive.

So it should come as no surprise that 46% of CFOs expect to invest far more in supply chain operations and logistics solutions—even more than they expect to allocate to Sales, Marketing, IT, and HR combined.

“Supply chain issues and inflation are causing two major issues: We can’t promise a delivery date for our products, and we can’t commit to a price, since our suppliers can’t commit to either of those,” said one respondent to a recent CFO.com survey. “Add to that the challenges of hiring and retaining staff, especially in the skilled trades, and we are struggling to provide the excellent customer service for which we are known.”

Speaking of supply chains, Environmental, Social, and Governance (ESG) is another major consideration for modern organizations going forward. After all, younger consumers care more than any previous generation about shopping with brands that align with their personal ethics and politics.

Unsurprisingly, 87% of surveyed CFOs plan to increase or maintain their ESG spending next year. “Leaders need to invest in ESG requirements while simultaneously preparing for a recession by balancing their investments in driving shareholder value,” explained one respondent.

Diversity, Equity, and Inclusion (DEI) policies are a major priority, with 85% of financial executive respondents planning to increase or maintain DEI spending, while 58% are committed to eliminating gender pay gaps in finance roles.

Simply put, tomorrow’s CFOs should think of ESG as the “new compliance.”

3. Adapting to disruptive remote and hybrid workplace trends

Another major consideration for finance leaders is the inevitable, inexorable shift toward remote and hybrid work that every organization must successfully manage if they want to retain and attract top talent. 

Coincidentally, even before the pandemic struck, a 2019 CFO Insights report from Deloitte revealed that the vast majority of CFOs had already planned on reducing spending and headcount:

• 77% of CFOs planned to reduce travel and expense (T&E)-related spending.
• 54% of CFOs expected to reduce or even freeze hiring.
• 38% of CFOs projected reduced headcounts.
• 32% of CFOs were looking for ways to delay or pause investments.
• 21% of CFOs wanted to reduce their leverage and debt load.

The stated goal of lower headcounts was corroborated in the recent CFO.com survey, which revealed that 17% of CFOs planned to cut back on new hiring in 2023. Yet at the same time, 72% of finance leaders admitted they were facing “critical hiring needs” in the second half of 2022.

In other words, organizations want to pay fewer people to do the same or more work, while admitting that they lack the talented hires to pull it off. Go figure.

According to the Bureau of Labor Statistics (BLS), financial manager roles will grow 17% by 2031, adding up to 123,100 new mid-level support positions below the role of CFO as the FP&A function becomes increasingly demanding, complex, and technology-centric.

And a recent Gartney survey revealed that digital acceleration was the overall top spending priority for CFOs next year, with a focus on “back office automation” solutions. Nearly 92% of surveyed CFOs also admitted they were actively searching for “data-driven” hires to manage modern FP&A tech stacks, with accounting and data analysis being the most sought-after skills.

Simply put, the global move toward cloud computing, agile financial planning/scenario modeling, and data visualization is here to stay.

4. Embracing digital transformation and data storytelling

When it comes down to it, modern CFOs are expected to speak the language of investors (i.e., grow revenues while cutting costs), while also being tech-savvy enough to lead an organization-wide digital transformation that empowers remote and hybrid workforces.

Yet nearly 22% of CFOs admitted to CFO.com that their organizations lacked tech integrations, while 31% stated they although they had a tech implementation roadmap in place, their organizations weren’t where they needed to be yet.

This is why 21st-century finance leaders are turning away from tried-and-true, dusty ledgers and spreadsheets and starting to pay far more attention to modern, cloud-based FP&A solutions that enable financial data storytelling and spend optimization.

Fintech has already streamlined financial reporting and made it easier than ever to gather, analyze, and present “the numbers.” In other words, CFOs can’t just get by as bean counters anymore—they’re expected to be strategic business advisors fluent in data-driven storytelling.

Put another way, “People hear statistics, but they feel stories,” said Brent Dykes, author of Effective Data Storytelling. It’s the job of every CFO to not only report on the numbers but to weave together complex scenario analyses, explain the risks behind likely “what if” situations, and help decision-makers understand the bigger financial picture in an actionable and insightful manner.   

The increased use of powerful and flexible scenario modeling, as well as easy-to-understand data visualizations, will serve as key data storytelling tools that help strategic CFOs identify and explain the most pertinent issues that can impact an organization—no matter what the future holds.

More is expected of CFOs than ever before

According to CFO.com, the most valuable skills for a modern CFO and finance leader are problem-solving and decision-making (68% of respondents agreed), strategic business-oriented thinking (67%), effective communication (53%), familiarity with technology (43%), and time management (34%).

The CFOs of the future are expected to be strategic business advisors and fintech enthusiasts with an advisory seat at the decision-making table. Their decisions, and the way they talk about and communicate financial findings, will impact every part of their organization for years to come.

Fortunately, modern fintech solutions can help CFOs stay ahead of expectations. Synario is a dynamic scenario modeling and business intelligence solution that any finance leader can use to plan for an uncertain and volatile future. 

Dynamic and collaborative FP&A tools, like visual financial models that can be toggled in real-time during presentations, can help finance teams quickly uncover the best way forward in a fraction of the time—while easily explaining a data-driven story to decision-makers.