The first mandate for any CFO is to lead the finance function with an eye toward maintaining the financial health of the enterprise in volatile and uncertain times. In so doing, CFOs have long known that technology is reshaping the finance function. But many have underestimated the dramatic pace of change, which has challenged their business tools and the competencies of their workforce.
As such, the first role federal CFOs can embrace to succeed is that of the economic guardian, by leading a highly automated, data-driven finance organization to ensure adaptive, efficient, and resilient enterprise operations.
Strategies and tactics that can help federal CFOs develop more automated, data-driven finance organizations include increasing their technical maturity and flexibility; embracing automation for efficiency and quality; using analytics and AI to become more insight-driven; and reskilling their workforces to provide more complex analysis.
Increasing finance technical maturity and flexibility
Finance leaders display varying maturity in adopting the latest technology for financial functions. Today, 79 percent of federal CFOs assert that they are primarily using only basic technology in finance, such as portals, data visualization, and robotic process automation (RPA). However, the race to increase their technological maturity is on, with 91 percent of CFOs actively "retooling" finance with the latest technology to maintain their influence across the enterprise.
Foundational technologies like cloud infrastructure and analytics tools are especially valuable for finance. Cloud technology is valued by federal finance leaders for its ability to provide new depths of insights via data consolidation (33 percent), ensuring operational resilience (33 percent), and improving reporting accuracy (32 percent).
Top challenges for finance’s adoption of technology include technical errors in RPA scripting and algorithms (45 percent), skill gaps surrounding artificial intelligence (AI) and advanced analytics (40 percent), concerns about information security (31 percent), and difficulties in standardizing agency-wide processes around a "single version of the truth" (28 percent). In terms of the future, 64 percent agree that their business systems are not ready for a widespread shift to digital currencies in the global economy.
Accelerating finance’s move to the cloud is critical to realizing more adaptive operations. At the same time, it also facilitates data consolidation, allowing users to take advantage of more sophisticated analytics more readily. As a result, federal CFOs should consider this a top technology priority.
Automation races ahead
CFOs are aggressively implementing automation technologies throughout the finance function. In our 2018 survey, CFOs globally shared that 34 percent of traditional finance tasks were automated and predicted that 45 percent would be automated by 2021.
Instead, our 2020 global survey found that this number had surged to 60 percent, far exceeding their predictions.
Our federal audience enjoyed similar levels of automation, reporting that a majority of specified tasks — ranging from 54 percent (for transactions) to 60 percent (for accounting, budget planning, and reporting) — are now automated.
Embracing automation for efficiency and quality
Federal CFOs view automation of core financial tasks as critical to: ensuring operational resilience (38 percent), improving reporting accuracy (33 percent), enabling cost efficiencies (31 percent), and empowering non-finance employees to perform financial tasks (31 percent). Given the need to become more resilient and efficient, virtually all (97 percent) federal CFOs have prioritized investments in automation, including 57 percent that have already invested "to a great extent."
Gerard Badorrek, chief financial officer of the U.S. General Services Administration (GSA) and chair of the Federal RPA Community of Practice, made the case as follows: "If the government deployed RPA at scale and achieved only 20 hours of workload elimination per employee, the net capacity gained would be worth $3 billion — and that is only scratching the surface."
As just one example, the organization’s recent The State of Federal RPA report found that the Defense Logistics Agency had implemented 96 automations in FY20, contributing over 200,000 hours of annualized capacity. Looking more broadly, Accenture estimates that AI may boost federal productivity by up to $532 billion by 2028.
Within their enterprise risk management initiatives, federal finance leaders view automation and analytics as most valuable for improved or more consistent compliance (60 percent), better or faster risk detection (48 percent), and greater auditability (42 percent).
Using analytics and AI to become more insight-driven
CFOs also recognize the need to use data and analytics, including AI, to become more insight-driven. Ninety-three percent of federal respondents say that they currently don’t have metrics sophisticated enough to gauge with certainty how effectively their agency can withstand a protracted economic downturn or long-term volatility. With these types of unanticipated disruptions becoming more commonplace, agencies need the ability to dynamically assess any number of scenarios and contingencies.
In response, federal agencies are making real efforts to become more predictive and anticipatory. On a scale of one (not at all) to seven (to a significant extent), agencies rank themselves a five for shifting from a reporting to a predictive mindset (5.04) and integrating new analytics technologies (4.83). Overall, they suggest that their analytics are almost evenly split between retrospective reporting (47.2 percent) and forecasting (52.8 percent).
While this represents significant progress, it is also worth noting that just 8 percent of CFOs report moving to a predictive mindset and 9 percent report adopting new analytics technologies to "the greatest extent possible." And while almost all (95 percent) are using advanced or predictive analytics to "some extent," just 20 percent report using techniques like machine learning extensively to deliver more automated insights.
Federal CFOs report they are using advanced or predictive analytics to improve accuracy of reporting, (35 percent), identify new sources of value (34 percent) and break functional silos (34 percent). In contrast, just 20 percent view advanced or predictive analytics as a source of cost efficiencies. In terms of making the case with OMB and Capitol Hill, 75 percent say advanced analytics and visualization are moderately (47 percent) to highly (28 percent) valuable in securing annual budgets.
Top benefits that CFOs report from using machine learning systems include improving reporting accuracy (35 percent), enabling self-service applications (28 percent), generating new insights (27 percent), and reducing costs (27 percent).
More sophisticated AI applications are differentiated by their ability to solve problems using human-like skills and capabilities — for example, identifying potential fraud using seemingly disparate factors. Federal CFOs view this as a valuable technology for reducing operating costs (30 percent), meeting budget targets (30 percent), and eliminating operating silos (28 percent) by fusing data together in new ways.
According to a Federal News Network report, the Centers for Medicare & Medicaid Services (CMS) have used predictive analytics to prevent over $1 billion in attempted fraud over the past decade. This resulted in significant return-on-investment of up to 10:1. Ray Wedgeworth, the director of CMS’ data analysis and systems group, adds that "with machine learning techniques, we’re getting better and better and refining those models to make them as actionable as possible."
Federal executives report that operational (39 percent), risk (38 percent), and national statistics (35 percent) data provides the most value and insight. Conversely, they have made less effective use of unstructured data (27 percent) and financial market (26 percent) data in their analysis.
Financial professionals are using a variety of approaches to generate insight from their data but have room for growth in their adoption. Just 7 percent are focused to a "significant extent" on identifying data sets with the most potential value (average 5.13 on a one to seven scale); 4 percent are focused on combining financial and non-financial data to a similar extent (average 4.85); 7 percent on integrating external data for analysis (average 4.83); and 4 percent are measuring value across extended value chains to a significant extent (average 5.16).
Reskilling the finance workforce to provide more complex analyses
Ninety percent of federal financial leaders agree that the traditional finance positions in their organization will increasingly be replaced by more strategically focused, analytical roles. And 79 percent say that it is urgent that they introduce non-traditional skills like advanced analytics and business agility, value architecture and storytelling to their finance organizations.
Given this imperative, the federal CFO Council has launched a Shape the Workforce initiative focused on:
- The desire of most agency CFOs to shift their organizations’ responsibilities from routine, repeatable transaction processing to higher value efforts and business partnerships.
- The skills needed in decision-support for organizations, such as greater business knowledge, negotiation, communication, analytics and critical thinking.
- Ways to create a professional workforce with skills to match current and future needs.
- How changing technologies will impact the workforce.
However, this transition from managing transactions to optimizing performance will not occur overnight. The biggest barrier to finance employees taking on more strategic activities is limitations in their current skills and abilities, according to 75 percent of respondents in our survey. But the case for developing these skills is clear: 76 percent agree that their agency will benefit substantially when a greater number of finance professionals are empowered to take on more strategic tasks.
Federal CFOs are looking to develop and train their finance teams to take on more strategic, multidisciplinary and cross-functional roles. In order to foster more innovative and collaborative thinking, they are now prioritizing skills like storytelling (47 percent), scenario planning and horizon scanning (42 percent), and data exploration and analysis (39 percent) in their training and hiring. In contrast, more traditional skills like finance and accounting (29 percent) and general management (25 percent) are being promoted less.
Critical actions for federal CFOs:
- Build a foundation for a data-driven agency. Invest in platforms, integrate enterprise data, identify added sources of insight, and standardize governance to empower next generation analytics that will drive increased productivity, new value, and more proactive risk management. Optimize time to value and sustainment costs by building on the cloud’s extensibility and elasticity.
- Shift your team’s focus from reporting to forecasting and scenario planning. Take advantage of more advanced analytics, machine learning, and AI to provide both real-time streaming intelligence as well as answering ‘what if’ questions more effectively.
- Invest in your workforce with new skills and mindsets. Identify your agency’s "financial professional of the future" and provide the training and opportunities for your workforce to grow their skillsets into these roles. Champion the value of lifelong learning and the need for continuous reskilling.