Research: Digital Transformation is the Top Priority For Corporate Finance in 2022, But Obstacles, Including Inflation, Growing Productivity and Efficiency Gaps, May Limit Finance’s Ability to Succeed
- The Hackett Group’s Finance Key Issues Research Identifies Priorities and Challenges for 2022
MIAMI & LONDON, May 5, 2022 – Digital transformation is now the top priority for finance in 2022, according to new Finance Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT). But finance executives’ confidence in their ability to meet business expectations is low, in part due to technology and process complexity and skills deficits. Rising finance workload combined with declining budgets and headcount will also create productivity and efficiency gaps that are likely to limit the ability of finance to meet its 2022 objectives.
The full research, “The Finance Agenda: 2022 Key Issues,” is available on a complimentary basis, with registration, from The Hackett Group® at this link: http://go.poweredbyhackett.com/22finkey2201sm.
Key findings from the research include:
Inflation a Major Concern – With inflation accelerating to 7.9% in February 2022 and projected to persist into the foreseeable future, many companies were caught by surprise and are now scrambling to understand the impact on their business, and develop responses to manage the risk. In The Hackett Group’s Finance Key Issues Study, conducted in Q4 of 2021, 31% of respondents cited inflation as a major concern and another 53% cited it as a moderate concern. The current inflationary environment was triggered by a confluence of factors that can be traced back to the pandemic: pent up demand, supply chain disruption, labor market disruption, loose monetary policy and fiscal stimulus. The unfolding conflict in Ukraine has added additional uncertainty to business conditions and could accelerate inflation through higher energy and commodity prices. Organizations that are agile and well-equipped to respond to the disruption can turn their advantage into real economic gain. That will require good analysis and coordination.
Digital Transformation Now the Top Priority – Digital transformation has now become finance’s top priority, with many of the function’s top priorities dependent on the ability to accelerate it. But executives’ confidence in the ability to meet business expectations is low, with specific cited challenges that include technology and process complexity, skills deficiencies, and organizational resistance to change. Finance executives are placing emphasis on improving analytical, modeling and reporting capabilities with 86% of organizations citing this as a critical or high priority. Additionally, finance must be prepared to invest in technologies, such as cloud, robotic process automation, analytics and others to reduce cost and create new capabilities. About two-thirds of all finance organizations are also expanding process automation, while over one-half have an initiative to expand the use of self-service tools.
Budgets and Staffing Continue to Tighten – Finance organizations face continued emphasis on greater cost efficiency in 2022, with workload expected to increase by nearly 5% while budgets and head counts are declining by 0.7% and 0.6%, respectively, the study found. Finance is counting on technology and service delivery model improvements, including centers of excellence and global business services, to bridge the productivity and efficiency gaps. Overall, cost reduction moved down the priority list by four spots to sixth place in 2022, as companies have navigated the pandemic and extracted savings. But it remains a major priority, and may rebound in importance if inflation continues to accelerate in 2022.
Three Critical Areas for Development – In three of the top 10 priority areas, there are significant gaps between their importance and finance’s ability to meet expectations. The three priorities with the largest gaps are: accelerating finance digital transformation; up skilling and retaining finance talent in the face of the “Great Resignation”; and enabling finance agility by fostering a nimble mindset.
Talent/Upskilling on the Rise – In the face of the “Great Resignation,” finance organizations are thinking critically about building the next-generation workforce. If finance is to achieve its goal of becoming a more effective strategic advisor to the business, it must acquire or develop new skills in areas, such as teamwork and collaboration, and evolve business and industry acumen. The goal of aligning skills and talent with evolving business needs moved up several spots in the 2022 Finance Key Issues Study. Nearly half of all companies have plans to acquire new skills and talent – significantly more than other planned workforce initiatives. Given the challenges that companies are experiencing in finding candidates with the right skills and at the right cost, there will also be a premium on retaining existing employees. Pandemic-triggered disruption and accelerated digital transformation are also sparking a reevaluation of the finance operating model, with 30% of the finance workforce expected to work from home by the end of 2022, and another 52% relying on a hybrid arrangement.
Strengthening Business Partnering – Acting as a strategic advisor to the business is now the number two priority for finance, requiring an emphasis on business partnering, the research found. Nearly 60% of finance organizations have a 2022 initiative designed to improve the interaction model between finance and business stakeholders, making it one of the most prevalent finance initiatives of any type. Between one-third and one-half of finance organizations also have initiatives aimed at bolstering individual business partnering capabilities, and nearly one-third plan to dedicate full-time staff to business partnering. The focus on business partnering will be critical to achieving other finance priorities, including optimizing working capital, and enhancing control and compliance capabilities. It is also critical for managing inflation risk.
ESG Accounting a Growing Concern – The environmental, social and governance (ESG) agenda is rapidly becoming a strategic priority for many companies, and this has far-reaching implications for finance organizations. The research found that while more than 60% rank the need to develop and support ESG strategy as important, only 32% rate their ability to meet business needs in this area as “high.” As reporting and disclosure standards continue to emerge, finance must evaluate how prepared it is to support future requirements from a people, process and technology perspective. Finance also has an important role to play in helping their businesses understand the financial implications associated with ESG-related programs and initiatives. Finance organizations must make their expertise in financial planning and analysis (FP&A), forecasting, compliance, and statutory and management reporting available to the organization in order to support the ESG strategy and execution of operational plans.
The Hackett Group’s 2022 Key Issues research is based on results gathered from more than 250 executives in IT, finance, HR, procurement, supply chain, and global business services at a global set of midsized and large enterprises.
About The Hackett Group, Inc.
The Hackett Group® (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking firm to global companies, offering digital transformation including implementation of leading enterprise cloud applications, workflow automation and analytics that enable Digital World Class™ performance.
Drawing from our unparalleled IP from nearly 20,000 benchmark studies with the world’s leading businesses – including 97% of the Dow Jones Industrials, 94% of the Fortune 100, 70% of the DAX 30 and 51% of the FTSE 100 – captured through our leading benchmarking platform, Quantum Leap®, and our Digital Transformation Platform (DTP), we accelerate best-practice implementations.
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