Redwood Shores, Calif.—Dec 17, 2015
The Digital Finance Imperative, new global research from Chartered Global Management Accountant® (CGMA®), found that CFOs need to rethink how they measure the health of their corporations in the digital age. According to the study, while the majority of a corporation’s value derives from intangible assets such as customer sentiment and brand, few finance professionals surveyed say they can access the right data to measure and monitor these critical elements of their business—just 25% in the case of customer sentiment1.
“Choosing the right KPIs is hard," notes Richard Wong, Vice President of Finance, LinkedIn. "You need to make sure that the KPIs you choose are measurable, impact the business and that the underlying data is right. The worst thing you can do is not have any KPIs. In the beginning, your KPIs may be very simple, and may need to change or evolve over time, but at least you will have KPIs to focus on, to track progress.”
The report, sponsored by Oracle, argues that measuring the business value of such intangible assets through innovative KPIs is only going to grow in importance as digitally enabled business models proliferate. Intangible assets have increased in importance over the last several years and today account for 80% of the value of companies that make up the S&P 500 Index2. The respondents to the global survey believe the top value drivers for their businesses are customer satisfaction (76%), quality of business processes (64%) and customer relationships (63%).
However, the survey found that finance professionals are struggling to access and analyze data around intangible assets. For instance, only 25% of respondents are able to assemble and analyze data on customer sentiment and only 20% have access to data about the impact of their brand on their business. Only a third of all respondents say they can measure the quality of their business process3.
“Finance is running the risk of sitting on the sidelines while more digitally-savvy lines of business deliver the insights that management needs to differentiate and grow,” notes Rondy Ng, Senior Vice President, Oracle Applications Development. “By unlocking the value of data using a modern and complete cloud-based ERP and performance management system, finance can seize the unique opportunity to become the new digital guidance system for the enterprise.”
When asked about the extent to which finance has been realigned to support new value drivers, only 15% of respondents reported that finance in their organization has been fully engaged with regards to ‘providing non-financial measures of progress towards strategic intent’ or ‘the identification of the intangibles to be measured and managed to ensure long term success.’
Dr. Noel Tagoe, FCMA, CGMA, Executive Director of Education at CIMA and one of the report’s authors, commented, “As digitization makes it more difficult for businesses to differentiate and earn a premium, the quality of decision making has become essential to success, and finance can take the lead in ensuring this quality. It has the enterprise-wide overview and skill required to work with diverse internal stakeholders, ensuring that the business assembles, analyzes, and applies data to improve performance.”
The study features insights from 744 executives in 34 countries. Respondents include executives from world-leading companies including LinkedIn, Walmart eCommerce, Shell, and Southwest Airlines.
1 Calculated as the percentage of respondents selecting high scores—4 or 5—less the percentage selecting low scores—1 or 2
2 Ocean Tomo, as cited in The Wall Street Journal, 2014
3 All calculated as the percentage of respondents selecting high scores—4 or 5—less the percentage selecting low scores—1 or 2
CIMA and AICPA conducted a global survey, sponsored by Oracle, of senior finance professionals and other managers across different industries. In addition, CIMA and AICPA conducted interviews with senior finance professionals across the globe to inform its interpretation of the survey results.
The survey was answered by 744 respondents in 34 countries: 37 percent were in EMEA (Europe, Middle East & Africa) countries excluding the UK, 27 percent in the USA or Canada, 14 percent were in BRIC countries (Brazil, Russia, India, China); 12 percent in the UK, 7 percent in APAC (Asia-Pacific) countries and 3 percent in Latin America excluding Brazil.
Most respondents were in senior finance roles but 5 percent were COOs and 21 percent were in other senior roles.
Respondents were from a good spread of businesses by size with approximately 20 percent being from each of the following turnover bands: $100m-$250m (20 percent), $250m-$500m (22 percent), $500-$1bn (18 percent), $1bn-$5bn (21 percent) and $5bn+ (19 percent).
Two of the world’s most prestigious accounting bodies, AICPA and CIMA, have formed a joint-venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognizes the most talented and committed management accountants with the discipline and skill to drive strong business performance. Currently, more than 150,000 management accountants worldwide hold the CGMA designation.
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with more than 227,000 members and students operating in 179 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations.
The American Institute of CPAs (AICPA) is the world’s largest member association representing the accounting profession, with more than 412,000 members in 144 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.
The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants (CIMA), it has established the Chartered Global Management Accountant (CGMA) designation, which sets a new standard for global recognition of management accounting.
The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.
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