How CFOs can Modernize Finance to Stay Agile and Competitive

Somna Trehan, Senior Director, Business Technology Strategy, Oracle Financial Services

The banking industry has seen incremental impact due to the pandemic. While some of this effect may be short-lived, certain changes for banks are of lasting nature. Banks not only deal with traditional challenges of low efficiency, squeezed margins, and legacy systems, but they also face new and emerging issues including market disruptions caused by FinTech and BigTech, changing customer expectations, and going regulations. According to McKinsey, 51% of banks globally operate with a return on equity (ROE) below cost of equity (COE), and 17% are below COE by more than four percentage points. Clearly, several banks still struggle to create stakeholder value for their customers, employees, and shareholders.

Moving finance forward amid the bumpy road

As banks strive to perform better in a dynamic and uncertain business environment, it’s imperative that they have better control and insight of their own data. Deeper analytics and a holistic view of data are crucial to drive operational efficiency, improve risk assessment, and channel resources towards areas of growth. It is critical for the banks’ finance operations to access the data and use it to generate insights and decision-making to steer the organization in the right direction.

Statements from bank CFO's on their most common finance challenges

We have a lot of data but lack timely and accurate insights for decision making.
We are dealing with multiple tools and sources to pull together our reports—this slows us down.
With ever-increasing transaction volume, we require better analytics to make inform decisions and stay competitive.

For banks and financial institutions, the average annual financial close period is 125 days. This is a huge effort across monthly, quarterly, and annual close cycles, with processes and systems that have low efficiency and high error rates. Finance teams end up spending large chunks of their productive time to generate reports and reconcile outputs from multiple and disparate data sources.

Bank leaders require accurate and current data analytics at both ends of the spectrum:

  • Granular details: Product, customer, or branch level profitability is needed to address causes of cost and revenue leakage.
  • Aggregate, consolidated view: Visualize cost-to-income ratios, capital adequacy indicators, COE, ROE, etc., to track and report; analyze and forecast critical business aspects like interest rates, product pricing, asset-liability management, etc.

A dynamic and everchanging business environment adds to the complexity of gathering and reporting data. To elevate the finance function and emerge as a strategic business partner, modern capabilities are needed to make better use of time spent on data and reporting. Per The Hackett Group, employees of ‘World Class Finance Organizations’ spend 17% more time analyzing data versus gathering data.

According to the 2022 Finance Agenda report from The Hackett Group, financial institutions are looking to increase technology spend by 7% despite a shrinking budget.

Different approach, same end goal

Finance modernization may differ from one bank to another due to their current level of maturity and strategic priorities. Some banks may initiate a complete transformation while others might take a modular approach to incrementally modernize an area at a time. Technology solutions with advanced analytics, automation, data management, and governance can help banks modernize. Technology that is integrated across the stack, including a centralized data model, will position banks to be agile and ready to face any new requirements.

Oracle Finance Modernization offers the advantage of a proven set of solutions that have been integrated to drive innovation and transformation including Cloud ERP, Cloud Infrastructure, Data Foundation, and Profitability Management among others. With Oracle Finance Modernization, banks can dramatically increase efficiency and reduce efforts to run the finance function, including the following:

  • Improved compliance and risk management using high data quality, accuracy, and financial integrity
  • Accelerated financial close and connected reporting for higher operational efficiency
  • Agile planning and forecasting with advanced analytics and data management tools for continuous planning
  • 360-degree view of profitability adjusted for risk with insight to drivers and KPIs across multiple dimensions including product, channel, geography, and individual customer
  • Cloud flexibility and security helps to standardize operations across the enterprise, ensure data security and reliability to facilitate growth and innovation in an everchanging market
reduction in risk adjusted performance reporting time each month
reduction in processing daily finance and treasury calculations
increase in staff productivity
reduction in financial decision support cost

With Oracle, banks can embark on their finance modernization journey with trust and benefit from the vast experiences Oracle experts have gathered in working with banks to build the strategic finance function of the future.