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Although the finance function has seen a significant level of turmoil and gone through massive change over the past decade, the fundamental role of finance has not changed.

Finance still needs to provide insight to the rest of the organisation, ensure effective control and risk management and drive its own and the organisation’s efficiency.

Globalisation and financial liberalisation 

Finance is shaped as much by the global business environment as it is by internal factors. Finance must respond if it is to support these business changes.

Globalisation and accompanying financial liberalisation continue to drive the evolution of financial markets.

Investors are increasingly active in the running and governance of businesses and they are increasingly intolerant of organisations that fail to deliver on their promises.

Risk management and the accompanying controls environment have proved an unexpected burden on organisations over the past ten years. Using technology and culture management, they are incorporating it into “business as usual”.

Over the past 20 years, technology has been the single biggest change agent in the transformation of business and the finance function.

Wage inflation in emerging economies 

Technology has enabled the rise of globalisation, supporting 24/7 management from any location and enabling businesses to move production and functional activities to any time zone.

At the same time, inevitable wage inflation in emerging economies effectively erodes the historic labour arbitrage that organisations traditionally gained from off-shoring.

To maintain cost efficiencies, organisations in developed countries have to identify new opportunities to standardise and automate processes – including mid-office processes - outsourced to developing economies.

As businesses move to the remaining truly low-cost economies, the risks increase. In the future, it will be technology and genuine process harmonisation, not people, which drive cost savings.

Convergence of data requirements 

Further synergies will be gained by leveraging mid-office processing and standardising and automating the controls environment.

The most successful organisations will be those which develop systems to support standard ways of working with their global customers and suppliers.

Constantly evolving internal and external reporting needs will require businesses to constantly review and update their underpinning data sets and capture processes.

Competing in the same markets, providing similar products and services to similar customers with similar ways of working, businesses will inevitably lean towards leading practices to create efficient and effective back and mid-office systems.

Ultimately this will lead to a convergence of data requirements across organisations. Markets and regulators will welcome this increased standardisation too. IFRS is, for instance, driving increased standardisation of published accounts.

Knee-jerk reactions from investors 

For investors and regulators alike, common operating processes, combined with common data sets, will significantly increase transparency of public information and enable greater understanding of business performance.

The past ten years have brought significant changes to the finance function, not least the burden of increased regulation.

Yet, despite the benefits of better governance, finance directors worry about knee-jerk reactions from investors if monthly, weekly or even daily reporting were to become the norm, rather than quarterly reports.

Although offshoring has had the single biggest influence on finance over the past ten years, ‘lifting and shifting’ system and process capabilities has limited the success of outsourcing.

The ultimate challenge is to standardise processes and systems across the businesses and geographies. Governance needs to be built into the organisation before organisations can have an efficient finance function.

Training ground 

While offshoring processes provide significant cost savings to the business, however, these savings increase by a further 25 percent if there is standardisation, which is also cheaper to deliver once in an offshore environment.

The role of the finance professional has grown in complexity. In a homogeneous world the only way that finance can create competitive advantage is by developing the one asset that other organisations cannot duplicate – its people.

Automation may have replaced many labour-intensive and low-value activities yet people still occupy a significant place within the finance function.

Outsourcing, off-shoring and increased automation have limited the traditional training ground of finance.

Too few junior business partners are coming up through the finance ranks via a stint in general accounting or general ledger work before venturing into the wider commercial field.

As the training ground of the finance professional is increasingly outsourced, there is greater need to share knowledge and to pass it down the line to more junior finance staff.

Key skills for finance staff will be the ability to work with remote people and increased analytical and commercial awareness.