Reimagining transformation in an era of economic and political turbulence

2024 is shaping up to be a challenging year for CFOs. For starters, the global economic outlook remains highly uncertain. The International Monetary Fund has predicted that global growth will slow to 2.9%, down from 3% in 2023 and 3.5% in 2022.

Additionally, while inflationary threats persist, central banks have indicated their intent to maintain interest rates at their current levels, increasing costs for companies needing to re-finance.

Also, ongoing geopolitical disruptions continue to threaten the stability of supply chains. Furthermore, another closely watched US election is expected to take place in November 2024, potentially creating further market uncertainty.

Balancing short-term pressures with long-term priorities

Against this challenging economic and political backdrop, CFOs are having to reimagine and re-evaluate the vision and strategy for their functions. The recent Global EY DNA of the CFO Report found that senior finance leaders face complex and contradictory demands as they strive to deliver long-term value and find short-term cost efficiencies while reinventing the finance function.

More than three-quarters (78%) of respondents surveyed for the research said that “effectively balancing trade-offs between short-term and long-term priorities is an important challenge for finance leaders”.

Given the difficult context, some CFOs might feel inclined to put their finance transformation plans on hold during 2024. But this is a risk since high-performing finance teams can help to accelerate the growth and long-term sustainability of businesses.

Also, the research found that only 16% of finance functions are currently delivering best-in-class performance, leaving plenty of scope for improvement. So, with finance transformation still an important agenda item, what are the expected key trends for 2024 and beyond? Here are three to watch out for:

1. A pragmatic approach to transformation

Due to uncertain economic conditions, CFOs may be wary of launching wholesale transformation initiatives during 2024 unless there is a powerful business case for them. Instead, they are likely to take a considered and targeted approach to finance transformation, drawing on lessons they’ve learned in the past on how to best to work with technology.

This approach would involve CFOs making strategic investments into the fundamental technologies and infrastructure that will support their organizations to successfully navigate short-term market turbulence while pursuing long-term growth.

Our EY Finance Consulting teams have observed that to keep costs under control, CFOs are likely to capitalize on standard, out-of-the box functionality instead of developing highly configured and customized technology, which can be expensive and difficult to maintain, upgrade and refresh.

Nevertheless, while pragmatism reigns, CFOs must still paint a clear vision of what they want to achieve through their transformation if they are to engage their people, deliver more successful transformation outcomes, and generally support their organization to prosper amid ongoing disruption and uncertainty.

2. Artificial intelligence as an enabler of finance

The potential of artificial intelligence (AI) to transform and enable the finance function is huge. It’s still early days in the AI revolution, however, so most organizations are likely to view 2024 as an opportunity to investigate the different use cases for the technologies and build business cases that support investment, including for use within finance.

While there is significant interest in the capacity of generative AI (GenAI) to produce the monthly management reporting narrative, a great deal of value can still be unlocked from more traditional AI systems through enhanced data strategy and data governance.

A major challenge for CFOs is identifying the transformational opportunities from deploying AI in finance. Too often, the focus is on solving current-state problems, rather than supporting the finance function to bring greater value to the organization through AI-enabled ways of working.

Taking a longer-term perspective, the big transformation trend within finance is likely to be the collective deployment of AI technologies to create an autonomous and touchless finance processes.

Rather than centering the AI conversation on cost reduction and efficiency, progressive CFOs should aim to free up the time of their finance professionals to focus on their business partnering roles.

By taking away their most mundane and routine tasks, AI can help finance teams to concentrate on delivering forward-looking insights that enable the organization to create value. For example, by connecting the dots across the organization’s diverse data sets, finance can help the business to optimize its pricing and inventory decisions and more effectively capture market opportunities.

3. CFOs hone their skills as empathetic leaders

 Getting the human element right is fundamental to the success of every business transformation – and finance is no exception. This point was underlined by joint research between EY and the University of Oxford’s Saïd Business School.

Notably, the research found that just 36% of finance teams believed that their leaders understood the team’s needs and views while only 31% felt listened to. These findings help to explain why at least three-quarters of CFOs surveyed for the research had experienced at least one underperforming transformation in the last five years.

To be effective leaders of transformation in 2024, CFOs must hone some key personal skills. For example, by enhancing their storytelling skills to bring to life complex financial information so that it is more easily understood by non-financial audiences.

Storytelling is an important component of the communication skills that are needed to help CFOs paint a compelling picture of the vision behind transformation and to engage internal and external stakeholders.

Another key skill to develop is an empathetic and authentic leadership style. A study by EY US Consulting found that the majority of employees (86%) believe that empathetic leadership boosts morale while 87% say empathy is essential to fostering an inclusive environment.

The experience of our EY Finance Consulting teams is that the success or failure of a transformation tends to be rooted in human emotions. As a result, CFOs must be able to empathize with the needs, wants and concerns of their teams if they are to inspire positive change.

Successful transformation takes place in an environment of trust and psychological safety. So, in 2024 and beyond, the most forward-looking CFOs will likely focus on engaging with people at every level of their team, from their most senior leaders through to middle management and junior professionals.

For example, they might use digital tools that give their people anonymized “safe places” to voice their opinions. They will also work with CHROs and other members of the C-suite to foster a culture of collaboration and innovation – one that embraces a diversity of perspectives and where people feel comfortable experimenting without fear of blame or reprisals.

2024 and beyond

While 2024 is likely to bring short-term turbulence that may lead CFOs to adjust their transformation strategies, the long-term imperative remains unchanged. CFOs should develop high-performing finance functions that help to drive their company’s growth while fulfilling their traditional remit.

These finance functions should be able to deploy cutting-edge technology to improve efficiency and reduce costs, but also deliver critical insights to the business through timely and robust forecasting and reporting.

High-performing finance functions are expected to also play a pivotal role in supporting organizations’ overall adoption of AI, including GenAI. The real breakthroughs in innovation will happen when companies begin to completely reimagine what their businesses would look like using the new technologies.

As a result, high-performing finance functions will partner with their businesses to decide when, where and how to make the critical investments in AI that will transform their organizations and spur them on to even greater success in future.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.