Curated Insights from the Discussion on “The Modern Finance Leader: Navigating Risk In The Digital Era”
on September 25, 2019
This month, The Ortus Club gathered CFOs, senior finance leaders, and finance managers from prominent companies in Kuala Lumpur to discuss, share, and theorise on navigating financial risks to a company in today’s digital era: specifically how transformation affects finance functions and the new responsibilities of financial leaders.
The discussion was held once again at Grand Hyatt, Kuala Lumpur, on September 12th, 2019. Present at the discussion were the following:
Alan Lew Head, Group Treasury of Wah Seong Corporation
Aravinthan Tharmaindran, CFO of IPG Mediabrands
Audrey Ho, Director of Corporate Strategy of Prudential Malaysia
Azizan Abd Aziz, CFO of Bank Islam Malaysia Berhad
Azizul Rahman Mohd Basir, CEO of Kub Telekomunikasi
Billy Ooi Giap Hwa, Deputy Head of Finance of Wah Seong
Chee Shean Wong, Regional Finance Manager & Head of Customer Service Centralisation of Wilhelmsen Ships Service
Ganeswaran Nadason, CFO of Terengganu Industrial Mineral
James Qiu, CFO of iflix
Kit Seong Lee, CFO of AEON Credit Service
Lily Ling Leong Shuang, Senior Manager Corporate Finance of Sapura Energy Berhad
Milind Jadhav, CFO of Pacific Inter-link
Mirko Dierks, CFO of Zuellig Pharma
Mustafa Shafiq Razalli, Senior VP, Finance of Bursa Malaysia
Sandran Govindasamy, CFO of India International Bank
Shyam Gowrikumar, Head of Finance of Hengyuan Refining Company Berhad
Sim Siew Chan, Group Financial Controller of Air Asia
Stan Zabolotsky, CFO & COO of Ta Win Holdings
Tan Ming Yew, Group Financial Controller of AmBank Group
Wilson Soon, CFO of TNG Digital
Wong Sheng Taur, CFO of Muda Holdings
The Modern Finance Leader: Navigating Risk In The Digital Era
Finance faces a tremendous amount of responsibility: aside from answering to shareholders, compiling reports, and overseeing resources, they now face a new duty in risk management. Coupled with the importance and ever-shrinking timetable that companies face for digital finance transformation, how can people in finance juggle their usual duties while looking out for an uncertain future in the digital age?
Three questions guided the discussion:
How should risk management be organized to deliver effectively?
How can transformation be delivered through digitization and ecosystems?
How does the modern finance leader cope with the evolving risks in this modern age?
The following article is a summation of the answers to those three questions, as well as other key points raised during the discussion.
Inherent Risks In Finance Transformation
Risk is an ever-present factor in financing. While the companies in attendance already agreed that they’ve taken steps to mitigate a lot of potential risks when it comes to finance, they also acknowledged that there are certain risks that will never go away. “Laws and regulations are an inherent risk that every company needs to take,” said one of the CFOs. “Compliance is never a sure thing.”
This need to be able to address potential issues on the fly brought up the subject of digital finance transformation – the ability to move old systems of financing to a more technical platform. Most CFOs agreed that this was a process that all their companies needed to undergo, but the pace at which they do it varied greatly from industry to industry.
Admittedly, the changing of finance systems can be considered a risk for many in the finance department – but it’s one that can be mitigated by having the correct personnel and systems in place to smooth over the transition. Some CFOs confidently asserted that they have already seen small-scale successes in their own organisations, and are slowly rolling out bigger changes.
Finance transformation may be the future for finance, but many have expressed concern that the changes may not arrive fast or as well-thought out as they could be. Timelines were the biggest issue, with some saying that their projections keep pushing back, and others saying that the demand for newer systems was something they struggle to keep up with.
Is Finance Properly Equipped To Understand New Technologies And Systems?
Personnel and technical expertise is at the heart of risk management, especially when it comes to finance transformation. While the finance managers in attendance had a closer look at the changes required from the ground up, the room agreed that the responsibility to act ultimately fell on the CFO: “it’s really up to us CFOs to take the initiative here – to align with what the company needs. We need to check what other companies are doing and what the market requires.”
This urgency for initiative when it comes to transformation strategies highlight one of the many challenges financing faces for risk management: the capacity for them to both do their usual duties and watch out for the signs that point to disaster. “It’s important to not transform things for the sake of transforming them, or just change things because you can,” stressed one CFO. “We need to do this smartly or not at all.”
Most of the room agreed with the need for training and connection between systems and control. The negative consequences of leaving inexperienced (or worse, fraudulent) personnel in key financing positions was a danger that everyone acknowledged. “Finance people don’t have the luxury of making mistakes – there’s too much at stake,” said one manager.
And while most were confident in their systems now, there was an agreed uncertainty with the systems that they have in their efficiency as time goes on. “Transformation is essential because the market changes so fast,” shared one CFO. Companies no longer had the luxury of upscaling operation or reshuffling resources when needed – they need to better with what they have, and mitigate the risks to what they can acquire in the process.
The Unique Challenge Faced By Companies In Their Respective Industries
However, some companies were more vulnerable to risks than others. Bigger companies in more regulated industries have a consistent urgency to always be one step ahead in their risk management strategies. Smaller, newer, and digital-first companies had more time and flexibility to react to potential changes, in addition to having a smaller stake in case things go wrong.
“Cost is what makes these things complicated,” said one CFO. As companies shuffle their resources and financing in order to address or mitigate risks, other areas will inevitably be affected. “The size of the company, the industry we operate in, and the regulations that we follow – all of these are factors in our finance transformation strategies.”
Shareholders are also a unique challenge: “How can finance tell the board members that they need to invest more to mitigate this particular risk?” shares one manager. Communication, another reveals, is always going to be a potential risk as well: “We need to figure out how adaptable our stakeholders are before we do anything major.” CFOs will need to balance the demands of the company with the demands of its investors – a task that many in attendance do not find easy, but necessary.
While the digital age has offered plenty of value for finance to more effectively oversee operations, it’s also allowed them a bird’s-eye view of the inherent dangers of unmitigated risk. CFOs and finance departments will need to quickly adapt to the tools and expertise required to navigate these dangerous waters – and in doing so, ensure their company’s survival.