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Preparing for the Next Catastrophe: We’re Not Thinking Close to Big Enough

Preparing for the Next Catastrophe: We’re Not Thinking Close to Big Enough

By Lloyd Howell, Jr., Chief Financial Officer at Booz Allen Hamilton.

Why Finance Organizations Must Ensure A Digital Future

As we enter a second year of living daily with the impacts of Covid, it’s been natural to think back about the enormity of unexpected change resulting just from the virus, aside from overwhelming cultural and political upheaval. Looking at pictures and articles from the first months of 2020 and earlier, it’s startling to contemplate what lay ahead at that time. There may have been hints about what was coming, but ultimately few of us had a clue.

The monumental disruption in the form of a pandemic has caused all business leaders to look at their organizations differently, starting with their workforce and the welfare of employees. But, equally important, it’s changed our understanding of what constitutes disruption. A merger, financial crisis, leadership issue or natural calamities all have been known potential disruptors within our crisis preparation. We’ve now learned that we’re not thinking close to big enough; we realize there are dynamics that happening in the world that can upend an institution in previously unthinkable ways, challenging resiliency, contingency planning, financial strength and other foundational components. Combine that with the rapidly escalating intensity of competition, and we have no choice but to take our planning and resiliency investments to new levels.

As the leader of a corporate finance organization, my focus has now turned to a new urgent priority to enhance my firm’s ability to withstand the unthinkable: develop a clear path to a digital future that will generate more true predictive analysis, better quality data and better policy essential for the highest levels of resilience. We know that artificial intelligence, enhanced modeling, automation and richer analysis can be transformative to business operations. In a fundamentally disrupted environment, that information can be critical to navigating uncertainty with the best possible insight. To achieve this, companies must commit to invest seriously in technology and transformation, integrate technology experts into a finance organization to work alongside those with financial knowledge and insight, and commit to an equal investment in change management.

The quest for decision-ready data has been a path in corporate finance for years but there have been obstacles to getting there. In times when the cost of overhead organizations is being constantly questioned, senior leaders can be reluctant to invest the money and time and endure a sometimes painful period of change management to achieve benefits and efficiencies that are not always quantifiable well in advance. The last year, which demanded constant turn-on-a-dime decision making, should serve as fair warning that a commitment to enhanced technology can’t wait. My own company, in two weeks in March 2020, made a decision to repurpose $100 million in existing budget to guarantee all jobs for the first three months of the pandemic and initiate several other support programs, eliminating an enormous stress point for employees and allowing them to focus on serving clients without that worry. It took massive round-the-clock analysis to support this decision, but we know next time we may not have even two weeks.

Beyond the investment in actual technology solutions, it’s essential that finance organizations commit to integrate technology experts into their teams. An expert in technologies like Smartsheet or Tableau is not going to replace someone with deep experience in an area like auditing or tax, but that person can become an essential peer. You’ve got to play to people’s inherent competencies, and over time the integration and interaction of skillsets drives education, knowledge and apprenticeships that get you to nirvana. We’re seeing in real time the important impact of skillset diversity: we transferred into corporate finance a person who previously provided tech services to our government clients to advance an internal audit IT strategy performing compliance analytics, which has helped the business identify and mitigate operational risk. We’ve seen similar advances with tech staff who implemented automation to identify improper expenses or duplicate payments to vendors, and this is just the first wave of an advancing tide of improved capabilities.

And, finally, success is dependent on committing to the people whose work integrates with the technology, people who are naturally going to worry about job security, skills deficits and the complexities of change. Leaders must not just explain but demonstrate the potential advantages of moving from manual tasks to higher level analytical work. Technology can enhance work life balance and flexibility, repurpose dollars to invest in training and education, and generate greater career mobility and greater satisfaction working in a more strategic realm. But with each advance, leaders first must first deliver those actual benefits to each team to create momentum for greater embracement of change. Seeing is believing.

Importantly, the impact of a strong progression toward a digital future goes well beyond internal benefits to a company. As external auditors understand and become confident in the capabilities of financial technology to reduce the potential for human error, their own work becomes more efficient with the capability to conduct their own analytics to help identify misstatements or unintentional or even intentional errors. Investors, too, want to see the benefits of removing costs while enhancing capabilities. When working capital management is stronger and talent is more lean in back-end operations and more advanced in the analytical reporting, you’re providing better information for an investor to understand the company’s current and future operations.

The experience we’ve been living through for the last year will trigger many changes for companies – a rethinking of workplace flexibility, different benefits, changes in real estate usage, further investments in remote technology. But perhaps the greatest lesson of all is we now know things can get worse than ever imagined, and how fast it can happen. We can’t let that lesson go to waste: the digital toolkit to manage a more resilient business never has been more essential.

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