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Why CFOs should lead digital transformation

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Matthias Thurner

By Matthias Thurner

Digital transformation – using new technologies to drive significant business improvements – is all the rage. Organisations in every country and sector are working out how best to leverage mobile, AI, analytics and the Cloud to improve customer service, increase profitability, and shorten time to market.

Yet a lot of digital transformation initiatives end up running in the sand. A survey last year by Wipro Digital showed that many executives believe they are on-track to miss at least half of their digital strategic objectives.

Many things can bog down corporate change initiatives, but not having one office with insight into all the elements under review can be fatal. Responsibility for executing digital transformation initiatives usually falls to the CIO or COO – sometimes to the CMO. But only one C-suite executive sits at the intersection of strategy, technology, operations, and financial management: the CFO.

Today’s CFO is the organisation’s true digital native

In the past finance was an administrative function. Accounting focused on cash flow, capturing numbers, and reporting to stakeholders. Interactions with other departments were limited. In today’s networked and collaborative world, finance increasingly works in an advisory capacity to solve problems and set objectives across the enterprise.

CEOs expect CFOs to add strategic value, using their view of cost and revenue drivers to protect margin while helping grow the organization. They are measured on their ability to measure results and contribute to actualising company strategy.

To do that a growing number of CFOsnow collect and analyse shedloads of business data from across the organisation and use it for decision support, forecasting & budgeting. As this is impossible without a proper digital strategy and software tools this makes them the C-suite’s true digital natives. It only makes sense that they assume a leadership role in mapping the issues that boards want technologies like big data and AI to address, and in shaping their organisations’ response to emerging business models for the digitally-oriented economy.

Seeing beyond the numbers

Another factor that can slow down digital transformation projects is undue focus on operationally-driven strategies that should be financially-driven. When OPEX dominates project decision making, there can be a built-in hesitation to act and avoid overspend. With the CFO in the driver’s seat, project mindset can actually shift away from reductive and short-term thinking towards how to deliver ROI, value, revenue benefits and sustainable cost-effectiveness.

CFOs can determine the cost-effectiveness and added value that digital processes and technology can bring to the wider organisation.

How to measure overall business success of the transformation initiative? What to aim for in terms of project ROI?  What are reasonable objectives for increased revenues, reduced operating costs and expanded gross margin? Only the CFO is in a position to answer these core questions and measure the true financial impact of digital transformation on the organisation.

With systems like CPM and predictive analytics becoming more established in the office of finance, CFOs increasingly have the tools and expertise to conduct detailed cost-benefit analysis and develop rational objectives based on accurate, real-time measurements. Those that have embraced new finance technologies are also in a better position to assess the longer-term benefits of transformation, such as competitive differentiation, talent acquisition, improved service and business agility.

The office of finance as digital case study

Perhaps the best reason to have CFOs in the lead of digital transformation is that many have recently lived through the experience in miniature within their own departments.

As the expectation on finance has grown from reliably recording and reporting numbers to providing strategic insight, more and more CFOs are leaving legacy technologies and manual processes behind, replacing them with automation, analytics, machine learning and Cloud deployments. They are seeing what works, what doesn’t, what skill sets are required, and as such can better anticipate the impact of culture and process on success.

Today’s CFO knows it’s about more than beating last year’s revenue forecast and can see both the direct and indirect potential of digital to create future value in the organisation. That must be the goal of digital transformation.

Finance

Elon Musk says bitcoin is slightly better than holding cash

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Elon Musk says bitcoin is slightly better than holding cash 1

(Reuters) – Tesla Inc CEO Elon Musk on Thursday said that owning bitcoin was only a little better than holding conventional cash, but that the slight difference made it a better asset to hold.

“However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere,” Musk said in a tweet. “Bitcoin is almost as bs as fiat money. The key word is ‘almost’.”

He also defended Tesla’s action to invest in bitcoin, saying that the difference with cash made it “adventurous enough” for the S&P 500 company to hold the cryptocurrency.

Tesla’s $1.5 billion bitcoin purchase set the cryptocurrency soaring toward this week’s record peak above $50,000 while Musk’s recent promotion of dogecoin on Twitter also lifted the price of that cryptocurrency.

Bitcoin was steady just below a record peak of $51,284 on Friday.

(Reporting by Aishwarya Nair and Shubham Kalia in Bengaluru; Editing by Sam Holmes)

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COVID response drives $24 trillion surge in global debt: IIF

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COVID response drives $24 trillion surge in global debt: IIF 2

By Marc Jones

LONDON (Reuters) – The COVID pandemic has added $24 trillion to the global debt mountain over the last year a new study has shown, leaving it at a record $281 trillion and the worldwide debt-to-GDP ratio at over 355%.

The Institute of International Finance’s global debt monitor estimated government support programmes had accounted for half of the rise, while global firms, banks and households added $5.4 trillion, 3.9 trillion and $2.6 trillion respectively.

It has meant that debt as a ratio of world economic output known as gross domestic product surged by 35 percentage points to over 355% of GDP.

That upswing is well beyond the rise seen during the global financial crisis, when 2008 and 2009 saw 10 percentage points and 15 percentage points respective debt-to-GDP jumps.

There is also little sign of a near-term stablisation.

Borrowing levels are expected to run well above pre-COVID levels in many countries and sectors again this year, supported by still low interest rates, although a reopening of economies should help on the GDP side of the equation.

“We expect global government debt to increase by another $10 trillion this year and surpass $92 trillion,” the IIF report said, adding that winding down support could also prove even more challenging than it was after the financial crisis.

“Political and social pressure could limit governments’ efforts to reduce deficits and debt, jeopardizing their ability to cope with future crises.”

“This could also constrain policy responses to mitigate the adverse impacts of climate change and natural capital loss,” it added.

EUROPE DEBT

Debt rises were particularly sharp in Europe, with non-financial sector debt-to-GDP ratios in France, Spain, and Greece increasing some 50 percentage points.

The rapid build-up was mostly driven by governments, particularly in Greece, Spain, Britain and Canada. Switzerland was the only mature market economy in the IIF’s 61-country analysis to record a decline in its debt ratio.

In emerging markets, China saw the biggest rise in debt ratios excluding banks, followed by Turkey, Korea, and the United Arab Emirates. South Africa and India recorded the largest increases just in terms of government debt ratios.

“Premature withdrawal of supportive government measures could mean a surge in bankruptcies and a new wave of non-performing loans,” the IIF said.

However, sustained reliance on government support could pose “systemic risks” as well by encouraging so-called ‘zombie’ firms – the weakest and most indebted corporates – to take on even more debt.

(Reporting by Marc Jones; Editing by Toby Chopra)

 

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Bitcoin’s record price unsustainable without lower volatility – JPMorgan

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Bitcoin's record price unsustainable without lower volatility - JPMorgan 3

LONDON (Reuters) – Bitcoin’s charge to a record north of $50,000 isn’t sustainable unless the cryptocurrency’s price swings cool down quickly, JPMorgan analysts said in a note.

The world’s biggest digital currency hit a record of $51,300 on Wednesday after smashing the $50,000 mark for the first time a day earlier, fuelled by signs it is winning acceptance among mainstream investors and companies.

Bitcoin’s three-month realised volatility, or actual price moves, is 87% versus 16% for gold – an asset proponents say it could threaten, the U.S. investment bank said in a note published on Tuesday.

The value of all bitcoin in circulation has swollen to $900 billion from $200 billion in September, the analysts said. The $700 billion jump has come the back of a total flow of just $11 billion from institutional investors into major trusts and futures markets.

Bitcoin’s limited supply – based on “miners” producing a set number of new coins – has led to a holders charging a premium on bitcoin coming to market, JPMorgan said. Retail flows may have also magnified institutional flows, it added.

(Reporting by Tom Wilson; editing by Thyagaraju Adinarayan)

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