INTERVIEW OF THE MONTH
GUEST ARTICLE WITH DR. KISHORE NUTHALAPATI,
CFO, BEKEM Infra Projects Pvt Ltd
As a seasoned corporate finance professional, how do you see the evolving role of the CFO in driving digital transformation within organizations, especially in areas like financial planning and analysis?
The digital transformation move in any organization encompasses all functions including finance, HR, marketing, and operations. However, the digital transformation in finance is very critical because any small disturbance in finance could impact the very existence of the organization. Digital transformation requires leadership and coordination of CFO with other functions and within finance function. Until now, digital transformation used to be the role and responsibility of the IT department. But as the complexities in the finance function are increasing day by day, the scenario has changed, and the CFO is required to lead the digital transformation of finance and to even guide other CXOs for collective integration towards digitalization. As all other resources need funds, CFOs are better placed to lead the drive of digitalization. CFOs guide the other teams in comprehending the return on investment (ROI) and in making amends to the course of action for successful digitalization.
How important is fostering a digital culture within the finance function, and what steps can CFOs take to ensure their teams are well-equipped to embrace new digital tools and processes
Digital way of functioning must be inculcated in the culture. Deviations in cultural practices will be minimal when compared to those in rule-based practices. In finance, unless digital adoption is 100%, the potential benefits cannot be derived. Part digital adoption is risky and may cause more disturbances and delays. Phase wise adoption has to be planned with tighter schedules and with close monitoring of the process and the outcomes.
CFOs should ensure that the implementation of the digitalization is planned as per systematic phases distributing the work for integration. The required hardware, suitable and reliable software and programs should be allocated. The teams should be provided with sufficient training and orientation programs.
All the members should be involved in the process and the implementation should be in a consultative and collaborative manner.
With your extensive experience in investments and project finance, how have digital tools, such as AI, data analytics, and automation, impacted the way financial decisions are made at an organizational level?
Digital tools are playing major role in certain functions. They include tracking receipts from debtors, TDS reconciliation, GST input reconciliation, loan servicing dates of multiple loans, stock integration and valuation, etc. The financial decisions such as allowing credit days, availing vendor credits, borrowing ad-hoc amounts, and guiding the time plans for expenses are now much improved due to the digital tools and automation.
What are the biggest challenges CFOs face when leading digital transformation initiatives, and how can they overcome these hurdles while ensuring alignment with the overall business strategy?
The challenges faced by CFOs differ depending on the nature and size of the business of the organizations. Common challenges include lack of sufficient skills with the team members, lack of cooperation among teams, delay in collecting the base data for digitalization, delay in implementation, inaccurate integration among the functions, lack of proper guidance, inefficient monitoring, incomplete inputs, delayed feedback, parallel functioning of legacy and digital versions, etc.
These obstructions could be avoided by involving all the concerned team members, timely feedback and with close and periodical monitoring of the progress.
As someone actively contributing to policy-making, how do you think digital finance regulations and policies need to evolve to support the increasing digitalization of financial services?
Digital finance regulations and policies are not fully in place. The result is seen in the unregulated financial services, digital frauds, high cost digital loans, undue volatility in cryptos, digital kidnaps, digital robberies, data thefts, etc.
The finance regulations have to be complete and unambiguous, data privacy should be ensured, KYC of all players should be well captured, punishments should be severe, recovery process should be efficient and timely, and tracking of movement of funds and players should be tracked. These are major and there are many more measures that are required to ensure safe functioning of the digitalized financial services.
Looking ahead, what are some of the key trends in digital finance that CFOs and organizations should be preparing for, particularly in the context of long-term strategic planning and investments?
There are good number, and many may evolve in due course. The trends could include integrated capturing of voucher to balance sheet directly, auto audit function, instant transaction settlements, day-based interest cost apportionment between the parties in all transactions, transaction based credit, blockchain based accounting, etc.