C O R O N

A V I R U SWHITE PAPER

A CFO’S GUIDE TO LEAPFROGGING DIGITIZATION

Ganapathy SubramanianVP, Finance Transformation, EXL

lookdeeper@exlservice.com

Amit GandhiManager, Finance Transformation, EXL

Written by

June 3, 2020

The four stages for finance organizations to stay competitive during and after COVID-19

Contributions by

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Jagmeet Singh Partner Finance Transformation, EXL

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Viewing Pandemic Business Challenges as Opportunities

Crises are often opportunities to transform organizations, and COVID-19 has proven to be an example of this. In light of the pandemic situation, finance organizations need to plan immediate safety and survival, near-term stabilization of the business, and longer-term preparations.

In the near-term future, finance organizations will need to understand the implications of the pandemic and “firefight” with the focus on immediate safety and survival. After this initial period, organizations must focus on stabilizing the business and planning for the long term. A phased approach to understand the challenges posed, respond and transform after recovering from the pandemic, will pay rich dividends.

We developed four phases to help finance organizations prioritize the recovery process and provide a forward-thinking, long- term approach to succeed.

STAGE 1 | Recognize: Understanding the challenges posed by the pandemic and recognize the need for action is the first step. CFOs need to analyze effects of COVID 19 on various aspects such as liquidity, cash flow, financial close, collections, and reduced employee productivity. Analytics and artificial intelligence can greatly bolster the ability of CFOs to understand the magnitude of the problem they are confronted with.

STAGE 2 | Respond: Taking care of the immediate challenges posed by crisis and building resilience is next. The most important step is ensuring liquidity by curbing expenses throughout the organization. This can be achieved through a “digital cash war room” where the CFO can constantly stay in touch with the other business leaders. Creating best case, most likely, and worst case scenarios for the paths the pandemic might take – and their implications – would enable risk mitigation. CFOs should also set thresholds that suggest what financial actions the company will take and when.

The financial fallout of COVID 19 is considered to be the steepest economic downturn since the Great Depression, challenging finance executives globally. The crisis demonstrates that the business case for finance digitization has never been greater. Segmenting the coming months into stages will help finance organizations prioritize the COVID-19 recovery process and provide a forward-thinking, long- term approach.

A CFO’S GUIDE TO LEAPFROGGING DIGITIZATION The four stages for finance organizations to stay competitive

during and after COVID-19

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and talent, improving the forecasting and reporting processes, executing strategic acquisitions, mergers, and divestitures identified in the previous stage. This will help position the finance organization to win in the post-COVID era. CFOs will need to do the heavy lifting to transform core business processes like vendor payments, financial close, collections, and reporting to reduce exposure to external shocks and to create resilience. Automation can enable rapid optimization of operations.

Digitization as The Key Enabler

The finance organization’s accelerated use of digitization to manage the crisis should not be considered a one-time occurrence. Digital initiatives like automated financial closings, real-time forecasts, CFO dashboards, digital finance FTEs, integrated driver-based planning, and reporting are now considered critical.

There are opportunity areas in each of the four stages where the digitization of finance can be the game changer.

Development of a communication plan with key stakeholders is necessary so that everyone is in agreement with what the finance organization is trying to achieve and, in turn, instill a sense of calm. Since most of the employees are working from home, ensuring capabilities that support employees and enhance productivity are vital for the health of operations. Digitization in the form of analytics, artificial intelligence and remote work capabilities can enable this phase.

STAGE 3 | Recover: Once cash concerns have been addressed, CFOs need to ensure that the finance organization is ready to effectively carry out its operations. Critical tasks include optimizing data for reporting, maximizing supply chain, optimizing use of collaboration tools, and evaluating opportunities for acquisitions, mergers, divestitures. Resilient companies with sound divestiture and an M&A strategy can outperform through the downturn. Analytics is critical to having a sound divestiture and M&A strategy.

STAGE 4 | Reform: Once the crisis subsides, the finance organization should focus on optimizing its operations

THE FOUR STAGES FOR STAYING COMPETITIVE DURING AND AFTER A CRISIS

• Effects on liquidity and capital resources

• Access to government financing

• Insufficient information for financial decisions

• New disclosure developments

• Reduced workforce productivity

• Change in financial close processes

• Supply chain constraints

• Create a digital cash war room

• Diversify financing sources

• Increase engagement with business partners

• Create a digital communications plan

• Ensure capabilities for remote work support

• Manage inventory and receivables

• Develop contingency plans and scenarios

• Strengthen the Balance Sheet

• Maximize the supply chain

• Evaluate financial reporting controls and risks

• Optimize FP&A data for forecasting and reporting

• Manage remote workforce and rationalize

• Evaluate acquisitions, divestitures, and mergers

• Optimize finance operations

• Enter new value-add partnerships

• Ensure adequacy of financial reporting controls

• Integrate driver-based planning and financial reporting

• Optimize talent for strategic finance

• Execute strategic acquisitions, divestitures, and mergers

ReformRecoverRespondRecognize

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Data visualization to give end users access to real-time Data visualization to give end users access to real-time financial informationfinancial information

Advanced analytics for finance operations to Advanced analytics for finance operations to accelerate decision support accelerate decision support

Driver-based planning and forDriver-based planning and forecasting

A digital finance talent strategy is necessary to bridge the gap between current and required capabilities. COVID-19 presents a golden opportunity to leapfrog pre-COVID digital agendas, given the irrefutable business case for digitization during the pandemic. Finance organizations must advance through the digitization maturity levels to see the rewards.

Leapfrog Digitization – What It Is and Why It’s Necessary

CFOs must accelerate the digitization of the finance organization or risk falling behind other functional groups and other companies whose digital transformations are already at an advanced stage. To keep pace with opportunities in a digital world, finance professionals need to make radical changes to their operating models.

Major technologies that can be applied to the finance function include:

Automation and robotics to improve processes in Automation and robotics to improve processes in financefinance

HOW DIGITIZATION OF FINANCE CAN BE THE GAME CHANGER

Stage How Digitization Enables and Accelerates Each of The Four Stages

PUse AI and analytics used to analyze impact of COVID 19 on liquidity and cash flowPUtilize AI to gather relevant information from sources such as social media, websites, search enginesPCreate self-service dashboards using data visualization to provide relevant information to decide future actions

PAI and analytics to develop best-case, most-likely and worst-case scenarios during COVID 19PDigital cash war rooms to ensure liquidity and proper management of capital resources during the pandemicPLeverage existing digital capabilities like Skype or Zoom to enable work from home for employeesPAnalytics for making payments closer to due date, resulting in working capital improvement PCollection analytics to identify potential delinquent customers and improve the collection strategyPAutomated software alerts for various coronavirus recession scenarios, i.e. breaching of liquidity and capital levels

PAnalytics to improve inventory stock management, procurement, and review underperforming assets PUse of workforce collaboration tools like Slack or Confluence to enable better coordination among employeesPAI and analytics to develop dynamic cash forecasting and reporting modelsPAI and automation to enable virtual financial close with employees working from homePUse technologies like FaceTime to communicate with auditors for physical inventories, figure out approaches for working togetherPRisk analytics to identify and mitigate financial reporting risks for improved compliance PData modeling and analytics to evaluate for acquisitions, divestitures, mergers and capital raise

PAutomation of financial statement consolidation through creation of bots to enhance efficiency of financial closePJournal entry bot to reduce the need for manual intervention during financial close and enhance efficiencyPAutomation of invoice entry and processing for better management of inventory and receivablesPUsing the opportunity to work with more finance vendors to use ACH, as opposed to check writingPIncrease in self-service, contactless options like mobile apps or online portals for consumer engagementPFinancial modeling that is focused on cross-departmental factors and collaboration PIntegration of software across different functions of the organization like marketing, finance, operationsPSelf-service dashboards using data visualization to monitor cash inflows and outflows in real time

Recognize

Recover

Reform

Respond

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until the projects are completed. Finance teams need to take a lead role on projects so that they are not entirely reliant on IT.

Establish employee incentives so they align with digital agendaAfter the initial phase of “firefighting” and ensuring survival, CFOs and senior finance leaders need to redesign incentives and compensation schemes to combat resistance to change and reward those who support creation of a digital finance function. Such incentives can also help attract top digital talent.

Set up a dedicated capability development program in finance CFOs should engage with other senior leaders to refine competency models, particularly those associated with the finance function, to recruit and retain the employees needed to carry out a digital agenda.

Key Considerations for Leapfrogging Digitization

Speed up the development of a digitization strategy The overall digital vision should be clearly defined in the finance organization. Without a strategy, projects will occur on an ad hoc basis. There will be little transfer of knowledge and the risk of launching duplicative initiatives, or initiatives that address the wrong finance problem, will slow strategic planning,

Invest heavily in data Data is the lifeblood of digital transformation, and it needs to be consistent to move seamlessly throughout the enterprise. Analytics and data visualization rely heavily on the power underlying data to be effective.

Don’t wait for next-generation Enterprise Resource Planning (ERP) software Finance organizations must not hold off on digitization

LEAPFROG DIGITIZATION FOR A COMPETITIVE ADVANTAGEFinance Digitization Maturity

• Dynamic risk analysis

• In process controls

• Dynamic planning and targets

• Advanced analytics

• Real time accounting

• Scenario modeling

• Centralized transaction level data

• Statistical forecasting

• Robotic Process Automation (RPA)

• Data governance

• Driver based planning

• Digital finance talent strategy

• Process standards and DTPs

• Self-service reporting

Emerging Scaling Established

x Inaccurate forecasting

x Challenging reporting

x Laborious decision making

x High cost and manual Reconciliation errors

x High risk to return ratio

PImproved planning and forecasting

PEasier reporting and compliance

PBetter decision making

PLower costs and fewer errors

PBetter risk to return ratio

PAccurate planning and forecasting

P�Streamlined accounting and compliance

PEnhanced decision making

POptimized costs and no errors

PDecreased risk and higher returns

ADO

PTIO

NRE

SULT

S

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To truly succeed in building a digital finance function, CFOs need to address critical organizational and talent-related issues like developing a clear vision for digitization and setting up capability building programs to bridge the gap between current capabilities and those required in digital finance function.

CFOs must act now to leapfrog digitization of the finance organization to be competitive in the post-COVID era. Those who wait will be too late and find it difficult and costly to catch up.

EXL has built solutions and frameworks to drive digitization of the finance organization. Please reach out to the authors for more information.

Amit Gandhi: amit.gandhi@exlservice.com Ganapathy Subramanian: Ganapathy.KolimanVenkataraman@exlservice.com

Conclusion: Go Digital or Get Left Behind

The rapid, global phenomenon of COVID-19 and its fallout has left CFOs facing unprecedented challenges, many of them changing daily. However, these problems provide an opportunity to flourish based on a new, modern reality – completely digital and contactless.

This is an opportune time to focus on digitization of the finance function by realizing the necessities accelerating it. Digitization will affect all financial procedures, lead to changes in organizational and process structures, and alter responsibilities:

Robotics software are taking on rule-based tasks in the CFO function

Advanced analytics offer finance divisions a whole new range of options for financial controlling and decision-making support

Data visualization is giving end users access to real-time financial information.

PROVEN OUTCOMES

Client Digitization Methodology Used

Large Procure to Pay Organization

RPA based invoice processing for PO invoices:

• Automated rule-based identification of target ERPs using PO number patterns

• Automated entry of invoice data into ERPs

• Automated PO matching based on configurable rules and thresholds

• Automated logging and routing through workflow in case of PO exceptions

Sales Tax Compliance BPM and Analytics Solution:

• Redesigned operating model around “Customer Centricity”.

• Deployed an automotive, cost effective and efficient workflow and document management solution that to enable preferential pricing for end clients

Advanced analytics and robotics for Supplier Cost Recovery and Contract Review:• Embedding analytics and robotics for 100% audit and continuous monitoring

• Consolidating all the transaction and reference data in one place

• Data Visualization using Tableau for creating reporting dashboards

Using RPA to enforce continuous auditing of ITGC controls:

• Continuous auditing replaces need for large audits by internal audit team

• Ability to automatically provide support proving 100% of tickets went through

• Ability to handle increased complexity without adding more FTEs

P~50% reduced Average Handle Time (AHT)P~30% improved Productivity P~24% reduced invoice processing cost

P32% increase in customer acquisition rate

P$1.66 M reduction in exposure to penaltiesP~10% improved Productivity

PCost recoveries of 10%P30% Reduction in overbilling P20% enhanced efficiency

P~250,000 cost savings over five yearsP100% coverage

Benefits

Leading Financial Services Organization

Leading Pharmaceuticals Company

Life and Annuity Insurance Provider

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