The future of Finance starts today, not tomorrow.

“The future starts today, not tomorrow.” CFOs can shape it, if…

…they start now
…their organisations understand the potential
…the last two years are not wasted

Covid has created a mini industry in ‘Thought Leadership’ prediction and an abundance of ‘Vision [2025/30]’ documents. While we know, of course, how important that kind of thinking is, we also like the sentiments above, of Pope John II.

The future we’d like to start today is the future of Finance in the insurance sector. We see this as not just a unique opportunity, but more as an imperative. First, most of what has been called ‘growth’ has been achieved through M&A activity. Second, while insurers have made huge advances in improving their customers’ experience, they have mostly focused on their front-end systems (such as Underwriting and Claims). Meanwhile, the underlying finance systems have been underfunded and less developed, so they are less aligned now with the businesses they support.

We know that the insurance domain has surprised itself by the astonishing pace and degree of change it has achieved over the past two years. What had always been accused of being a slow, change-resistant, labour-intensive, customer-unfriendly domain has been scrutinised and held up for re-appraisal and re-definition. We want to celebrate that. And also, to challenge. Especially in that critical area of Finance – because those changes have been particularly relevant, and the progress even more marked, in those departments.

Functions that were once the preserve of office working have switched to remote with no impact on performance. If close processes and business partnering can be delivered in this new setting, where else can the transformation of Finance take that team, and the organisation around it?

Will finance leaders commit to maintain this change? How serious are they about transforming their performance? Will they embrace continuous disruption? Are they prepared to start their future today?

We have been dedicated to the insurance domain for more than 20 years. We know what’s needed to succeed, and we see an almost limitless potential for further improvement. We believe that real transformation depends first on a change of perspective. And the most fundamental shift in perspective is towards a word not usually associated either with insurance or with Finance.

The conversation around Finance departments should be about how they create value for their organisations. About how they can inspire fresh thinking and new capabilities, to create a step change in performance all around them.

Creativity

The conversation around Finance departments should be about how they create value for their organisations. About how they can inspire fresh thinking and new capabilities, to create a step change in performance all around them. We are seeing that energy in our CFO clients, seizing the opportunity to make a deeper, more positive contribution than ever before; and we’re also seeing that energy translate into faster decision-making and action. As the saying goes, “vision without action is a dream”.

We’d like to share a vision for Finance, highlighting five key areas in which the best players are already acting. It’s our blueprint for new performance:

1. Create the right operating model

This has to start with being prepared to re-imagine the model.

There can be no going back to prepandemic norms, especially in the understanding of where – and how – businesses create value. This realisation goes right to the heart of the Finance function: as ‘strategy’ becomes more dynamic and less an annual ‘3-year plan update’ process, Finance has a more continuous input and role. It needs to think, and deliver, more in terms of capabilities and outcomes.

"DLG has innovation at its core, and we are excited by the prospect of enhancing the role, contribution and recognition of Finance teams through this transformation journey. We, at DLG have taken credible steps in defining the future vision of the finance function, that of being a leaner, digital-savvy and value additive internal business partner.

It’s important that we also have the right external partner. In EXL, we have experts in the kind of Data & Analytics application that we know will be critical, and also people who have unrivalled knowledge of the insurance domain. We’re excited at the prospect of our collaboration with them, not only to meet our current objectives, but also to ensure that we will always be ‘future ready’."

Alexandra Cliff
Group Financial Controller
(Direct Line Group)

Overall, the finance function’s key focus will shift from a unit primarily providing internal transparency and transactional services to that of a business partner providing added value.

Inevitably, this means building-in greater operational resilience, maximising flexibility, so businesses need to move to multi-shore structures and cross-functional teams. Some CFOs have started to be more open with their operating models and are better leveraging their partners to unlock value

We can identify four levers of this new type of operating model success:

• New capabilities: Client organisations being prepared to work more closely with external partners to enhance their key capabilities. Those external partners must therefore show continuously how they are creating better outcomes, for both operations and reputation.
• Value delivery replacing cost delivery As these 3rd party relationships mature, and fewer opportunities remain for significant savings, suppliers must prove themselves on more constructive and enduring issues.
• Digital partnering. As companies understand more of the potential for technology in providing greater insights, they can now integrate digital strategies into their business processes, they become aware of the exponential potential of greater knowledge and resources. Shared service models now embrace and develop those capabilities.
• Embracing ‘one team’ culture. Organisational structures are becoming more dynamic and fluid. As attitudes, experience and technologies reinforce each other, internal reporting lines and relationships change quickly to ensure teams are genuinely fit for purpose.

2. Create new value through technology

Finance leaders can now re-write many of the established norms of their role, through a smart adoption of new technologies. By recognising that businesses are competing in an ever-expanding digital world, and embracing the principles of digital strategy, CFOs can now truly engage in enterprise strategy; and by instilling digital practices, they can automatically help drive the move away from ‘transaction’ and toward ‘value’.

Here, we see five streams in which CFOs need to be aware and expert:

• Optimising the existing technology stack. The enlightened CFO asks more searching and value-directed questions: “Am I utilising the capabilities of my ERP properly?” “Am I seeing my reconciliation tool as just an archive, or am I making full use of its potential?” ‘Efficiency’ and ‘effectiveness’ come together, and underwrite the sense of financial clarity, ‘smart thinking’ and performance.
• Leveraging ancillary technologies. Finance teams over the years have become congested with unnecessary and unconstructive ‘reports’. We have collaborated with clients to optimise the spreadsheet environment while improving the control environment, by leveraging low code technologies and workflows, such as Alteryx and Appian.
• Driving self-service. CFOs’ teams should encourage the right understanding and use of data, and transfer the power to generate reports to the user him/herself. Finance therefore becomes an internal business partner to drive better decisions across the whole enterprise.
• Driving analytics and AI. Analytics are now being effectively implemented into core finance processes to make instant and permanent improvements. We are helping clients to make interventions such as fuzzy logic principles in, for example, cash application and bank reconciliations; propensity analysis for collections and fraud; and to create commentary that visualises performance on key financial metrics.
• Embedding digital strategies into the core of ERP processes. Integrating wider cloud-based practices into these systems will create not only greater efficiencies, but also help ensure that the best insights and AI/ML capabilities become an intuitive part of that organisation’s competence.
• Mitigating risk through the cloud. CFOs are always going to feel the responsibility of protecting financial and other information assets. Making good use of cloud-based resources will become a natural consideration for Finance leaders, as they engage in their enterprise strategy.

3. Create an enterprisewide understanding of finance

• We are seeing the Finance function now building recognition as both guardian and leader of business value. As companies grow in international scope, and the speed of business intensifies, the importance of data and analytics multiplies.
• The understanding of the potential for data is growing exponentially. This trend in data analytics is also creating new opportunities, for companies to establish competitive advantage by monetizing financial and non-financial data from a wide range of sources.
• A key objective/ expectation of the finance function is increasingly to align quality assertions in the financial statements with the data available on the market. CFOs are now leveraging on this demand to have a great influence on discussions around pricing, service levels and technology provider with their deepening knowledge of customers (internal and external) and access to market trends.
• To conclude, for finance functions to successfully pivot from transactional partners to business partners, usage of advanced data analytics for decision making has to become core to the functioning of the organisation

4. Create the true finance factory

The idea of a Finance Factory is taking hold in many people’s minds. We agree with this, largely, but counsel against some of the current interpretations. It is tempting, but we believe limiting, to define the Finance Factory purely as a rush towards ‘touchless transactions’. CFOs have a far greater, more strategically relevant, role to play in what we see as the creation of Centres of Excellence. Digital disruption is simplifying many of the finance processes, but we see the real benefits extending far beyond the replacement of human involvement in historically transactional activities. If ‘innovation’ is another way of saying ‘transformation’, then these Centres of Excellence are where it is rooted and proven.

To us, the Finance Factory is where insurers gain the confidence to make better decisions. Specifically, we would highlight three key areas of significance

Value creation, not arbitrage. Perspectives within the insurance sector are moving towards the longer-term and in favour of ‘value’ over ‘price’. This is a key element of insurers’ strategic planning, and naturally a strengthening facet of the CFO role.

Structural integration. Strategy will always come before structure, but the two need to work in combination to be their most effective. A Finance department with the right access to the right insights, developing the right networks to enable the right decisions to be made at the right time, will create the highest-performing business.

Continuous improvement. As strategy becomes more dynamic and iterative, organisations must welcome the constant challenge to learn, adapt and advance.

CFOs can help create not only a more efficient organisation, fuelled by better insights and enabled by greater selfconfidence in its decision-making, but also a more ambitious one.

5. Creative talent strategies

Insurance has always had people at its heart, and it will continue to. So, insurers will have to look hard at their talent strategies, and perhaps none more so than in the Finance area if they are to realise the potential we are describing.

We like the challenge that “creative” sets for the sector, and we’re already helping some clients rise to it. If CFOs are going to lead teams that can live up to the promise we know exists for them, those teams are going to require new skills – and new attitudes.

The ‘attract – develop – retain’ model has become more nuanced and more demanding. A more dynamic and iterative strategy will require a more iterative and dynamic organisation; new competency frameworks must be developed, and new attitudes encouraged. ‘Creation’ will be at the heart of that change, which we believe will take form around three key principles:

• Finance will be the source of organisational confidence. Access to richer information, and the ability to interpret, extrapolate and project from real-time insights will be critical to the success of any business. But they will all call for a more expansive, imaginative mentality: although ‘risk’ is the foundation for the insurance sector, people must develop a new ‘feel’ for the issues their customers and partners are concerned about.
• Flexibility and fluidity will be core competences. People are already used to the idea of ‘hybrid’ working, as WFH became a pandemic standard; now, we suspect that idea will extend beyond the physical perimeters of organisations. Off-shore partnering will increase dramatically, and that will in turn bring about a change in people’s expected roles and responsibilities. That is an area of business leadership that we know is already exercising the minds of the right-thinking CFOs.
• Techno-functional roles will become the norm. Room will have to be created for specialists who might bring a particular talent or perspective to a team. As insurance moves generally towards more embedded digital capabilities, and as the Finance team becomes more engaged in that evolution, individuals who know and are helping to push the boundaries of that world will naturally become an integral team member. What at first might feel unusual or uncomfortable will quickly become essential and enabling.

The EXL conversation

We were born from an insurance company 21 years ago – we are as expert as we are enthusiastic about this domain, and we are dedicated to helping our clients transform their business. Much of our work is now focused on maximising the impact of integrating digital strategies into the everyday operations of those business, all along the value chain. The depth of our working relationships makes us not only confident in our understanding of what constitutes ‘success’ in that market, but also sensitive to all the inter-dependencies in our clients’ journeys.

“We make sense of data, to drive your business forward” is the promise we make to our clients, and the offer we make to anyone who has not yet worked with us. We are excited at the potential for the insurance sector to continue its reinvention, and at what the Finance teams within those businesses can achieve. But we are never satisfied with ‘potential’ – it has to be realised to be worth anything. All of the points in this document are real and happening now; we’re working on them with our clients at the moment.

Those clients who have engaged us to redefine their Finance teams have already started their futures. If you would like to start yours, we’d be delighted to talk with you.

Written by:

Mohit Manchanda
Head of Insurance,
UK and Europe

Prashant Chaturvedi
Vice President & Leader,
Finance Transformation