Amar Shubar (Management Partners) on how big data benefits the CFO
In the past, decision-making was reactive or based only on a leader’s vision. However, data analytics allows a more scientific and proactive approach.
This is important for the CFO whose role includes cost reduction and risk management, top and bottom-line growth, but also the ability to forecast and plan for the future and cope with sudden changes in market conditions. Data-driven budgeting, advanced cost analysis assessments, profitability modelling and optimisation will help address this new requirement.
Another promising area is minimising risk and fraud since big data can offer better insights about the customer repayment risk, says Amar Shubar, partner at Management Partners, a Dubai-based management consultancy.
“It is already commonly used in firms providing a delivery service to validate the credit rating or worthiness of delivering goods to certain households. This is because if there is a high default rate then this will obviously affect the firm’s returns. With big data you can consolidate some information on past transactions and relate it to information about the neighbourhood where you are sending the delivery and associate this information to a particular client,” he explains.
Shubar furthermore argues that data mining and analytics can help identify irregular patterns that may be hidden within normal financial transaction information. It can give additional information and help CFOs understand the connectivity of certain employees with suppliers, since there may be other relationships happening outside a firm’s normal financial accounting system, helping to increase transparency.
The relevance and compliance challenges
Additionally, a lot of data is generated by old transactions and can also be collected from external sources and partner companies. So what is the strategy CFOs should adopt to make the most of all the information out there? “The big question they should ask themselves is how can you really generate insights from data? Is it relevant? Storing data is easy but are you storing the right data? And how do you analyse this data?”
By 2020, IDC estimates that at least a third of all data will pass through the cloud and that nearly 40% of the information in the digital universe will be “touched” by cloud computing providers.
“The cloud could help CFOs by adding functionalities and logic. Many aspects like credit worthiness and fraud management can be embedded in larger data analytics system as well as other considerations to link different publicly available information together and provide a view on a customer, vendor or even a future employee.”
“At the same time, with the cloud, data providers can ensure that they can keep their platform regularly updated and that it complies with data privacy laws across the different regions of the business. Data privacy is not aligned globally – and this can be a challenge for a global firm.”
