CFOs Ignore Big Data at Their Peril

Updated July 18, 2013, 12:30 p.m. ET

CFOs Ignore Big Data at Their Peril

MAXWELL MURPHY

LE-AA270_DATAch_D_20130717112405

Big data seems tailor-made for finance chiefs. So why aren’t more of them using it?

Many chief financial officers say big-data technologies—which use high-performance computing to organize and analyze impossibly large volumes of information—would make their jobs more complicated and might not be worth the extra cost. They say their existing tools, mainly sophisticated financial dashboards that can crunch an organization’s numbers in real time, are adequate for their financial-planning needs.But experts say the CFOs who haven’t embraced big data are missing out on opportunities to speed up and improve some of their more difficult and time-consuming tasks. With the power of massive data sets and advanced analytics, they say, financial executives could better anticipate customer and supplier demand, predict sales and profits under hundreds of different scenarios, detect fraud and drastically cut the time it takes to close the books at the end of each quarter.

Chevron Corp., CVX +1.15% for instance, is tapping big-data technologies to transform the audit function. The oil giant can run audit tests on all of its accounts-payable transactions instead of the small sample it used to analyze before. This enables the finance department to better understand various business risks and adjust audit coverage to the areas that pose the greatest risks. At the same time, it reduces the time spent on auditing by about 15%.

“This offers a combination of much better quality for notably higher efficiency and lower costs,” says Chevron CFO Patricia Yarrington.

Big data can also help companies identify the risks in entering new markets. When International Business Machines Corp. IBM -2.25% considers expanding operations beyond the more than 170 markets it already serves, it can combine internal data—payment trends, expense-to-revenue ratios and currency exposure—with external metrics such as growth in gross domestic product, currency risks and inflation. The system then produces a scorecard of potential risks. The result “allows IBM to take early action to protect its financial position,” says Carlos Passi, IBM’s assistant corporate controller.

Most companies have dedicated substantial time, money and resources to compiling their own internal data over the years, and now each has a “whole spaghetti mess” of technologies and systems that combine to produce the data dashboards that many CFOs are comfortable with and find sufficient, says Brian Hopkins, an analyst with Forrester Research Inc. FORR -1.84% This likely means companies will adopt big data slowly, as their old systems become obsolete and as rivals who deploy big data begin to outperform, he says.

Moreover, many big companies have cut the costs of their finance functions to an average of 1% of revenue or less, says Andy Rusnak, a partner with Ernst & Young LLP. With finance budgets so lean, CFOs may be reluctant to try to justify large big-data investments to their chief executives and boards without more demonstrable evidence that it can do to finance what it can to operations and marketing, he says.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: