As CEOs pursue digitally driven business model innovation to get ahead of their competitors, they must more quickly contend with unfamiliar compliance regulations. Increased organizational complexity is likely to introduce companies to new industries, markets and sources of revenue that are governed by new or evolving compliance mechanisms. At the same time, the democratization of data increases the opportunity for data misuse, compounding the risk of noncompliance.
CFOs today cite growing regulatory scrutiny as their primary cause of concern — even ahead of digital disruption. Meanwhile, rapid business model innovation and new judgment-based accounting standards will complicate finance leaders’ approaches to ensuring their organizations stay in compliance.
What it means for the finance service mix
As new business models proliferate, regulatory and compliance expertise will be placed at a premium, particularly because the new accounting standards issued by the Financial Accounting Standards Board are increasingly principles- and judgment-based. Services such as tax risk management, debt advisory and legal entity rationalization have become increasingly important to organizations’ survival, elevating the importance of finance’s “middle office” (controllership, tax and treasury).
What it means for the finance operating model
As the organization becomes increasingly complex and explores more innovative business model options, finance’s accounting, tax and treasury specialists will need flexibility and scalability to keep up. This includes the ability to rapidly scale up governance structures and provide early advisory services for the business project by project. Existing subfunctional divisions in finance’s front and middle offices are likely to blur to support this capability.