CFOs Must Strike Balance Between Investing In R&D, Maintaining Financial Stability, Profitability: Kaushik Sarkar, Senior Vice President And CFO, BGSW
From Managing cash flow and maintaining profitability for sustained success to ensuring strong financial governance and transparency for the organization’s financial well-being, Kaushik Sarkar, Senior Vice President, and CFO, Bosch Global Software Technologies (BGSW), talks with BW CFO World about the challenges facing the technology sector, and how CFOs are overcoming them
Given the demand for innovation, how do CFOs balance the need for investment in R&D with the financial stability and profitability of their companies?
There are challenges when it comes to balancing research and development investment with financial stability due to the cost and risk associated with it. It can be expensive and there is always the risk that R&D projects will fail, either because the technology does not work or because the market is not ready for it. Companies need to make sure that they have enough cash reserves to support their R&D investments without jeopardising their financial stability.
Formulating a strategic R&D plan aligned with the overall company strategy, establishing feasible R&D budgets in collaboration with the CEO and engaging with stakeholders, including investors and analysts, to foster trust and secure future R&D funding are some of the key points to consider to counter R&D challenges. Vigilantly monitoring R&D spending and project outcomes to address issues promptly, along with implementing the MVP concept for early assessment and risk management, also plays a crucial role in striking a balance.
With the rapid pace of technological innovation, how is the technology sector adapting to changing customer demands and market dynamics?
The technology industry is increasingly focusing on providing a superior customer experience and is constantly evolving to adapt to changing customer demands and market dynamics. Investing in AI and ML, cloud adoption, customer-centric approaches, and market diversification are some ways in which industry is adapting. Tech companies prioritise superior customer experiences, including user-friendly interfaces, personalised support, and efficient issue resolution. They are also expanding into the healthcare, education, and transportation sectors due to increased demand for tech solutions in these fields.
Can you discuss the impact of emerging technologies such as artificial intelligence, blockchain, and 5G on the financial strategies and decision-making processes within tech companies?
AI, blockchain, and 5G are reshaping financial strategies and decisions as we speak. In finance, it’s key for us to have real-time data that our teams analyse for cost overruns, reduce returns, ensure high quality, and maintain high efficiency.
AI-powered chatbots and algorithms are employed to provide customer support, personalise financial advice, and manage risk. AI-driven credit assessments and investment decisions help enhance risk management, cash management, and treasury management. Blockchain technology is another game-changer in finance, offering secure and transparent financial transactions, automating back-office processes, and lowering costs. In the context of the Internet of Things (IoT), blockchain safeguards the integrity and privacy of IoT-generated data. It also optimises logistics and shipping processes, reducing paperwork and enhancing transparency. Financial institutions and organisations are increasingly investing in these technologies to stay competitive and better serve their customers, which serves as a guiding beacon for other industries.
Cybersecurity threats have become a major concern in the technology sector. How are CFOs addressing the financial risks associated with data breaches and cyberattacks?
Chief Financial Officers are addressing the financial risks associated with data breaches and cyberattacks in several ways. It includes implementing cybersecurity strategies, formulating a data breach response framework and procuring cyber insurance coverage. Allocation of resources towards the deployment of cutting-edge firewalls and intrusion detection systems can safeguard organisations’ critical data and systems against cyber threats. Structured plans to outline precise steps for the timely identification and containment of breaches, notification of affected stakeholders, and effective remediation procedures can also help in minimising the adverse impact of data breaches.
In addition to this, it is important to work with other stakeholders, such as the CEO, CIO, and CISO, to ensure that a cybersecurity strategy is implemented across all levels. This strategy should align with the company’s overall business strategy and should be designed to protect the company’s most critical assets.
How is the shift towards remote work and digital transformation influencing the financial priorities and investments of technology firms?
From managing cash flow and maintaining profitability for sustained success to investing in long-term prosperity and ensuring strong financial governance and transparency for the organisation’s financial well-being and sustainability, a CFO has many priorities. Firms are increasingly prioritising investments in technologies that support remote work and digital transformation. Moving data and apps to the cloud to boost remote work, scalability, and flexibility and adopting new collaboration tools like work management platforms, video conferencing tools, enhanced instant messaging tools and cloud-based productivity tools can help in the smooth transition.