Developments

Considering the current inflationary situation that is existing globally, the investments have gone down that has impacted a lot of economies, according to the media reports. It is vital for the management and CFOs to know about the working-capital requirements to withstand recession as controlling the cash outflow is important and becomes even more essential during hard times like a global slowdown, said Rikhil Shah

A CFO (Chief Financial Officer) comes with a deep understanding of all aspects in an organization and not limited to finance, says Rikhil Shah, Chief Finance Officer and HR Head, SBI General Insurance.

The roles, opportunities and trends in CFO Community have been evolving since recent past. Considering the current inflationary situation that is existing globally, the investments have gone down that has impacted a lot of economies, according to the media reports.

While explaining about growth trajectory in the CFO community, Shah answered a few questions to BW Businessworld during an interview.

In what ways have the role and duties of CFO changed in recent times?

Over the years, the role of a CFO has seen a strategic shift. CFOs traditionally used to be number crunchers who worked silently behind the scenes. Today, however, the role has undergone a colossal paradigm change. A CFO comes with a deep understanding of all aspects of an organisation, not limited to finance or aspects such as capital allocation, business agility and resilience, mitigating operational risks, but across a wide spectrum including supply chain management, macro trends, digital adoption, and even ESG. Given that they work in tandem with the CEO, providing critical insights and advice on the potential outcome and growth opportunities for business initiatives, CFOs are well-positioned to play a pivotal role in shaping the future of their respective industries.

The role of a CFO in the insurance sector has seen a remarkable evolution from merely heading financial operations to building and heading strategic corporate imperatives for insurance providers. In this sector, CFOs are actively driving decisions for business, reinsurance, enabling capital optimisation, bringing in analytical thinking, and more. This is also largely due to the digital transformation witnessed by insurers, coupled with growing regulatory demands, compliance and data-governance benchmarks, etc.

CFOs understand the importance of value creation for investors, shareholders and other stakeholders that further aids the CEOs’ strategic vision. Since CFOs are at the center of it all, they can stay at the forefront of leading the shift in the ecosystem, and helping insurers navigate the changing landscape.  

What opportunities have evolved in recent times for the CFO community?

Today, CFOs have a much-evolved role as they also contribute as strategic advisors by utilising the correct data and insights to tap into newer opportunities that can help businesses scale. It can be attributed to their comprehension and real time view of the company’s finances, market environment, and regulatory climate.

In recent times, CFOs analyse key stakeholder connections and develop a solid understanding of their motivating factors. They are proactive in their communication and also manage contact with the media, clients, investors, and regulators strategically.

CFOs oversee a recurrent value narrative and are well-versed with the corporate narrative providing confidence to stakeholders.

In what ways and to what extent digitisation has been implemented in the finance sector that has served good results?

Digitisation in the Banking, Financial Services and Insurance (BFSI) sector has substantially transformed the method of operations and has strengthened efficiency and accuracy by leveraging technologies like Artificial Intelligence (AI), Machine Learning (ML) and predictive analysis. In the Insurance sector, we can now process claims online in no time with just a click on a website or on a mobile app thereby reducing the time in policy writing, all thanks to rapid digital advancements.

On similar lines, it also helps insurers in building large distribution channels and speeding up underwriting procedures at a low cost. Digitisation has modified the traditional business models creating new opportunities for the insurance industry. The advancement in technologies is also helping insurers in addressing persistent problem of insurance frauds across the globe. AI acts as gatekeeper preventing insurers from being a victim of insurance claim fraud. Adoption of tech based innovative solutions like digital documents transfer, digital signature, video KYC (know your customer) for identity verification, geo-tagging for address verification etc. has become instrumental in avoiding frauds. 

How may finances be secured for the future amid a global slowdown?

It is vital for the management and CFOs to know about the working-capital requirements to withstand recession as controlling the cash outflow is important and becomes even more essential during hard times like a global slowdown. The company should diligently evaluate the operational cost and strategically plan to minimize the non-essential expenses.

The company should review its capital structure on a regular basis to achieve flexibility in the hard times, check on the liabilities and reevaluate pre-decided/planned initiatives such as acquisitions, capital intensive projects etc. While planning for recession, companies should only take decisions based on data and metrics to ensure team collaboration and timely resolutions to defeat any kind of losses.