Determined to remain competitive and survive in an ever-changing business landscape, organizations today are embracing digital transformation to bolster their financial operations and forecasting capabilities. By adopting new digital tools, they’re shifting their strategic priorities to better anticipate what lurks around the corner.
The onset of the COVID-19 pandemic unleashed an abundance of dynamic market factors vying for the C-suite's attention. Recent survey data, with findings from 257 financial decision-makers throughout North America, shows that finance leaders believe ongoing political disruptions like supply chain inefficiencies, inflation and the Great Resignation are still major problems without an end in sight. Nearly 75% of respondents expect inflation and supply chain concerns to creep into 2023. Thus, organizations must adapt to unanticipated factors that were likely not reflected in their initial 2022 budgets and plans.
In response to these difficulties, the majority of finance executives said their organizations were forced to raise prices in order to combat new market challenges.
The largest threat to business this year is, and continues to be, economic disruption. Thirty percent of survey respondents ranked this as their number one concern, followed by cybersecurity weaknesses (20%), the ongoing impact of the pandemic (18%) and supply chain disruptions (16%). Amid a possible economic downturn and labor constraints, finance teams will continue to prioritize efforts to combat these top threats in the remainder of 2022 and as they develop 2023 budgets.
Inflation and Supply Chain Concerns
At this point in the year, it is hard to imagine that inflation and supply chain challenges will dissipate in the near future, particularly as the holiday peak season approaches. So what are finance leaders doing to manage high inflation rates? Besides increasing prices, which more than half of those polled confirmed the need to do (51%), nearly half also plan to execute new sales initiatives and campaigns (48%). That’s a 13% increase from the fall 2021 survey results, signaling a deeper need to expand sales initiatives in a tightening economy.
Additionally, teams are expanding their supplier networks, taking a more strategic approach to buying raw goods and materials and conducting regular inflation forecasts. Falling to the bottom of the list is contract renegotiations with suppliers, indicating the need for continuity and trust among tried-and-true partners.
While consumers will absorb the price increases, supply chain and manufacturing teams are tapping into a multitude of other options to help lessen the blow of inflation and supply chain bottlenecks. Technology can play a key role in aggregating the data needed to make responsible business decisions. Artificial intelligence and machine learning are two technologies able to increase the flexibility, agility, efficiency and speed that many organizations require to thrive in today’s business environment.
Combatting Inflationary Pressures
Technology is seeing increased investment rather than budget cuts because of its ability to increase efficiency, streamline processes and provide near-real-time data to drive business decisions. In the same survey, 87% of finance leaders noted that their companies have adopted, or are in the process of adopting, an automated machine learning solution to benefit sales and marketing initiatives, customer service and feedback, and intelligent data optimization. Technology can also be leveraged to improve recruiting and prevent talent depletion — or the Great Resignation.
The manufacturing and supply chain industries are also adopting technology and digital transformation to streamline and anticipate supply chain disruptions. Yet cost can’t be overlooked: 42% of surveyed leaders ranked price as the number-one obstacle to getting their organization on board. Interestingly, cybersecurity concerns and the technical skills gap of current employees were both tied as the other two major obstacles to implementing automated machine learning.
Leaders across industries are weighing the need to make quick, informed decisions to survive unpredictable markets and the upcoming holiday peak season, with the drawbacks of associated costs and potential cybersecurity concerns. While the majority of finance executives anticipate supply chain complications and inflation to continue into 2023, the investment in predictive technology and talent skills will increase to counteract these unavoidable obstacles. Today’s economic landscape is filled with uncertainties, presenting new challenges to the finance teams tasked with keeping organizations moving forward. But with the right tools to support an informed approach, teams can be set up for success as they steer the ship into 2023.
Bill Koefoed is chief financial officer of OneStream Software.
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