The six paradoxes
of finance transformation

The six paradoxes of finance transformation

Finance transformation is challenging for many reasons, including the complexity of most insurance businesses, the rigid legacy systems in place across industry carriers, and intense regulatory burdens. Finance leaders face distinct barriers, which can be viewed in terms of six paradoxes. The net effect of these forces drives the need for more intelligent and adaptive finance operating models.

01

Outset: Do more for less

Supporting business growth while reducing operating costs at the same time.

02

Offset: Innovate plus protect

Competing more effectively, without undercutting trust or compliance.

03

Toolset: Upgrade and sustain

Harnessing new tech whilst preserving mission-critical systems.

04

Dataset: Insight to foresight

Moving from historic data to forward-looking intelligence.

05

Mindset: Change is constant

Providing stability while making continuous improvements.

06

Skillset: Upskill or stagnate

Sustaining core expertise and instilling new capabilities.

What CFOs say

Of the functions that exist within the organization, transforming a finance function is the one that is probably least understood.

⁰¹

_{Outset: Do more for less}

Fundamentally, CFOs and their peers are being asked to deliver more value and higher performance at lower cost and with fewer resources. It’s not just day-to-day operations that are subject to time, resource and cost constraints; so too is the process of transformation itself.

To navigate this paradox, CFOs rightfully start by standardizing and automating manual processes. They also seek the right balance of reliance on internal shared service centers and support from third parties, both during transformation initiatives and for business-as-usual (BAU) operations.

Engaging partners for specialized services (e.g., insurance accounting) can provide internal resources the space they need to focus on transformation objectives and engaging the business. But no matter the sourcing model, efficiency and flexibility provide the foundation for delivering core services faster and cheaper while accommodating continuous change.

What
CFOs say

The biggest challenge is having growth as a strategy on the one hand and cost management on the other hand. You can’t have both easily.

It's a lot about process transformation but this is part of the overall strategy – grow our top line and reduce our costs.

⁰²

_{Offset: Innovate and protect}

With insurers under huge pressure to innovate at greater pace and scale, finance functions are also pressured to enhance performance. And yet, in an uncertain world, it’s never been more important for insurers to safeguard stakeholder trust.

One practical challenge is to allocate sufficient finance expertise to the design and implementation of change initiatives (e.g., product innovation, ecosystem development) without disrupting or weakening vital in-flight activities (e.g., reporting).

Balancing innovation and growth with trust and compliance is vital because they are all necessary for long-term success. To find that balance, CFOs can design and adopt innovation-friendly governance frameworks, with clear risk limits and decision rights embedded directly into BAU operations. By innovating its own services (e.g., delivering more timely and actionable market insights and faster forecasting), finance can help facilitate innovation, as well as operational agility, across the business.

What
CFOs say

You have to make sure that you’re continuously innovating and that you’re at the cutting edge of technology.

⁰³

_{Toolset: Upgrade and retain}

Powerful technology is critical to both successful finance transformation and ongoing innovation and growth. But as important as new technology implementations are, interruptions to core systems are unacceptable because of the always-on nature of finance.

The overall complexity of IT environments in insurance and complicated data mapping between multiple general ledgers and core ERP platforms make it extremely challenging for CFOs to “fix the plane while flying it,” as the old saying goes.

Beyond massive volumes of sensitive data, the huge number of policies, distribution channels and extent of agent relationships mean that upgrades are never easy.

A two-track approach has emerged as a leading practice for finance transformation because it protects mission-critical systems and harnesses the power of new technology. Ideally, new tools can add capabilities to existing systems and platforms via interfaces users are familiar with. Similarly, legacy technology can be “wrappered” with new features, functionality and AI-based user experiences where replacement is unrealistic.

What
CFOs say

We are in the age of disruption from a tech perspective. The industry is constantly under the threat of a disruptive product or niche company, with AI being at the core of it.

⁰⁴

_{Dataset: Insight to foresight}

Delivering actionable, forward-looking intelligence provides value to the business. However, the difficulties posed by inadequate data, and the problems of managing data across multiple sources, emerge time and again as key concerns for CFOs.

Providing historical data will always be part of finance’s job. After all, that data provides the basis for future projections and, when paired with external data sets, predictive insights about market trends. But thriving in an uncertain future will require more adaptable financial planning and analytic capabilities.

Given the surprises and volatility of the last few years, CFOs will need to enrich scenario planning models that can project the profitability and capital impacts of a wider range of shocks and events than they’ve considered before. Decision-making processes for capital investment and resource allocation should incorporate more varied data sets and factors, while new data management practices can boost confidence in data quality, accuracy and timeliness.

What
CFOs say

The companies that are able to harness data in the most effective way will win.

My core thinking is that transformation is about having a data-driven business.

⁰⁵

_{Mindset: Change is constant}

The amount and pace of change the industry has experienced in recent years have demonstrated the importance of organizational culture and leadership styles. Indeed, changing mindsets, behaviors and work environments is just as important as upgrading technology when it comes to finance transformation.

Finance functions have always had to adapt, thanks to changes in insurance accounting and reporting requirements. However, the need to maintain day-to-day reliability in key processes can create barriers to transformation (e.g., rigid hierarchies, inflexible decision-making).

The challenge for CFOs is to encourage people to work adaptively, experiment creatively and think differently. People and teams may need convincing that continuous improvement is a requirement for long-term success and that the difficult process of change is worth the effort.

A compelling future vision can outline the benefits of change for individuals (e.g., more satisfying work, clearer career paths) while new incentives and metrics can reward behavioral change. Technology can play a role, too; embedding workflow management tools within familiar interfaces balances user familiarity with promoting new ways of working.

What
CFOs say

Maintaining corporate culture and morale through transformation is important. Even with AI, people are still what sets us apart from other companies.

⁰⁶

_{Skillset: Upskill or stagnate}

Even in the age of AI, people remain the greatest driver of success in finance. However, competition for insurance talent is more intense than ever. At the same time, labor costs are a perennial target in cost-optimization efforts.

Talent should be at the heart of future finance models and transformation efforts because it increases the chances of success. In fact, EY research shows companies that take people-centric approaches are twice as likely to succeed as those that don’t.

The first steps for CFOs are to understand the skills they will need in the future and then create a plan to attain them, while still retaining expert talent in core areas.

Steering their teams through personnel changes and restructuring initiatives without harming morale or motivation is particularly challenging now. CFOs may need to address the widespread fears regarding AI’s potential to replace jobs.

What
CFOs say

How do you ensure that you’re training your people for the skillsets of today and the skills they need for future technologies?

I would put as much focus on people as on tech. Especially as we advance toward AI, we want the best people to be with us and not leave.