Technology innovation and the shifting dynamics of global trade are challenging businesses across all sectors right now. Felt by both procurement and finance functions, these new pressures are pushing companies to think about how they can prepare for emerging trends and their companies’ ability to thrive in the future.
In its new “What’s Now and Next for Finance and Procurement?” report, the Economist Intelligence Unit (EIU), singles out “anticipating the future” as one of several critical skills that finance and procurement executives should be honing and perfecting right now. It also says that:
The biggest impact of automation will be on internal processes. In a survey of 400-plus finance and procurement executives worldwide, EIU learned that most expect the automation of payments, procurement processes, and supply chain management to have the greatest impact on their organizations—ahead of Artificial Intelligence (AI)-powered decision-making or decision-making within other key finance and procurement processes.
The most commonly cited impact of automation is a reduced need for staff, as identified by 36% of respondents. Going forward, a smaller headcount will be performing higher skilled tasks, with nearly as many respondents (34%) believing that automation will free up time for them to focus on more strategic initiatives.
Headcount will be counterbalanced by increases in technology investment and digital initiatives. The most common way for survey participants to prepare for automation is to increase their technology budgets, a strategy adopted by 39% of respondents. This was also true of digitization.
Digitization will reduce overall costs but also intensify competition for talent, respondents believe. Just under one-third (32%) of executives expect digitization to bring down costs, the second most commonly-expected impact, but almost as many (31%) agree that recruiting employees with specialized digital skills will be critical to unlocking digital transformation in their organizations.
China-U.S. trade relations and post-Brexit trade negotiations loom large. These are the two most impactful trade trends identified by a majority of the finance and procurement executives that EIU surveyed. “They expect trade dynamics to have negative effects, most commonly an increase in procurement costs (35%) and greater supply-chain complexity (29%),” the organization states.
This is forcing companies to look further afield for growth. The most popular way to prepare for shifting trends in global trade, the survey shows, is to develop alternative sourcing options (37%). Securing alternative sales leads/markets (32%) is another common response.
Companies cannot predict the future but they can prepare to adapt. A common thread linking preparations that companies have taken for automation, digitization, and global trade dynamics, EIU concludes, is “the ability to be responsive to whatever fate may throw at them.”
Preparing for the Future
In reviewing the findings of its survey, EIU says that the confidence among finance and procurement executives in their ability to adapt to automation, digitization, and global trade trends is encouraging. “Although no one can predict the future with certainty, the survey reveals that these functions have at least considered and, in many cases, made explicit preparations for potentially disruptive trends,” EIU writes, “ranging from robotic process automation to Brexit.”
Here’s the good news: EIU says there are some key strategies that can help finance and procurement departments—and the organizations they serve—thrive in the near future. They include automating to get lean (which will allow them to get more work done with smaller headcounts); optimizing talent for adaptation (i.e., actively recruit a new generation of workers); and diversify for growth.
“No company can assume that the suppliers and markets that have served it in the past will continue to do so in the future,” EIU concludes. “Now is a good time to consider alternative suppliers and markets, so the risks posed by the shifting dynamics of global trade are at least spread, if not eliminated.”