Digitalization of Corporate Finance: How Finance 4.0 is changing the role of Chief Financial Officer (CFO)?

MASTER THESIS WITHIN: Business Administration NUMBER OF CREDITS: 15 PROGRAMME OF STUDY: International Financial Analysis AUTHOR: Rusne Sablinskiene JÖNKÖPING May 2021

1

Master Thesis in Business Administration Title: Digitalization of Corporate Finance: How Finance 4.0 is changing the role of Chief Financial Officer (CFO)? Authors: Rusne Sablinskiene Tutor: Dinara Tokbaeva Date: 2021-05-24 Key terms: CFO, Finance 4.0, Industry 4.0, Digitalization, Digital disruption, Digital transformation, Corporate finance Abstract Background: While technologies are progressing exponentially and inevitably becoming an essential as a means for business to adapt and survive, no exception is the finance division. Digitalization activities have become do or die tasks for many companies and have been a challenging process for finance departments. Yet, in the context of Finance 4.0 it is barely researched. Due to evolving understanding of how finance departments should look, the Chief Financial Officer (CFO) as the leader of the whole finance division is going through a lot of changes surrounded by uncertainty. The expectations for CFO and finance department are increasing and it becomes unclear what financial specialists should actually deliver for business. Hence, this paper aims to identify how CFO’s role is changing because of Finance 4.0, otherwise known as finance function digitalization, and what skills will be needed to successfully work as CFO in the new environment that seeks to become fully digital and automated. Purpose: The purpose of this master thesis research is to identify and analyze how the CFO’s role is changing because of Finance 4.0 and what skills will be required in future for the CFO position. Method: A qualitative study with interpretivism philosophy, inductive approach and narrative inquiry strategy is taken as the best options for this particular study. Semi-structured interviews with Chief Financial Officers (CFOs) is a method for primary data collection as well as thematic data analysis for gathered data analysis are chosen in order to answer research questions. Conclusion: This research investigates how Finance 4.0 is changing the role of CFO as well as explores what future skills are required for the profession. The research clearly reveals that digitalization is affecting CFO’s role significantly and brings more uncertainty. Research results show that fundamental responsibilities of a CFO will not undergo changes any time soon as well as the skills required for work will remain largely the same. This is because the professional skills of a CFO directly reflect the responsibilities and working tasks, and, moreover, the finance departments are not completely undigitized. However, even though the foundation of the CFO role remains the same, digital disruption causes expansion and increased complexity. While existing academic knowledge is focused mostly on the change process itself and the benefits of digitalization, CFOs revealed what is challenging for them during this digital journey and what negative effect they have experienced.

2

Table of Contents 1 Introduction 1 1.1 Background 1 1.2 Problem description 1 1.3 The aim of the study 2 1.4 Research question 2 1.5 Research methodology 2 1.6 Structure of thesis 2

2 Literature review 3 2.1 Industry 4.0 3 2.2 Finance 4.0 4 2.3 Chief Financial officer’s (CFO) role and responsibilities 7 2.4 CFO’s professional skills 8

3 Methodology 11 3.1 Research philosophy 11 3.2 Research approach 12 3.3 Research design (methodological choice) 12 3.4 Research strategy 13 3.5 Time horizon 13 3.6 Data collection 13 3.6.1 Secondary data collection 13 3.6.2 Primary data collection 14 Sample 15 Interview guide 17 3.7 Data quality 18 3.7.1 Reliability 18 3.7.2 Trustworthiness 19 3.8 Data analysis and ethics 19 3.8.1 Data analysis method 19 3.8.2 Data ethics 20

4 Research findings 21 4.1 Digitalization of the finance function 21 4.2 CFO’S role and responsibilities 24 4.3 Digitalization challenges for CFO 24 4.4 Future of the CFO’s position 25 4.5 Traditional and additional CFO’s skills 26

5 Research analysis 28 5.1 Need of digital solutions for finance function 28 5.2 The other side of digitalization 30 5.3 CFO: from gatekeeper to creator 31

6 Conclusions 35

7 Discussion 37 7.1 Practical implications 37

3

7.2 Limitations 37 7.3 Future research 38 References 39

4

Figures

Figure 1 The four stages of the Industrial Revolution. Source: Kagermann et al. (2013) 3 Figure 2 Phases of the Finance departments’ evolutionary journey. Source: Govender et al. (2019) 8 Figure 3 What Is and What Is Not a CFO? Source: Dergel (2014) 9 Figure 4 The Research Onion model. Source: Saunders, Lewis and Thirnhill (2012) 11 Figure 5 Research themes identification procedure. Source: Author 19

Tables

Table 1 Information about the interview participants and interview. Source: Author 17 Table 2 Traditional & Additional (future) CFO’s skills. Source: Author 27 Table 3 CFO’s responsibilities from literature review & semi-structured interview. Source: Author 31

Appendix Appendix 1 GDPR Thesis Study consent form 43 Appendix 2 Interview guide 45 Appendix 3 Data analysis final coding 48

1

1. INTRODUCTION

_____________________________________________________________________________________ This chapter introduces the background of the paper as well as the problem, aim of the study. Moreover, a short presentation of the research methodology and the structure of the thesis can be found. ______________________________________________________________________ 1.1 Background Nowadays technologies are progressing exponentially and inevitably becoming an essential as a means for business to adapt and survive (Deloitte Touche Tohmatsu Limited, 2020a). It is changing more fundamentally than the world has ever seen (Justenhoven, Loitz & Sechser, 2018) and expectations for business are growing (Sher, Ehrenhalt & Englert, 2018). Digitalization is all about improving business economics, consumer and employee experience, so in order to successfully operate in the modern world, digital transformation and technologies have to be taken seriously (Deloitte Touche Tohmatsu Limited, 2020a). Anyway, it is often easier said than done. Today it is not enough just to be open minded for technologies, companies have to ensure commitment from all levels of the organization to successful digital transformation (Deloitte Touche Tohmatsu Limited, 2020a). As companies are transforming, so too is their finance division (Justenhoven et al., 2018). Even though finance departments are far behind with technologies compared with other departments, due to dramatic changes caused by the financial crisis in 2008 (Govender & Monteiro, 2019), employees are starting to do new things in new different ways (Sher et al., 2018). Moreover, the modern outlook to controllership is sharply contrasting to the past (Kaplan, Waelter, Nuttycombe & Carrington, 2017). The idea of Chief Financial officers (CFO), as a leader of the finance function of the company, becoming agile, oriented on innovations and strategic decisions, instead of being mostly technical functions, is getting stronger (Kaplan et al., 2017). It is clear that the old way of doing things is not enough anymore and executives have to be ready for the Fourth industrial revolution (Deloitte Development LLC, 2018a). Hence, for CFOs there are only two options to choose from: either change and adapt or retire (Sher et al., 2018).

1.2 Problem description Exponentially progressing technologies are changing daily work and business routines from the basis. Since digitalization is a quite new phenomena, it brings a lot of uncertainty that leads to complications in reacting and adapting. As well as can require a lot of financial resources and can cause quite a lot of stress. Therefore, The issue of uncertainty about CFO function and the diverse set of professional skills required to successfully adapt in the Finance 4.0 environment is the focal problem of this paper.

2

1.3 The aim of the study The aim of this paper is to identify how the CFO role is changing because of the Finance 4.0 and what can be identified as a set of skills needed to successfully work in this position. 1.4 Research questions In order to fulfil the aim of this study and ensure the consistency of the paper, it is important to define research questions. After conducting a literature review, these are the research questions that this particular study aims to answer:

- How is Finance 4.0 changing the role of CFO? - What are the future professional skills required for a CFO position?

1.5 Research methodology Methodology of this research is based on the model called The research onion presented by Saunders, Lewis and Thornhill (2012). As for the methodological choice, qualitative study with interpretivism philosophy, inductive approach and narrative inquiry strategy is decided as the best options for this particular thesis. Narrative literature review for secondary data collection and semi-structured interviews with Chief Financial Officers (CFOs) for primary data collection are found as the best methods in order to answer research questions as well as thematic data analysis method is chosen for research findings and research analysis chapters. 1.6 Structure of thesis This master thesis consists of literature review, methodology description, research findings and analysis, conclusions and discussion that involves implications, limitations and future research. As for literature review, it explains the existing knowledge on main definitions of the study: Industry 4.0, Finance 4.0, Chief Financial Officer (CFO), CFO’s professional skills and responsibilities. Also, analyzes the existing predictions about how the CFO role should look in future. The methodology describes the philosophy, approach, design, time horizon and process of the research as well as explains chosen methods and techniques. Further, the research findings and analysis part is focused on identification of patterns of meaning in the dataset which is used to create coding that leads to themes and helps to answer the research questions. Conclusion of this master thesis summarizes the output from the analysis and the discussion part leads to limitations faced in this study, defined theoretical and practical implications as well as potential future research possibilities.

3

2. LITERATURE REVIEW

___________________________________________________________________________________

The purpose of the Literature review chapter is to explain the existing knowledge about

the main definitions of this master thesis: Industry 4.0, Finance 4.0, CFO’s role &

responsibilities as well as CFO’s skills. Moreover, to examine what are the challenges

and opportunities of the digitalization of corporate finance, as well as future predictions

for the CFO role.

______________________________________________________________________

2.1 Industry 4.0 The main focus of this paper is the Finance 4.0 environment, but in order to understand it, we need to start from defining what is Industry 4.0, otherwise known as the fourth industrial revolution (Stefanuk, February, 2021). In history, the world has faced four industrial revolutions and each of them brought more and more complexity to the systems and environment. (Kagermann, Wahlster, & Helbig, 2013) (Figure 1).

Figure 1. The four stages of the Industrial Revolution. Source: Kagermann et al. (2013) In the late 18th century the water and steam powered production mechanization was introduced to the world and that represents the first industrial revolution (Kagermann et al., 2013). Following electricity powered mass production based on assembly lines discovered in the late 19th century marked the second industrial revolution (Kagermann et al., 2013). Afterwards, due to advancement of the information technologies in the

4

second half of the 20th century, the automation of manufacturing started to rise and led to the third industrial revolution (Kagermann et al., 2013). The term Industry 4.0 was first presented in 2011 by German government at the Hannover Fair event, symbolizing a brand new era for industries - fourth industrial revolution (Tay, Aziati, Chuan & Ahman, 2018). However, Industry 4.0 term is not commonly used outside the german speaking countries and Scandinavia, even though it represents digital transformation (or in other words digitalization) of industries (Catkin, June 2016). Hence, in this paper digitization and digital transformation are used as synonyms for Industry 4.0 (later on, for Finance 4.0 as well). Industry 4.0 represents the way in which smart connected technology becomes embedded within organizations (Deloitte Development LLC, 2018). The Fourth Industrial revolution has a power to change many things around - work, operations, society (Deloitte Development LLC, 2018). Basically, the main idea of Industry 4.0 is that businesses are enabled to take advantage of modern technologies to create innovative business solutions instead of using technologies in the same old way of doing business (Deloitte Development LLC, 2018). This transformation involves and affects everything and everyone around, so it is crucial to have a good understanding about the connection between business and social needs, between financial outcomes and innovative strategies, between workforce productivity and people’s well-being as well as integration of existing technologies within creation of new ones (Deloitte Development LLC, 2018). Over time the Industry 4.0 term was evolving, getting broader and now it is one of the greatest market shaping trends in the world. Research shows that digital business strategy has a positive impact for companies: encouraging innovative solutions lead to increased agility and profitability of the business (Murawski, Bühler, Martensen, Rademacher & Bick, 2018). Biggest benefits of the digitalization for the companies are increased revenue (Westerman, Tannou, Bonnet, Ferraris, & McAfee, 2012) and competitive advantage (McKinsey Digital, 2016) which are the result of increased sales, risk reduction, efficiency improvement, expanded digital channels and new business fields (Neumeier, Wolf & Oesterle, 2017). Digitalization today provides many extraordinary opportunities and even opens the window to Winner takes all dynamics for those that find a way to pursue modern technologies and benefit from innovative business models (Schreckling & Steiger , 2017). However, this revolution can take decades and can also bring nearly as much uncertainty as possibility (Deloitte Development LLC, 2018). While some companies are enjoying the success that digital disruption has brought, market players that are not that agile and open for technologies are struggling (Schreckling et al., 2017). Companies that are ignoring the fact that technologies are already here and it is crucial to transform and adapt, are at risk to be outcompeted by those faster and smarter ones (Schreckling et al., 2017). 2.2 Finance 4.0 As the present world is going through a fourth industrial revolution, which aggressively transforms every part of the business, no exception is the finance division. One of the major challenges nowadays for finance functions is digital transformation which in many companies is a do or die task (Glader & Strömsten, 2020). However, due to the

5

great crash in 2008, finance departments and financial services organizations have experienced dramatic changes that enabled them to fully benefit from the technological innovation disruption of the past decade (Govender & Monteiro, 2019). Because of the financial crisis back then, Finance departments as non-revenue generating departments were forced to rapidly cut the costs and undergo around a decade of adopting and complying with constantly changing regulations (Govender et al., 2019). Not surprisingly, the budget of the financial department was focused on complying with regulations, because it was mandatory when at the same time technological solutions were just nice to have (Govender et al., 2019). Of course, during the past decade major steps were taken: beginning of transactional accounting outsourcing to low cost countries and business-oriented controllers separation from statutory dimension (Glader et al., 2020). Unfortunately, even now when the world is stepping into the digital era, technological solutions such as Excel are still most widely used as a work tool, which shows that the finance division is far behind regarding technologies in comparison with other departments (Govender et al., 2019). This is quite ironic due to how many parts of any business are affected by finance functions (Klimas, January, 2019). Govender and Monteiro (2019) talked with CFOs and other senior finance leader from the companies at the different stages of digitalization and all of them agreed, that it is critical for finance departments to become more digital. They also claim that even though digitalization takes time, effort and requires long-term strategy, the finance division has to see technologies as worthwhile, which are basically short or medium term benefits (Govender et al., 2019). Generally speaking, digitalization has to solve real problems that finance departments are facing. Research shows that nowadays CFO are actually seeing long-term value of digitalization embedding with corporate reporting, organization culture and decision making processes (Corson & Klimas, 2020). Data quality has always been a great problem of a finance division (Govender et al., 2019). Due to this issue, finance departments are still spending large amounts of their time searching for mistakes and correcting them (Govender et al., 2019). Moreover, finance function of the large multinational corporations are still spending about 30% of the time creating reports (Glader et al., 2020). CFOs and other finance professionals are buried in reporting together with governance and the need for these two functions is only increasing (IMA; ACCA, 2014). Due to technological disruption the complexity of business as well as amounts of data are growing and it gets more and more challenging to finance professionals to gather meaningful information for effective and efficient decision making process (IMA; ACCA, 2014). Moreover, it gets more challenging to build well operating ERP systems for large scale enterprises (Glader et al., 2020). Finance departments are still seen more as scorekeepers that provide data to management than value added participants in the decision making process (IMA; ACCA, 2014). Hence, digital disruption has brought these challenges into the spotlight, now it is time to change and move the finance division and its professionals into the digital era. Finance 4.0 is a fourth industrial revolution for finance or as a subset of Industry 4.0 (Klimas, January, 2019; Stefanuk, February, 2021). For no other business function digitalization is truer than for finance (Klimas, January, 2019). For example, traditionally account payables and receivables is a back-office function, but in the digital economy with involvement of technologies it could be automated (Klimas,

6

January, 2019). We can only imagine how much time it would save for CFOs as well as their professional team and that is where we start to see real benefits. It is even believed that outcomes like that would totally free finance specialists from report generating processes, and also encourage faster and more efficient decision making processes (Glader et al., 2020). The whole idea of Finance 4.0 is to involve intelligent technologies such as Internet of Things (IoT), Artificial Intelligence (AI), Blockchain, Robotic Process Automation (RPA) and innovative visualisation tools into the finance function (Klimas, January, 2019; Govender et al., 2019). The journey starts with technological solutions taking over building block activities - processing, recording, correcting and controlling (Govender et al., 2019). New digital tools will even create a possibility for financial controllers' make monthly reporting into a zero day's work (Glader et al., 2020). This would allow finance departments to spend minimal time dealing with daily operations such as reporting and compliance with regulations (Govender et al., 2019). Needless to say, that would leave more space for focusing on value enhancing activities, such as predictive insights that in nowadays dynamic business environments are crucial (Govender et al., 2019). Also, it will allow more time to work with business partners (Glader et al., 2020). Of course, CFOs and other finance professionals will continue to interpret accounting and regulatory rules, but due to modern modeling capabilities, they will be better equipped to respond quickly and strategically (Govender et al., 2019). This strongly refers to another common problem of large Scandinavian corporations - visualization (Glader et al., 2020). Even as just the start of a long journey, it will change CFOs’ and the whole finance department lifes significantly. Corson et al. (2020) predicts that in 2025 finance will be more open because of the extended ecosystem, deeper collaboration and a more fluid operating model. Moving forward on the digitalization path, the next significant change has to be automation by involving intelligent robots (Govender et al., 2019). Ideally, future finance departments should get fully automated from input to output (Govender et al., 2019). Of course, it is not an easy task and requires long-term strategy, but benefits are worthwhile to give some effort (Govender et al., 2019). RPA systems have a short payoff period, they can work 24/7, they don’t get sick and they are self-learning (Govender et al., 2019). Since finance function is very sensitive for any deviations according to the task performance - RPA systems solve this problem: robots do not make any deviations and once a robot program is created, it can be copied to another robot (Govender et al., 2019). According to Sher et al.(2018) predictions, transactions of the finance department should become touchless because of blockchain technology and periodic reporting will no longer drive operations and decisions. Anyway, after talking with CFOs IMA and ACCA (2014) defined an ineffective Finance - Business partnering problem as a result of the evolving technological environment. Additionally, the decision making process not necessarily will benefiting from increased speed of work: while with the help of the Cloud technology everything will become agile, accessible and easier for companies, it can potentially give an end for the internal discussion about what should either be centralized or decentralized (Glader et al., 2020). In response, Govender et al. (2019) sees Cloud technology as a solution rather than a threat. The biggest advantages for the finance department that Cloud can bring are the cost of finance technology becoming OPEX instead of CAPEX, elimination of operational risk and data optimization as well as possibility to work from

7

any corner of the world that naturally should increase the ability to communicate (Govender et al., 2019). As this significant transformation is happening, it inevitably changes the understanding of what kind of professionals should be working in the finance department of the future. Of course, core accounting knowledge and controlling understanding are crucial for successful finance specialists, but instead of previous experience with specific production processes, communication, data science skills and ability to innovate becomes more important (Govender et al., 2019). Individuals must embrace digital and technological change and it naturally will change the required skills set (Glader et al., 2020). Since CFOs are professionals with many years of experience in finance, that kind of radical change of expectations brings an uncertainty about the future of the CFO in the Finance 4.0 environment. 2.3 Chief Financial officer’s (CFO) role and responsibilities Good business is like an engine for society and it needs a good oversight which is the role of the Chief Financial Officer (CFO) (Mellon, Nagel, Lippert & Slack, 2012). Yet, a lot of business people asked about what CFO is, finding it difficult to define (Dergel, 2014). Cambridge Business English Dictionary defines CFO as “the most important financial manager in a company or organization, who is the head of the finance department” (Cambridge Business English Dictionary, 2021). CFO responsibilities involve managing the budget, corporate spending, internal control as well as supervising financial reporting and ensuring compliance with accounting regulations (Hoitash & Kurt, 2016). It also involves outsourcing financial data management, provision of management information, managing investor relations, insurance and treasury activities (Mellon et al., 2012). It is clear that CFO already has a wide spectrum of financial responsibilities (Mellon et al., 2012). Usually, the CFO is considered as the second in importance after the Chief executive officer (CEO) in the corporate hierarchy (Hoitash et al., 2016). Generally speaking, while the CFO looks after accounting and all the finance functions of the company, other parties such as CEO and the board members are responsible for making decisions that affect the business (Hoitash et al., 2016). Moreover, financial reports provided for the audit committee supervision, have to be certified by both CEO and CFO (Hoitash et al., 2016). Nevertheless, CFO is not a single decision maker with respect to accounting, investing and financing, but more as a advisor that gathers data and performs financial analysis required for major business decisions (Hoitash et al., 2016). The financial probity has never been more important than now as well as the job of the CFO has never been as complex or broad (Mellon et al., 2012). Since expertise and unique technical knowledge of CFOs position is crucial for successful key business decisions, expectations for finance executives to partner more closely with the business are rising (Kaplan et al., 2017). Companies nowadays are looking for CFOs that would not only focus on financial reporting and supervision, but would also be involved in major business decision making processes (Caglio, Dossi & Van der Stede, 2018). Moreover, nowadays financial departments, the same as any other business function, have to deal with accelerating digital disruption that brings even more expectations and uncertainty to the CFO role and whole vision for controllership.

8

Govender et al. (2019) created a model, that explains how CFO functions will change in different phases of finance digitalization evolutionary journey (Figure 2). As can be found in Figure 2, there are four phases of the finance department evolutionary journey: Legacy dominated CFO, Digitally enhanced legacy CFO, Digitally enabled CFO and Digitally optimized CFO (Govender et al.,2019). The journey starts from the CFO that is working on mostly building block activities, does not initiate changes in finance processes for decades, does a lot of work manually, does not use Cloud technology and involves a little or none of robotics and AI into daily work (Govender et al., 2019). With the knowledge that we have about the digital transformation now, the most digitally matured CFO represents Digitally optimized CFO, who spends most of the time on value driven activities, optimally manages and controls, uses Cloud possibilities at its maximum as well as finance block activities are fully driven by AI (Govender, 2019). Basically, it is a journey from 80% of building block activities, all the way up to high AI involvement and 95% of value enhancements.

Figure 2. Phases of the Finance departments’ evolutionary journey Source: Govender et al. (2019) Corson et al. (2020a) also claims that modern CFO should focus on how to balance between long-term value and short-term results. Also, every CFO knows that a company would benefit a lot if the finance department could deliver better quality financial information in a more timely fashion (Sher et al., 2018).

2.4 CFO’s professional skills According to Mellon et al. (2012) there are two types of CFOs: financial CFOs and operational CFOs. Basically, most of the CFOs are either strong in financial decision making or have strong operational backgrounds, rather than being strong in both (Mellon, 2012). However, in today's complex world successful CFOs are those who can balance between traditional approach and new mandates while protecting values together with future growth (Corson et al., 2020a). Mindset of the CFO plays a break from the past role and becomes as crucial as the finance skills (Mellon, 2012). It is important to understand that having a title CFO does not necessarily mean being a real CFO (Dergel, 2014). Main fundamental factors that describe a real CFO are being

9

strategist, leader and advisor at the same time (Dergel, 2014). Figure 3 summarizes what is and what is not a CFO.

Figure 3. What Is and What Is Not a CFO? Source: Dergel (2014) CFO strategist makes business decisions and creates plans of actions based on the company’s strategy as well as participates in the company's strategy development (Dergel, 2014). As for the future, CFOs are increasingly seen as key stakeholders of the company (Corson et al., 2020b). Moreover, CFOs are expected to put the finance department into a more central position when reframing long-term value creation goals (Corson et al., 2020b). Everyone would agree that as a real leader, CFO is a person that inspires, sets the pace and acts as an example for the people that are working under their authority as well as for other executives (Dergel, 2014). As it is about the CFO himself it is also about the people in the finance department. Usually, a CFO is defined as a left-brain approach manager due to strong rational thinking and analysis based decision making (Corson et al, 2020b). However, it is often the case that the finance team is not developed broadly enough to reach success (Mellon et al., 2012). There are two reasons why it happens: relatively narrow finance professionals' career development and extended finance teams, in many cases even spreaded around the globe (Mellon et al, 2012). Hence, as a leader of the finance division, CFO has to build the trusted relationship for a strongly connected leadership team and for that a right-brain capabilities are needed (Corson et al., 2020b). CFO has to become a leader that communicates, inspires and motivates people as well as encourages discussions between fair and balance (Corson et al., 2020a). CFO plays an advisor role by sharing the knowledge with CEO and other executives when making major business decisions (Dergel, 2014). Emotional intelligence plays an important role here: to create a stronger leadership team and close relationship with other C-suite peers, CFO needs to recognize and understand people’s emotions, especially in difficult conversations as well as find the ways to speak the same language (Corson et al., 2020b). Additionally, most of the data managed by the finance department today is delivered by ERP systems (Glader et al., 2020). Also, a survey conducted with CFOs by Corson et al. (2020a) shows that many finance functions, such as internal auditing, financial reporting, planning, control, risk, compliance, tax and treasury, are under the threat of being displaced by AI and automation. Therefore, it is important to understand that skills needed to be a successful CFO are also evolving and require additional ones than only traditional CFO skills. Potentially business will require skills in dealing with AI and machine learning (Glader et al., 2020). However, survey shows that CFOs are aware about the pressure to change and at least 40% of CFOs participated claimed to

10

have advanced capabilities in areas such as blockchain-based tools, advanced analytics, AI, automation and RPA, ERP systems and Cloud (Corson et al., 2020). It is still not that clear what skills will be needed in the new digital environment, but if a finance degree stops being an absolute necessity for a career, it raises a concern about finance specialists' knowledge about the fundamental mechanics of accounting and controllership (Glader et al., 2020).

11

3. METHODOLOGY

___________________________________________________________________________________ The purpose of the Methodology chapter is to present research philosophy, approach, design, strategy, time horizon and quality. Also, to present secondary & primary data collection, research ethics as well as methods used for analysis of collected data. ______________________________________________________________________

Methodology is an integral part of this master thesis and can be defined as a general strategy of how research is performed (Melnikovas, 2018). It explains the understanding of the research questions and the research method choice as well as lets to ensure the consistency between chosen tools, techniques and underlying philosophies (Melnikovas, 2018). Accordingly, The research onion presented by Saunders, Lewis and Thornhill (2012) (Figure 2) is seen as a best suitable methodology construction for this particular research. The main idea of this model is to provide the explanation for assumptions of each stage of the methodology which is necessary in order to have a high credibility of the paper (Saunders et al., 2012). The research onion has 6 layers that represent research stages: research philosophy (3.1), research approach (3.2), research design (methodological choice) (3.3), research strategy (3.4), time horizon (3.5), techniques and procedures (data collection) (3.6), data quality (3.7) as well as data analysis and ethics (3.8). The structure of the methodology chapter is based on these layers.

Figure 4. The Research Onion model Source: Saunders, Lewis and Thirnhill (2012) 3.1 Research philosophy Classical research methodology is usually based on specific philosophical theory which later on defines used strategies and techniques, so it is important to define research philosophy from the very beginning of the research (Melnikovas, 2018; Saunders et al., 2012). There are few different research philosophies (so called research paradigms) that

12

can be classified by the responses to three fundamental questions: ontological (explained by the nature of reality or being), epistemological (explained by the acceptable knowledge) and methodological, so called axiology (explained by the role of values in research) (Aliyu, Singhry, Adamu & Abubakar, 2015; Saunders et al., 2012). According to that, Saunders et al. (2012), classified four main research philosophies: pragmatism, positivism, realism and interpretivism. Pragmatism, positivism and realism were rejected as they do not match with the aim and purpose of the study, so interpretivism was selected as a most suitable paradigm for this particular paper. Basically, this study requires small samples with depth investigation (i.e. semi-structured interviews) instead of having large samples with standard data (i.e. annual reports). Also, the study has a focus on a very specific target group - Chief Financial Officers, in a clearly defined environment that is surrounded by uncertainty - Finance 4.0. Due to that, research is relatively subjective. Moreover, interpretivism philosophy claims that it is necessary to take a human factor into consideration which is also seen as an important aspect for this paper (Saunders, 2012). Besides, interpretivism claims that the future is unpredictable and knowledge of the future events can be collected only using intuitive strategies (Melnikovas, 2018). Digitalization in general is surrounded by uncertainty. 3.2 Research approach There are three main research approaches presented by Sanders et al. (2012): deduction, induction and abduction. Generally speaking, while deductive approach moves from theory to data and is mainly about building and testing a theory, inductive approach moves from data to theory and creates a generalizable projection based on observations (Saunders et al., 2012; Azungah, 2018). On the other hand, the abductive approach starts from the observations and moves forward to creating a theory of how it could have occurred (Saunders et al, 2012). Collecting a substantial amount of data, then moving forward to searching for patterns in the data and finally creating a general set of propositions is considered as the most suitable way of conducting this research. Hence, induction is a research approach selected for this paper. 3.3 Research design (methodological choice) Research design can be defined as an overall plan for answering research questions (Saunders et al., 2012). Along with what researcher wanted to achieve, the research design can be quantitative, qualitative or a complex mix of both (Saunders et al., 2012). While quantitative research is based on numeric data and describes what exists, qualitative research refers to the collection of descriptive data and conveys what exists (Saunders et al., 2012; Melnikovas, 2018; Gray, Williamson, Karp & Dalphin, 2017). Due to interpretivism as a research philosophy and inductive research approach selected, the most appropriate research design for this master thesis is qualitative. The biggest advantage of the Qualitative research method is that it allows us to identify subtleties and interpret data that numbers do not convey (Gray et al., 2017). It also seeks to create a better understanding of social realities and focus on meaningful patterns, processes and structural features by looking from research participants point of view (Flick, Kardorff & Steinke, 2004). Digitalization of corporate finance in general is a field that is surrounded by uncertainty about the future and has a lack of previous findings, thus taking a research participants point of view (which in this particular study

13

are CFOs with many years experience in finance function) creates a bigger chance to provide real predictions and solutions with potential implications. 3.4 Research strategy While research design illustrates the overall plan for answering the research questions, research strategy is a plan of actions to achieve the goal (Saunders, 2012). There are quite a few strategies to choose from, such as experiment, survey, archival research, case study, but narrative inquiry strategy is considered as the most suitable for this study. Narrative inquiry is a set of human stories of experience that provides a strong foundation for investigating how people experience the world (Webster & Mertova, 2007). Main prons of this research strategy are simpliness of getting people to tell their story, because people do like to share their experience; It is possible to gain in-depth data because it occurs easily in narrated events; People do not tend to hide true facts when telling their story (Savin-Baden & Niekerk, 2007). The target group of this particular study is CFOs from different backgrounds and it can be difficult to collect the right amount of acceptable qualitative data. Hence, it is important to choose the right research strategy that empowers researchers to reach the most relevant information. Moreover, investigating topics such as digitalization which is accompanied with uncertainty, it is important to focus on experience and insights from practice. 3.5 Time horizon Saunders et al. (2012) have provided two options of time horizon: Cross-sectional and Longitudinal time horizon types. Since only studies conducted through a short period of time are used for this particular research, the time horizon selected for this paper is cross-sectional (Saunders et al., 2012). Data used for research is collected in approximately 4 months due to time limitations, but can still be applied to different contexts because of the variety of industries. 3.6 Data collection The research involves both primary- and secondary data. As for secondary data collection, a comprehensive literature review was conducted in order to gain knowledge about the subject and prepare for the further investigation. Review involves secondary data analysis on Industry 4.0 and Finance 4.0 phenomena as well as the role of CFO and skills required for work now and in future. After successfully conducting secondary data collection, researcher held eight qualitative semi-structured interviews with CFOs from two different countries and different industries in order to gather empirical evidence for further analysis and research questions. 3.6.1 Secondary data collection First step of data gathering is identified as a secondary data collection - narrative literature review. Narrative literature review can be described as a discussion of important topics from a theoretical point of view (Jahan, Naveed, Zeshan & Tahir, 2016). This literature review method allowed researcher to scan literature on a broader scale than traditional systematic review (Phillipson, Goodenough, Reis & Fleming, 2016). Main purpose of narrative literature review was to investigate the current

14

knowledge on the subject, provide an extensive overview for the reader and place information into perspective (Green, Johnson & Adams, 2006). Moreover, as an additional benefit of narrative literature review a potential to reduce the author’s bias was seen (Green et al., 2006). To gain a better understanding about the subject, research involves not only academic publications, but also reports from consultancy services companies such as Deloitte, PricewaterhouseCoopers, McKinsey & Company and others. These reports are treated as up-to-date material with a potential to build a basis for future predictions. Anyway, the risk of data being biased is taken into account. The goal of the researcher was to have literature review as exhaustively as it relatively possible. To fulfill this expectation, four scholarly databases were used: Primo by the Jönköping University, Google Scholar, Business Source Premier and RePEc IDEAS. Criteria followed during literature review by researcher:

- Only articles published January 1, 2000 or later; only reports from consultancy services companies published January 1, 2014 or later.

- Only reports from large scale and reliable consultancy services companies can be accepted.

- Peer-reviewed articles. - Articles released by authorities or other official executives. - Articles published in academic journals.

Additionally, reference lists of the most relevant articles and reports of consultancy services companies were investigated for potential literature sources. 3.6.2 Primary data collection For the primary data collection eight semi-structured interviews were conducted. Semi-structured interviews are pre-scheduled and relatively detailed interviews held in order to collect sufficiently objective knowledge from the respondents that have experience related with the subject (McIntosh & Morse, 2015). Analytically, it is easy to compare respondents of the research after conducting this kind of interviews and quantify data if needed, because all the interviewees get the same questions in the same order (McIntosh, 2015). This method of primary data collection was selected for the research, because of these reasons:

- Digitalization is surrounded by uncertainty, hence it is inefficient to hold strictly structured interviews; It is a risk that something important will not be asked.

- It has a basic structure that helps to keep the consistency of the interview and the whole research, but at the same time leaves space to get insights that were not taken into consideration during the literature review.

- Quantitative analysis might be recommended for future research and this type of primary data collection empowers researcher to quantify collected data if needed.

As this particular research aims to identify CFO role and skills changes, it was decided to hold interviews with CFOs regardless of the country, age or industry they represent. Criteria how potential interviewees were selected , presented more detailed in the remaining chapter.

15

McIntosh et al. (2015) also recommend holding a pilot interview in terms of critically testing the prepared interview questions. However, due to limited possibilities to reach the necessary number of research participants, it was decided to involve all the conducted interviews into the further research analysis. Sample Many discussions about the size of the sample of qualitative research in literature can be found. However, according to McIntosh et al. (2015), the size of the sample has to ensure the adequacy of the data collected. However, Sim, Saunders, Waterfield & Kingstone (2018) made a statement that it is problematic to predefine a size of sample for inductive research, because of the complexity to predefined the themes. Also, Emmel (2013) declared that it is way more important what has been done with the data collected instead of the number of cases counted. With this in mind, snowball and judgemental methods were selected as the best way to find the right participants for the research. First, the profile of the potential respondent was identified:

- Currently working or has recently worked as CFO. - Has at least 5 years experience in finance.

However, such indicators as country of origin, age, gender or working industry were not taken into consideration due to ambition to build an overall picture of the finance department and CFO role and skills required in any background as well as assuming they do not have an impact on the results. Moreover, the variety of industries helps to reduce a possible bias because of the industry. Only because of simplicity and increased possibilities, CFOs that were working in companies that operate in either Sweden or Lithuania were counted as suitable. Second, several potential respondents were contacted using personal connections, official email address and Linkedin.com social media platform. As it was expected, few of them gave further recommendations of people that in their opinion would be a better fit for semi-structured interviews within digitalization topics focused on CFOs. As expected, more than 60% of invited CFOs have declined the invitation or have not responded to mail or message. Also, those who accepted the invitation mentioned that topic sounded interesting and a lot promising. Moreover, few of them admitted agreeing to the interview with the expectation to learn something new about the subject as well. Due to privacy and confidentiality reasons that are defined by GDPR thesis study consent (can be found in appendix 1), there are no names provided of interviewees and the company/organization they are working in. Hence, every interviewee got the code name Participant X (PX), depending on the order of interviews. Moreover, all the participants’ specifications are presented in the same structure: Working industry, age category, gender, experience in Finance, experience as CFO, previous position, size of the managed team. Eight interviews in total have been conducted during primary data collection, with four CFOs from companies operating in Lithuania and the same number of CFOs from the companies operating in Sweden. In table 1 code of the participant, specifications, date and duration and the language of the interview can be found.

16

Interviewee Specifications Date and duration Language

Participant 1 P1

- Corporate (cruise ships/real estate)

- Operating in Lithuania - 40-50 age category - Female - 20 years of experience in

Finance - 10 years as CFO - Previously as CAO - Managing 5 people team

Date: 2021-03-31 Duration: 1 hour

Lithuanian

Participant 2 P2

- Pharmaceuticals - Operating in Lithuania - 30-40 age category - Female - 20 years of experience in

Finance - Not a CFO at the moment,

current position - Strategy Director

- 5 years as CFO - Previously as project manager - Managed 10 people team

Date: 2021-04-01 Duration: 1 hour

Lithuanian

Participant 3 P3

- Fintech - Operating in Lithuania - 30-40 age category - Male - 10 years of experience in

finance - 1 year as CFO - Previously as Co-founder/CEO - Managing 4 people team

Date: 2021-04-02 Duration: 0,5 hour

Lithuanian

Participant 4 P4

- Financial Services - 40-50 age category - Operating in Lithuania - Female - 17 years of experience in

Finance - 10 years as CFO and CEO - Previously as CAO - Managing 3 people team

Date: 2021-04-06 Duration: 1,5 hour

Lithuanian

Participant 5 - Emergency response and health Date: 2021-04-23 Lithuanian

17

P5

care services - Operating in Sweden - 30-40 age category - Female - 8 years experience in Finance - 2 years as CFO - Previously as Financial Analyst - Managing 6 people team

Duration: 1,5 hour

Participant 6 P6

- Financial Services - Operating in Sweden - 30-40 age category - Female - 10 years of experience in

Finance - 1 year as CFO - Previously a Financial Auditor - Managing 5 people team

Date: 2021-04-25 Duration: 1 hour

Lithuanian

Participant 7 P7

- IT Consulting - Operating in Sweden - 40-50 age category - Male - 20 years of experience in

Finance - 4 years as CFO - Previously as CAO - Managing 8 people team

Date: 2021-05-05 Duration: 1 hour

Swedish

Participant 8 P8

- IT Consulting - Operating in Sweden - 50-60 age category - Female - 20 years of experience in

finance - 5 years as CFO - Previously as CAO - Managing 8 people team

Date: 2021-05-06 Duration: 1 hours

Swedish

Table 1. Information about the interview participants and interview. Source: Author Interview guide Before starting semi-structured interviews with selected CFOs the guide of the interview was set. It consisted of explanation of confidentiality and GDPR thesis study consent for the interviewee as well as permission to record the interview, introduction to the interview and research itself, interview questions and closure of the interview. The interview guide can be found in Appendix 1. It was chosen to divide interview questions into three parts in order to ensure the basic structure and the quality of the interviews. Since this particular study has two main research questions, first part questions for

18

CFOs covered general information of the respondent, second part questions covered role of CFO and skills required and thirt part of questions focused on challenges and opportunities of digitalization for finance division. Every interview was closed with the extra question about additional comments to encourage discussions as it was recommended by Bryman & Bell (2011). Moreover, most of the questions were structured to start with “How” and “What” as well as lead to the examples from respondent experience. As for the language of the interview, researcher was able to hold meetings in three languages: Lithuanian, Swedish and English. The mother tongue of all respondents was either Lithuanian or Swedish which was beneficial in regards to ensuring the uniqueness of the content. Also, all of the meetings were held online using Google meetings and Microsoft Teams platforms due to Covid-19 restrictions. Average duration of each interview is provided in table 1. The duration of interviews varies from 0,5 to 1,5 hour with an average of 1 hours. As it was mentioned before, CFOs are the representatives from the management team with many responsibilities that affect their availability for interviews as such. Hence, it was tried to make a process as simple as possible for CFOs:

- GDPR thesis study consent for signing was provided online for digital signature. - Interview questions were sent in advance in two languages: English and

Swedish/Lithuanian. - Topic, purpose of the study and short presentation was sent out in advance by

email. - Respondents had a chance to choose the most preferable communication tool

(i.ex. email, LinkedIn.com, Microsoft Teams, etc.). - Agreed time schedule of the interviews was strictly followed. - After signing GDPR thesis study consent interviews were recorded instead of

making notes in order to ensure data quality and safe time. 3.7 Data Quality 3.7.1 Reliability Reliability of the study is about whether the data collection techniques and procedures would ensure the consistent findings while repeating the same research, but on a different occasion and by different researchers (Saunders et al., 2012). However, it is not possible to measure how research conducted by qualitative methods is reliable and it is more focused on how data has been collected and processed (Bryman et al., 2011). Since semi-structured interviews selected for primary data collection do not have a strict structure, doubts about the reliability could arise. However, to avoid a risk of research being unreliable, researcher have spent an additional time with explanations and presentations about the subject and the research. Generally speaking, the more structured research has the higher chances to ensure the reliability of the study. It is an important factor for the research, because the lack of reliability can create a lack of trust in the credibility of the study as well.

19

3.7.2 Trustworthiness Trustworthiness of the research is the level of confidence in collected data, used methods and interpretations in order to ensure the quality of the study (Polit & Beck, 2014). To guarantee the acceptable trustworthiness of this particular research, a lot of attention was given to create the logical connection between the purpose of the study and the research questions. This was achieved by critically selecting relevant literature for the literature review part which later was a basis for pre-prepared semi-structured interview questions and interview guide. As for the generalisability, the study aims to increase the understanding about how CFO’s role is changing because of Finance 4.0 and what skills will be needed rather than provide generalizable results. Hence, generalisability is considered to be relatively low. 3.8 Data analysis and ethics 3.8.1 Data analysis method For the research analysis part, the thematic data analysis method, which in qualitative research is the most widely used, has been selected (Bryman et al., 2011). The purpose of the method is to identify and analyze patterns of meanings in the collected data in order to answer the research questions (Braun, Clarke & Rance, 2014). Also, the method is well suited for qualitative data analysis collected via interviews, which is the primary data collection method taken in this paper (Braun et al., 2014). Braun et al. (2014) present two ways of identifying themes in the data set: inductive and deductive. For this particular research, deductive approach is taken as the best fit due to study being affected by theoretical and analytical interest (Braun et al., 2014). Also, since pre-prepared semi-structured interview questions were divided into three categories according to the research questions, it means that themes identified are referring to the specific contexts. An important part of thematic data analysis is to identify and categorize the themes according to the major trends in the data set. For being able to set the themes for the research analysis part, coding of the collected data was conducted. Final coding procedure can be found in the appendix 3. Also, Figure 5 below illustrates the whole procedure of identifying research themes starting from audio recordings taken during semi-structured interviews.

Figure 5. Research themes identification procedure. Source: Author

20

3.8.2 Data ethics Research ethics is the critical aspect of every successful research (Saunders et al., 2012). It refers to the standards of behaviour that ensure study being in relation to the rights of those who were participating in the research or affected by it (Saunders et al., 2012). This paper represents a qualitative study that involves secondary and primary data analysis, so it is the researcher's responsibility to ensure the high ethical standards during the whole research process. First, in order to avoid plagiarism, all literature used in this particular paper is appropriately cited or referenced. Second, for primary data collection, it was important that semi-structured interview participants were fully informed about the purpose of interviews, how information collected will be handled and what are their rights (such as skip any questions they do not feel comfortable with). For the data protection purposes name, surname and company/organization of the participants is kept fully confidential. Audio recordings of interviews were only made with the permission of interviewees as well as agreement to erase them after the submission of the paper. It is an important to mention, that none of the interviews were conducted without signing GDPR thesis study consent and sharing pre-prepared questions with the participants. GDPR thesis study consent consists of the clear description of the research, rights of the respondent, confidentiality explanation, contact information in case of any data protection violations. GDPR thesis study consent can be found in the appendix 1.

21

4. RESEARCH FINDINGS

___________________________________________________________________________________ The purpose of the Research findings chapter is to present research results gathered during semi-structured interviews. This Master thesis section starts from brief general findings about the participants of the study, then moves on to findings that cover digitalization of the finance function and findings about CFO’s role and responsibilities. Moreover, the chapter presents research results on traditional and additional CFO’s skills. ______________________________________________________________________

The purpose of this master thesis is to identify how the CFO role is changing because of Finance 4.0 and what will be the skills required in future for the position. Therefore, the researcher has conducted semi-structured interviews with eight CFOs from two different countries, different industries and age categories. All of the interviews were recorded and transcripted in order to ensure the quality and consistency of data analysis as well as identify patterns and create coding that leads to specific themes. Together with focus on CFO and professional skills, study brings out information gathered regarding finance division digitalization due to better understanding about the environment CFO works in. The general information about the respondents gives a chance for researcher to gain knowledge about their background and the origins of the examples provided during interviews. Even though the country respondents come from was not taken into account for analysis data, four of the respondents were representing companies operating in Sweden and the same number represented companies operating in Lithuania. Respondents also represented six different industries: Pharmaceuticals, Cruise ships/real estate, Fintech, Emergency responses and health care services were represented by one respondent each, when two of the interviewees were from the Financial services sector and two from IT-consulting. With respect to research participants' age, none of the interviewed CFOs were younger than 30 years old and only one was older than 50. Rest of interviewees were between 30 and 50 years old. The main characteristic that all CFOs participating in the research had in common is experience in finance. All of them regardless of country, industry or age had at least 8 years of experience. The average of respondents' experience in finance is 15,6 years. Moreover, all of them have worked as CFOs for at least one year, but this number of years differs from 1 to 10 in regards to years of experience in finance. Since CFO is a position from the top management, all of the participants had a team to manage, formed from 3 to 10 people. 4.1 Digitalization of the finance division As it was already defined in the literature review chapter, to have a good understanding about Finance 4.0, it is important to be familiar with the Industry 4.0 definition first. Respondent P5 have showed some solid knowledge and interest about the phenomena as well as P2 and P8 have heard it before and had an idea about what it could be. The rest of the respondents have not heard it before. Finance 4.0 definition was completely new for all of the respondents. However, when asked about digitalization all of the

22

respondents recognized the word and had some experience to share about how this phenomenon has already affected their work. Everyone agreed unanimously that the finance division needed digital solutions for many different reasons. P3 as well as P7 even mentioned that nowadays it is hard to find a finance department that is completely non-digitized and we should talk not only about digitalization, but more about automatization. Nowadays all of the finance departments are working with softwares that is an inseparable part of daily work. Also, P1 explained that demands for standardization from public companies, such as The State Tax Inspectorate, increases as well so there is no other choice than to adapt and embrace digital tools used by authorities. P2 was focusing a lot on digitalization on workflow and how it simplifies daily work of the whole company. For example, if a finance specialist needs a report from the sales about the last month's numbers, because of the digital workflow he does not need to disturb a colleague from another department and can find everything himself. According to P2 it has also affected the finance department's relationship with management: before high importance meetings that involve questions such as budget or investments, finance specialists have a possibility to slice and dice financial data the most efficient way and see outcomes in the very early stage. In some cases, correctly modeled data can show that some kind of questions can not even be brought up, so it saves time of endless discussions. Moreover, P4 shared an example about computer failure right before financial year closing reporting that caused a lot of chaos, because the finance department P4 worked at did not have a practise to save copies of everything in the Cloud. At the moment, lessons are learned and Cloud has not only fixed data storage questions, but also made easier access to information for all team members. Anyhow, P2 and P8 admonishes that digitalization should be embraced within mind, evaluating abilities and possibilities. Even though digitalization has affected each of CFOs' work significantly, opinions about the future differ. P1 has shared the idea that in a long perspective the finance department should be set only from CFO and financial analysts when roles such as accountant, auditor or even controller should be fully outsourced or automatized. On the other hand, P7 was quite sceptical about fully outsourced accounting services or automatized auditing any time soon. Respondent shared the example about accounting and auditing services in Sweden outsourced to India: when accounting looks to work fine, auditing did not pass the test because of the language barrier and high demands in regards to regulations in Sweden. P6 as a representative from the financial services sector agreed that companies increasingly decide to outsource their unessential financial functions to India and that aligns well with high demands and regulations in Sweden, when at the same time this type of outsourcing does not look possible for audit. P2 have represented a company operating in Lithuania and have expressed an opinion that unessential functions and those that do not require special knowledge in the field should be outsourced, but the company should not expect any miracles from that. Of course, it gives freedom to reallocate resources, i. ex. substitute accountant with controller instead, but it does not give a space to get rid of the internal finance department: somebody will still need to prepare the material for outsourcing and control the work. Moreover, P3 admitted using outsourcing for accounting functions, because the company simply does not need a full time internal resource for that, but highlighted that you can never expect the same engagement to the company from external players as from internal employees. P2 also highlighted that an important factor of the future of the

23

finance department is to become from cost center to profit center. That is where the finance function is actually heading and that is where digitalization will play its role. Nevertheless digitalization has many positive sides, research has identified some negative effects as well. P1 has expressed a concern about the security and data protection regarding auditing procedures in the digital environment, when all the financial documents of the listed company are sent by email or can be found online. P3 has also agreed that security and data protection in the Fintech industry is a sensitive question regarding digitalization, especially when talking about global problems such as money laundry, information leakage, etc. Otherwise, P6 being closely involved in auditing processes at work stated that security or data protections should not be a problem if the right tools are used. Same position was taken by P7 and P8. One more negative factor about digitalization brought by P7 was technical failures. If the system the whole finance department works with shuts down for a day and everything is based on that system - nobody is able to work that day. Also, P2 explained that when the finance department decides to initiate any new ways of working (specially digital), for at least a month or even longer, employees are duplicating work. At the very early stages of new tools integration, all kinds of technical errors are not uncommon, so duplicating is a security measure to avoid mistakes and consequences. Here, P8 agrees with P2 that new initiatives regarding digitalization require additional resources, time and budget. Also, P2 gave an example that sometimes finance departments initiate solutions to solve specific problems and when it reaches users or/and consumers - it does not solve problems for them. Hence, user experience and testing should be taken very seriously. When digging into topics such as digitalization, even though the focus is on a specific department, it is important to get an overall picture of the whole organization. The respondents were asked about the support from the company regarding digital tools and all of CFOs gave positive answers. Both P1 and P4 mentioned being users of financial and ERP systems from authorized providers. P2, P5 and P6 were employees of the large scale listed companies, so they have shared that all three companies invest a lot of time and money to educate people about technologies. Furthemore, P3, P7 and P8 were representing IT-consulting and Fintech companies, so high quality IT support was common sense. P1 even came up with the idea that IT support nowadays sometimes understands more about financial operations than accountants that worked at the company for 10 years. Anyway, together with positive answers about support regarding digital solutions, P2 and P6 mentioned sometimes feeling that support outgrowing into a pressure. Regarding how other departments in the company are dealing with digital disruption, all CFOs, except P7 and P8 (Who were representing IT-consulting companies), marked out the finance department as a good example for others. P2 shared how the finance department of the company were proactive and were periodically presenting new digital solutions for not only finance division work, but also for other departments. Respondent highlighted the marketing department being quite resistant to new ideas and complaining until the last moment benefits are seen. P1 shared similar experience about finance division representatives volunteering in all kinds of technology and daily work

24

improvement fairs as well as bringing new ideas to the company. P3 could not exclude one department from the whole picture because of being a Fintech startup. The clear message that was communicated in every interview was that the financial department is definitely changing and together with that - old structure and ways of working have to be changed. 4.2 CFO’s role and responsibilities All of the research participants shared what are the responsibilities of a CFO and what they see as the most important work tasks. Respondents agreed that it really depends on the organization, but researcher was able to see clear patterns between the answers. Internal & external reporting, Cash flows control, budgeting, investment supervision and involvement in the strategic decision making process were the responsibilities mentioned by all interviewed CFOs. P1 explained that in listed companies annual planning is a highly important task as well as its review every month. CFO role here is to keep an eye on financial indicators of profitability such as EBIT & EBITA and report to the group board if any deviations from the plan are observed. Of course, special attention is given to cash flow control and payback of investments. P2, P5 and P6 have also given a high importance for internal reporting that involves stakeholders, management, group board and external reporting that is mainly about authorities. The rest of the respondents expressed the importance of the reporting and governance as well, but since their companies were smaller scale, they did not focus that much on the annual plan and the board but more on compliance with regulations and reporting to authorities. As it was expressed by most of the interview participants, a big part of CFO work is to enable business to create value by supporting management with internal control, risk management and ensuring financial resources. P7 even explained that a company can not ensure growth without taking a risk and it is CFO responsibility to see what risks are worth taking. Moreover, the most important task for business is to ensure the liquidity of the company, which covers most of the tasks in the CFO basket. However, when asked about what tasks that take most of the working time, all of the CFOs answered that it was either reporting and compliance with regulations or supervision/governance tasks, but not strategic or advisory ones. Basically, not necessarily most important tasks take most of the time and everyone has agreed that it has to change. 4.3 Digitalization challenges for CFO Researcher also tried to find out if being CFO nowadays when digital disruption has reached exponential growth on a large scale can be challenging. P2 shared that it can be a challenge to be a CFO in general sometimes, because this is a role that involves a lot of responsibility and usually is followed by strict deadlines. Generally speaking, usually there is no I can’t now if work has to be done. P4 relied a lot on deadlines and pressure during financial reporting periods as well as P6 on finance function being very seasonal work. P2 mentioned that CFOs are often introverts that prefer to deal with duties individually in the way that feels most efficient for them, so additional tasks such as implementing digital solutions that require time, forces CFOs to reorganize their schedules, delegate tasks and plan more. P1 also agreed that for CFO work it is usually

25

the time that is the most sensitive factor and new ways of working inevitably requires it and causes the stress. P8 explained that during the last couple of years understanding about what CFO should do has evolved significantly. If earlier the CFO was mostly seen as a gatekeeper of the finance division, now it is expected from the CFO to be more as a management player regarding financial business decisions. Needless to say, it was always a part of CFO work, but with the evolution of technologies, standardization and automatization of daily routines of finance function is increasing which leads to the assumption that CFO has more available time for focusing on support for business. Moreover, P6 said “Now, when everything is changing because of digital disruption, it is hard to understand who does what. So, if you do not know who to ask - ask CFO” which reveals uncertainty about the internal responsibilities in the finance department. Repetitive factor of all interviews in case of stress and challenges was the age. Even though none of the respondents have shown or said that age has an impact for them personally, all of them have seen clear signs of age being a strong indicator in their departments. P8 shared that those who spent a long time at the company often do not even know about the possibilities that digitalization brings. Also, companies are not so often inclined to hire consultants that could help and show new ways of working. P1 mentioned that older colleagues in the finance department are experiencing a lot of stress, because it is hard for them to renounce well known ways of working for the new ones. Especially, when tools are improving all the time, so older ones feel constantly insecure. All of the respondents have given examples about how digital disruption has affected their work bringing new digital tools to their daily routines. Interviewees representing large scale companies shared that usually bigger size companies have a wide variety of tools and softwares as well as allocates a lot of resources for innovative ways of working. However, Excel still plays a significant role. P2 shared how internal finance department employees have created models with the help of Macros that simplified daily work a lot as well as P3 and P7 uses Excel for modeling, calculations and presenting numbers because of its simplicity. P1 admitted that uses Excel only because of the absence of other more revolutionary tools. Only P4 have declared using Excel only because of clients and for personal work preferring calculations and modeling with ERP software instead. Nevertheless, it is important to understand that all of the companies nowadays have financial and ERP systems, so Excel is an additional work tool and more innovative solutions are needed to be implemented. 4.4 Future of the CFO’s position When asked about the future, P8 mentioned that earlier the CFO was mostly focused on reporting, budgeting, controlling and governance of the finance department when now we are at the stage when CFO is taking more of a change role. CFO becomes oriented mostly on strategic decisions and business value creation. Moreover, P8 highlights that finance function is going through a period when previous mindset professionals are changed by modern thinking ones. P2 strongly supports the idea that CFO becomes a creator instead of protector, because the number of so-called cabinet managers are significantly decreasing and hands-on way of thinking becomes a new normal for management. Respondent also believes that in 5, 10 or 15 years main responsibility of CFO will be strategic decision making and most working time will be allocated there.

26

Moreover, according to P8 in the future all the financial reports should be generated with one button click, but we are not there yet. Anyway P2 shares the idea that in order to change, others have to accept it. Which means that the mindset of the whole management is important, not only the finance division or CFO. Interview participants were asked if CFO could be replaced or outsourced as other finance functions such as accounting. P3 expressed an opinion that it does not look possible or at least reasonable. CFO is an essential resource of the company that has a very complex and experience required profile. However, P8 expressed an opinion that nowadays businesses need different profile CFOs than a few years ago: they should be more agile, creative, proactive instead of being heads of the accounting department. Respondent highlighted that it is not about being a good CFO or bad if you do not have additional knowledge about IT. It is about evolving business needs. Basically, CFO's do not have to be outsourced, but their mindset and the role has to evolve together with the market, because the business environment is changing as well. 4.5 Traditional and additional CFO’s skills As the role of the CFO is evolving so is changing the skills required to successfully perform in this position. However, even though digitization is transforming the understanding about the CFO’s role, the basic knowledge remains the same. Generally speaking, the fundamental competencies regarding finance as well as economics that comes along with the responsibilities of CFO presented in 4.2 part will still be crucial in future. Even if the fundamental skills remain the same for the future, the list is complemented with additional ones. P8 has shared that the traditional CFO profile does not involve the knowledge about IT as well as digital solutions and often financial specialists (CFO including) do not even know about the possibilities out there. Also, for companies with the traditional mindset it is not that common to hire external consultants to educate personnel about it. P5 even expresses the concern about small and medium enterprises that are still trying to ignore digital disruption and do not invest in the new working solutions and employees’ education. At the same time, P4 admits that it becomes pretty hard to ignore digitalization's existence, but sometimes CFOs with their teams just do not know how to take action. It was mentioned before that the finance department in future will start being an income center instead of only being a cost center. It will become a value creating department that according to P2 will need a CFO with ability to identify chances and communicate by doing influence. It will be crucial to have an ability to see a possibility and use it. In order to be a CFO of the future, P1 defines analytical skills as crucial for both the finance division and its leader. It will be also hard to see a highly professional CFO without strong strategic skills and knowledge about the market as said by P8. When trying to build a picture of CFO in the Finance 4.0 environment all of the respondents imagined CFO as a decision maker and a management partner. P8 highlighted that the future is about the results and further decisions. Moreover, P7 added that the complexity of the risk management will increase and CFOs will be the ones capable of identifying, analyzing and reporting to the management. According to P6, the

27

expectations for CFO in future from management and the board will increase too, so CFOs that are ignoring digital disruption, will be not able to handle responsibilities in old fashion ways. P4 after 17 years in finance, was also sharing that the environment itself pushes professionals to grow. To summarize what are the traditional skills of a CFO and what are the additional future skills defined by research participants, table 2 is provided below. Traditional CFO’s skills Additional CFO’s skills in future

- Problem Solving abilities - Optimization of Company’s

performance - Financial accounting - Cash management - Competencies of Corporate

finance - Decision-making skills - Risk management - Internal control skills - compliance with regulations

knowledge

- Strong analytical skills - Influencing skills - Ability to see posabilities - Strategic skills - Agility - Interest of new ways of working

(digitalization) - Partnership with management

(incl. CEO and the board) - At least basic IT skills - Complex risk management

Table 2. Traditional & Additional (future) CFO’s skills. Source: Author

28

5. RESEARCH ANALYSIS

___________________________________________________________________________________ The research analysis chapter is about analysis of the empirical findings presented in comparison with previous research from the literature review part. Due to the thematic literature analysis method selected for this study, chapter is divided in three parts by themes. Firstly, analysis covers the need for digital solutions for finance function. Second, it moves forward with the other side of digitalization. Finally, analysis of CFO becoming a creator from gatekeeper is provided. ______________________________________________________________________

The purpose of this paper is to identify how the role of the CFO is changing because of the Finance 4.0 as well as how the skills required for the position will evolve in future. Helce, narrative literature review and semi-structured interviews were conducted. As it was mentioned before, in order to understand Finance 4.0 phenomena it is important to be familiar with Industry 4.0 definition. Findings gathered during semi-structured interviews showed that respondents were not that familiar with either of these two definitions and only P5 showed a knowledge about it. After explaining that both of these definitions can be used as synonyms to digitalization, all of the interviewees were able to share experiencing the digitization process with examples. On the one hand, outcome was expected, because of a narrative literature review finding about Industry 4.0 term not being commonly used outside the german speaking countries and Scandinavia (Catkin, June 2016). On the other hand, half of the research participants were representing companies operating in Sweden and still were not that familiar with the phenomena. 5.1 Need of digital solutions for finance function The clear alignment between literature review and interviews findings was the agreement that the finance division needs digital solutions, because of many different reasons. Moreover, finance departments of the companies are aware about exponentially progressing technologies and are trying to adapt in the ways they found most efficient. Old way of doing things is not enough anymore and executives have to be ready for the Fourth industrial revolution (Deloitte Development LLC, 2018a) Govender et al. (2019) expressed the concern that finance departments still use Excel as the one of the main working tools which indicates being far behind with modern technologies used for daily work. However, all of the respondents representing companies were using financial and ERP systems as well as other digital tools provided by the companies. Even though Excel is one of the most widely used tools for finance division work, respondents shared the experience searching for new ways of using it or admitted looking for more innovative tools. The ambition to find new ways of working seems as a positive result of the research, since companies that are ignoring the presence of the technologies and importance to transform and adapt, risk to be outcompeted by those who do (Schreckling et al., 2017). Nevertheless, for many companies nowadays digital transformation is a do or die task and is challenging for finance function (Glader et al., 2020). Yet, as important it is that new ways of working would not remain only as

29

a beautiful idea, desperate actions can do more damage instead of bringing benefits. Hence, together with ambitions it is important to evaluate abilities and possibilities. As it revealed during narrative literature review, finance departments are still spending large amounts of time searching for mistakes and correcting them which causes data quality problems (Govender et al., 2019). As for the quality, interview participants did not see it as a problem, since most of the financial data comes from ERP systems nowadays, but as for time spent with reporting - that caused a different reaction. Glader et al. (2020) claims that finance departments of the large multinational corporations are still spending about 30% of their time creating reports. CFOs participating in the research agreed that supervision of reporting and actual reporting takes a huge amount of their working time. Even if we do not see reporting as an old fashioned manual report conducting, CFOs (especially from listed companies) have a big amount of monthly and annual reports they have to take care of. However, results also revealed that CFOs are aware about this problem and trying to find a solution: turn to IT specialists to create formulas for more automated work, try to use tools they already have such as Excel but in a more efficient way by using Macros. P4 even started to use Cloud that never used before, after computer failure, when others were already using it. It is promising news for the finance department, because Cloud was also revealed as a first step on the digitalization journey by IMA and ACCA (2014). Few CFOs participated confirmed that digitalization has already accelerated in the finance department and division is getting ready for next steps in the Business intelligence journey. P8 shared that at the beginning the company was technology blind, but now they have a goal to improve the reporting process to the report per one button click. This is very exciting news, but for others respondents financial and ERP systems were still the core working tool. Even if Cloud is starting to be used for data storage purposes. Glader et al. (2020) states that while complexity of daily work increases, it also gets more and more complicated to build well operating ERP systems. Hence, even if ERP systems are a widely used reliable working tool, finance specialists should start thinking about alternative or additional solutions. Research findings revealed that most of the respondents have also felt the increased pressure from the environment to adjust daily ways of working to technological disruption. As it emerged during the interviews, it became not only the question of competitiveness (mostly focused by previous research), but also of compliance with regulations: The State Tax Inspectorate have updated their reporting systems with new digital solutions, so companies have no other choice than adapt in order to follow the law. It is an ironic outcome, because as it was revealed in the literature review, earlier compliance with regulations was the reason why digital evolution of the financial department was postponed due to budget allocations (Govender et al., 2019). Now, financial authorities seem to be a factor pushing enterprises to reexamine their digital tools. Another common problem of large Scandinavian corporations is visualization (Glader et al., 2020). As it was presented by Corson et al. (2020), over 40% of CFOs participated in their survey had claimed to have advanced capabilities in areas such as blockchain-based tools, advanced analytics, AI, automation and RPA, ERP systems and Cloud. However, if the Cloud or ERP systems were widely used by participants from this paper

30

research, that was not the case with technologies such as blockchain-based tools, advanced analytics or AI. Of course, all of the CFOs interviewed have heard about it and had some kind of opinion, specially those from IT-consulting and Fintech, but could not share the examples using it in daily finance work. It is important to understand that this particular research is focusing on specifically finance function daily work and tools used for it. Hence, researcher assumes that even if CFOs claim to have knowledge in new technologies that have a potential for finance function efectivization, it is not necessarily the case that the finance department actually uses it. Moreover, for solutions to become used in finance division daily work it has to show CFOs short-term benefits and solve real problems (Govender et al., 2019). However, as it was presented by Govender et al. (2019) such innovations as blockchain-chain based tools or automation & RPA are the next big step in the digitization journey. Also, they are not exactly covering digitalization itself, it is more a discussion about the automation of processes. Hence, it is a very positive result when P3 and P7 admitted being ready to move into other stages of this technological journey and claimed their departments being almost fully digital. However, others admitted sometimes being overwhelmed by the speed of the technological change, or at least their employees did. As it was mentioned before, Govender et al. (2019) discussed tool Excel usage for the daily routines too often as a sign that the finance division is still far behind regarding technologies in comparison with other departments. However, research has proven completely opposite. All eight interviewed CFOs have claimed the finance department to be an example to others, volunteers in fairs and initiator of new digital ways of working. Moreover, most of the CFOs shared other departments being resistant to new digital ways of working in many cases as well as showing signs of stress. Same outcomes revealed after asking respondents about IT support regarding finance daily routines - everybody named IT support as a high level service of the company, sometimes even turning into relatively pressure. 5.2 The other side of digitalization Together with the positive impact of digitalization on finance function, research tried to investigate what negative effects it can have. Narrative literature review showed that digitalization takes time, effort and requires long-term strategy as well as the finance division has to see short- and medium-term benefits in order to make technologies worthwhile (Govender et al., 2019). Hence, when discussing challenges caused by digitalization, CFOs mostly focused on short term challenges such as duplication of work at the very beginning of the implementation process, need of additional resources, risks that tools will not solve problems the way expected and time of adaptation and education. No doubt, interviewees have clearly seen benefits that are brought by digitalization as well, but everyone draws the attention to how much effort it actually requires. Also, it is very important to mention that usually CFOs do not know about the possibilities or where to find them, so pressure to implement something you do not understand can cause a lot of stress. Another very clear negative effect of digitalization for finance function that emerged was security. CFOs were truly concerned about the company’s information not being

31

properly protected when sharing it with external players, such as auditors. Needless to say, for a listed company it can be a very sensitive question. The CFO that represented the Fintech industry also agreed that security is a relatively delicate question, especially when talking about global problems such as money laundry, information leakage, etc. Otherwise, this can not be stated as absolute truth, because another CFO being closely involved in auditing processes at work stated that security or data protections should not be a problem if the right tools are used. Unfortunately, this knowledge could not be compared with already existing academic literature, because none of the involved articles brought up security as a red flag of digitalization. Govender et al. (2019) claims that RPA systems have a short payoff period, they can work 24/7, they don’t get sick and they are self-learning as well as robots do not make any deviations: once a robot program is created, it can be copied to another robot (Govender et al., 2019). Unfortunately, even though technologies are more predictable than people, technical failures are possible and by CFOs marked as one more negative effect of digitalization. If the finance department working system shuts down for a day and everything is based on that system - nobody is able to work that day. We can only do the math on how much it costs for the company, when the whole department collapses for a day. Also, what if the program that crashes is used in more than one department? 5.3 CFO: from gatekeeper to creator When trying to understand what CFO is and what CFO does, researcher tried to identify what are the responsibilities of CFO and what are the skills needed to fulfill them. As it can be found in the table 3 below, CFO’s responsibilities identified during narrative literature review slightly differ from those pointed out during semi-structured interviews, but the foundation remains the same.

CFO’s responsibilities from literature review

CFO’s responsibilities from semi-structured interviews

- Budget - Corporate spending - internal control - financial reporting supervision - ensuring compliance with

accounting regulations (Hoitash et al., 2016)

- outsourcing financial data - investor relations - insurance - treasury activities

(Mellon et al., 2012)

- Internal & External reporting - Cash flows control - Budgeting - Investments supervision - Strategic decision - Internal control - risk management - ensuring financial resources - liquidity management

Table 3. CFO’s responsibilities from literature review & semi-structured interview Source: Author It is an important discovery, because it shows that CFO’s responsibilities are unlikely to change extremely. Also, interviews findings show that skills required for CFO are in

32

many cases reflecting their responsibilities. However, this particular research tries to identify how CFO’s role is changing because of Finance 4.0, otherwise known as digitalization of finance function, and what are future skills required for the profession. Even if the fundamental part of the CFO work is not that much changing, it definitely is evolving and getting more complex. According to Hoitash et al. (2016) CFO is considered as the second in importance after the CEO in the corporate hierarchy. It is hard to say about that high importance in the corporate hierarchy from the interviews, but the support and advisory for management revealed to be highly important. As well as most of the CFOs confirmed having a close relation with the CEO. From narrative literature review can be found, that while the CFO looks after accounting and all the finance functions of the company, other parties such as CEO and the board members are responsible for making decisions that affect the business (Hoitash et al., 2016). Even though the close relation with C-suite have shown, most of the respondents have said that CFOs are still seen as gatekeepers instead of being creators or changers. This proves the facts stated by IMA; ACCA (2014) that the whole finance department is still a scorekeeper that provides data to management than value creators and participants into the decision making process. However, all of the respondents have mentioned that strategic decision making is already a part of the job, just does not take that much of the stake and in future should move to a larger scale. This also revealed as already being in action, because P2 mentioned noticing the decreasing number of so-called cabinet managers and hands-on way of thinking becoming a new normal for nowadays management. Most of the interviewed CFOs expressed an opinion that a big part of CFOs work is to enable business to create value with the support of internal control, risk management and ensuring financial resources. This outcome supports the statement that due to expertise and unique technical knowledge that CFOs have, they are expected to partner more closely with the top management team within key business decisions (Kaplan et al., 2017). However, interviewed CFOs declared to spend way more time on reporting and governance tasks instead of dealing with strategic decisions. Which reveals the fact that even if a business needs CFOs that are able to handle crucial overall business duties, the CFO role is still so complex and buried under reporting, controllership and governance. It is physically impossible to allocate more time for advisory at a strategic level. And yet, CFOs believe that it is just a matter of time when the CFO’s role will be mainly based on making major business decisions, because more and more fundamental work tasks will be digital or automated. Dergel (2014) has defined that having a title CFO does not necessarily mean being a real CFO and to be one, CFO needs to be a strategist, leader, and the advisor at the same time. As for being a leader, CFO is usually defined as a left-brain approach manager due to strong rational thinking and analysis-based decision making, but to build a trusted relationship for a strongly connected leadership team, right-brain capabilities are needed as well (Corson et al., 2020a). Semi-structured interviews with CFOs showed that most of the cases CFO is an introvert that prefers to deal with duties individually in the way that feels most efficient, so additional tasks such as implementing digital solutions that require time, forces CFO to reorganize his

33

schedules, delegate tasks and plan more. This can cause quite a stress for the CFO himself and the whole finance team. Hence, as Corson et al. (2020a) highlighted, it is important to understand that being a CFO it is not only about doing the work right, but also communicating, inspiring and motivating people as well as encouraging discussions between fair and balance. CFO as a leader of the finance function of the company, becoming agile, oriented on innovations and strategic decisions, instead of being mostly technical functions, is getting stronger (Kaplan et al., 2017). Even though being an advisor is a part of fundamental expectations from a CFO, emotional intelligence starts to play a significant role in being a CFO that successfully operates in a new more digital environment. It became not enough just to be able to share your knowledge with other management representatives regarding major business decisions, but also to recognize and understand people’s emotions, especially in difficult conversations as well as find the ways to speak the same language (Corson et al., 2020b). This supports the facts from semi-structured interviews that it is not only about the CFO himself, but also about the people that are around. Most of the CFOs mentioned that it is not enough just to change the responsibilities or skills required for the position to reach success, it is also important what is the outlook of others in the company, especially the management team. An additional factor that appeared to be important while the CFO together with the finance department is going through this digital journey, was the age. Even though interviewed CFOs have not shown any signs about age affecting their adaptation process with digitalization themselves, everyone mentioned seeing it on the other finance professionals. This was a surprising outcome from interviews, because academic literature does not focus that much on the age of finance professionals. P1 and P8 have given examples of how for older colleagues that have spent many years at a company, it can be hard to embrace new ways of working as well as that can cause a lot of stress. Furthermore, it was an important reflection expressed from P2 that to be a CFO, no matter today or yesterday, it is challenging itself. Because of this reason, there was a clear message from all the interview participants, that the future finance department will be most likely built from CFO, financial analysts and business controllers. Anyway, due to the high uncertainty level of digitalization, this can be counted only as a prediction. When talking about the future finance division with only CFO, financial analysts and business controllers, naturally the question about accountants and auditors arises. Glader et al. (2020) have shared that during the past decade major steps were taken and one of them is the beginning of transactional accounting outsourcing to low-cost countries. (Glader et al., 2020). Hence, interviewed CFOs have been asked about what they think about outsourcing. Even though outsourcing sounds as a game changer, it is not working that perfectly in practice as it can look. P3 admitted using outsourcing for accounting functions, because the company simply does not need a full time internal resource for that, but highlighted that you can never expect the same engagement to the company from external players as from internal employees. Also, from the first sign it can look that because of outsourcing many of finance functions just simply disappear. However, P2 has explained that unessential functions and those that do not require special knowledge in the field should be outsourced, but the company should not expect any miracles from that. Of course, it gives freedom to reallocate resources, i. ex.

34

substitute accountant with controller instead, but it does not give a space to get rid of the internal finance department: somebody will still need to prepare the material for outsourcing and control the work. Moreover, CFOs were also familiar with Glader et al. (2020) provided examples about outsourcing to low-cost countries, because it is already known practice in Sweden. Yet, when accounting looks to work fine, auditing did not pass the test because of the language barrier and high demands regarding regulations in Sweden.

35

6. CONCLUSIONS

In today's dynamic world the focus on digitalization of finance division has been very intense and it seems to continue. As the leader of the whole finance function of the company, today's CFO is going through many changes that are accompanied with uncertainty. Moreover, it is not one of those cases where the CFO could choose either to adapt or not: it is more an adapt or retire question. This research investigated academic literature to define a phenomenon of Industry 4.0 and Finance 4.0, more widely known as digitalization. Also, it explored CFO role and professional skills in order to gain knowledge about what is already known in the subject and link it to the findings of the research. As the next step, semi-structured interviews were conducted to gather the data from CFOs that were representing companies/organizations from two different countries, different industries and different age categories. The study analyzed how Finance 4.0 is changing the role of CFO as well as what will be the skills required for the position. According to the academic literature, digitalization is changing the role of CFO significantly and required skills for the position are expanding. Hence, it was important to investigate what and how is changing. There is no doubt that the CFO together with the finance department is going through changes and needs digital solutions for daily work. From literature review can be found that Excel is still one of the most widely used tools for finance work which revealed to be true during semi-structured interviews. It could be considered as the red flag of finance departments being way behind regarding digitalization in comparison with other departments, but CFOs confirmed looking for more innovative solutions or atleast new ways of using Excel. Moreover, semi-structured interviews showed that finance departments are definitely not far behind from other departments, they are actually initiators and creators. However, the journey has just started and ambitions give many promises, but it has to become actions. Research has also shown that even if finance function is going through digital disruption causing changes, fundamental responsibilities of CFOs will most likely not change any time soon. CFOs still remain responsible for liquidity and risk management, as well as ensuring compliance with regulations or internal control, but the already existing advisor role will expand into the larger scale. Most likely major business decisions will start to take not only the highest importance position, but also most of the time will be allocated there. Yet, even if the foundation remains the same, ways of working and skills required are evolving. As skills required for CFO positions directly reflect CFO's responsibilities, the foundation of skills will also remain the same. However, it will expand into a longer list. While finance processes and data are nowadays constantly changing, the CFO has to be able to adapt, react and have the ability to see possibilities. Also, because of improving ways of working and digital tools becoming an inseparable part of work, it will be crucial to have at least basic knowledge in IT. Moreover, when the next step in

36

the journey is automation. Research has discovered that CFOs are already trying to adapt, be agile, search for new ways of working and embrace technologies. Additionally, it will become extremely important to focus more on emotional intelligence due to becoming closer to management and being a leader of the finance department in this journey. As digitalization has shown many positive sides, research revealed negative effects as well. Companies are overwhelmed by the ongoing process and sometimes new ways of working not only bring solutions, but also outgrow to pressure. Also, for finance professionals that have spent many years in finance departments it causes a lot of stress, because it is not that easy for them to renounce well known ways of working to those that are surrounded by uncertainty. Additionally, data security appeared as an issue of the digital ways of working from CFOs as well as technical errors that are not that uncommon, specially with automated processes. All in all, digitalization has positive and negative sides for both the CFO and finance department. Even though it is surrounded by uncertainty, one thing is clear - the world is not coming back. Hence, it was important for researcher to identify how Finance 4.0 is changing the role of CFO and what skills will be needed in future.

37

7. DISCUSSION

___________________________________________________________________________________ The chapter presents practical implications of the conducted research as well as discusses limitations and potential future research. This part of the paper is based on the researcher's knowledge and observations from conducted research empirical findings. ______________________________________________________________________

7.1 Practical implications

According to Corson et al. (2020b), many CFOs do understand the importance of digitalization in today's business environment, but do not always know what their role in this digital journey is. The research findings show, the interest in new ways of working is increasing, but lack of education and information causes stress. Hence, spreading of the knowledge collected during the study can give ideas to other CFOs how to implement new digital solutions, how to manage with negative digital transformation effects as well as how to deal with the stress and resistance to technologies from the team members. Moreover, digital solutions discussed in the paper can give ideas for finance departments to improve their workflow management, data warehouse management, reporting routines, etc. 7.2 Limitations Digitalization in general is a relatively new subject surrounded by a lot of uncertainty. Hence, the lack of existing knowledge, especially academic literature, made it challenging to build a strong theoretical basis for further research. Specifically academic literature on Finance 4.0 phenomena is extremely rare. The world has never faced that large scale technological growth which makes it almost impossible to predict what comes next. What was found in this particular research is only based on a limited number of interviews due to the time constraints and Covid-19 restrictions. It was not allowed to have physical meetings as well as it was difficult to reach potential respondents that were willing to participate and share their experience in online meetings. This has also affected participants’ mood during the interviews, because the online format did not create a friendly environment to freely share thoughts on the given questions. Hence, this caused a research limitation of data collected. Moreover, the qualitative research method selected is considered to be a limitation because of being relatively subjective. In addition, the risk about CFOs being biased has also to be considered. Hence, this paper provides a generalized approach, but additional future research is required.

38

7.3 Future research As for further qualitative study, demographic indicators could be taken into consideration in order to investigate the Finance 4.0 environment effect on CFO role in a specific country or industry. Also, future research can involve quantitative research in regards to validating the data collected and conclusions made in this study.

39

REFERENCES

Aliyu A. A., Singhry I. M., Adamu H. & Abubakar M. M. (2015). Ontology, Epistemology and Axiology in Quantitative and Qualitative research: Elucidation of the Research Philosophical Misconception. Academic Conference: Mediterranean Publications & Research International on New Direction and Uncommon Vol. 2 No. 1. Azungah, T. (2018). Qualitative research: deductive and inductive approaches to data analysis. Qualitative Research Journal Vol. 21. Braun, V., Clarke, V. & Rance, N. (2014). How to use thematic analysis interview data. London: Sage. pp. 183-197. Bryman, A. & Bell, E. (2011). Business research methods. 3th ed. Oxford University press. Caglio, A., Dossi, A. & Van der Stede, W. (2018). CFO role and CFO compensation: an empirical analysis of their implications. Journal of accounting and Public Policy. Cambridge Business English Dictionary (6th March, 2021). Chief Financial Officer definition. Retrieved from: https://dictionary.cambridge.org/dictionary/english/chief-financial-officer. Catkin GmbH (6th June, 2016). Logistic platforms for Industrie 4.0. Retrieved from: https://medium.com/@SmartLogistics/logistic-platforms-for-industrie-4-0-56be82453015 Corson, M. & Klimas, T. (2020a). How the CFO can balance competing demands and drive future growth. Earnst & Young Global limited. Retrieved from: https://www.ey.com/en_gl/assurance/how-the-cfo-can-balance-competing-demands-and-drive-future-growth Corson, M. & Klimas, T. (2020b). How can the CFO evolve today to reframe finance for tomorrow? Earnst & Young Global limited. Retrieved from: https://www.ey.com/en_gl/assurance/how-can-the-cfo-evolve-today-to-reframe-finance-for-tomorrow?fbclid=IwAR1pBvFo_J2cYOascbr8UZtiOus5xx0tghoZAGCr7smXFNNrNjomuP1eFRo Deloitte Development LLC (2018). The Fourth Industrial Revolution is here—are you ready? Deloitte Insights. Deloitte Touche Tohmatsu Limited (2020a). Realizing the digital promise: Top nine challenges to digital transformation for financial institutions. A paper from the Institute of International Finance and Deloitte. Deloitte Touche Tohmatsu Limited (2020b). Realizing the digital promise: Key enablers for digital transformation in financial services. A paper from the Institute of International Finance and Deloitte.

40

Dergel, S. (2014). Guide to CFO Success: Leadership Strategies for Corporate Financial Professionals. Hoboken, New Jersey: Wiley. Emmel, N. (2013). Sampling and choosing cases in qualitative research: A realist approach. London: Sage Publications. Flick, U., Kardorff, E. & Steinke, I. (2004). A companion to QUALITATIVE RESEARCH. London: Sage Publications. Glader, M. & Strömsten, T. (2020). Digitalization of the Finance function. Controlling & Management review. Vol. 63. p. 64-67. DOI:https://doi.org/10.1007/s12176-020-0128-0 Govender, B. & Monteiro, A. (2019). The CFO of the Future. The CARPO Institute Journal of Financial Transformation. Gray, P. S., Williamson, J. B., Karp, D. A. & Dalphin, J. R. (2017). The Research Imagination: An Introduction to Qualitative and Quantitative Methods. Cambridge University Press. Green, N. B., Johnson, D. C. & Adams, A. (2006). Writing narrative literature review for peer-reviews journals: secrets of the trade. Journal of Chiropractic Medicine. Vol. 5. Issue 3. p. 101-117. DOI: 10.1016/S0899-3467(07)60142-6. Hoitash R., Hoitash U. & Kurt, A. C. (2016). Do accountants make better chief financial officers? Journal of Accounting and Economics. Vol. 61. Issue 2. 414-432. DOI: 10.1016/j.jacceco.2016.03.002. IMA; ACCA (2014). Financial insight: challenges and opportunities. Accountants for Business. Jahan, N., Naveed, S., Zeshan, M. & Tahir, A. M. (2016). How to Conduct a Systematic Review: A Narrative Literature Review. United States: Cureus Inc. Vol. 8 (11). p. 864-864. DOI: 10.7759/cureus.864. Justenhoven, P., Loitz, R. & Sechser, J. (July, 2018). Digitalisation in finance and accounting and what it means for financial statement audits. PricewaterhouseCoopers International Limited. Kaplan, B., Waelter, A., Nuttycombe, W. & Carrington, Ch. (2017). A new true north Shaping a vision for the future of controllership. Deloitte Development LLC. Kagermann, H., Wahlster, W., & Helbig, J. (2013). Recommendations for implementing the strategic initiative Industrie 4.0: Final report of the Industrie 4.0 Working Group. Munchen, Germany: National Academy of Science and Engineering (Acatech). Klimas, T. (31th January, 2019). The Fourth Industrial Revolution For Finance. Digitalist magazine. Retrieved from:

41

https://www.digitalistmag.com/finance/2019/01/31/fourth-industrial-revolution-for-finance-06194670/ McIntosh, M. & Morse, M. J. (2015). Situating and Constructing Diversity in Semi-Structured Interviews. Los Angeles, CA: Sage Publications. McKinsey Digital. (2016). Industry 4.0 after the initial hype. Where manufacturers are finding value and how they can best capture it. McKinsey & Company. Retrieved from: https://www.mckinsey.com/~/media/mckinsey/business%20functions/mckinsey%20digital/our%20insights/getting%20the%20most%20out%20of%20industry%204%200/mckinsey_industry_40_2016.ashx Mellon, L., Nagel, C. D., Lippert, R. & Slack, N. (2012). The new CFOs: How finance teams and their leaders can revolutionize modern business. London; Philadelphia, PA: Kogan Page. Melnikovas, A. (2018). Towards an Explicit Research Methodology: Adapting Research Onion Model for Future Studies. The General Jonas Zemaitis Military Academy of Lithuania; Department of Political Science. Murawski, M., Bühler, B., Martensen, M., Rademacher, R. & Bick, B. (2018). How Digital Business Strategy Affects Profitability: Opening the ‘Black Box’ of Performance. AMCIS. Neumeier, A., Wolf, T. & Oesterle, S. (2017). The Manifold Fruits of Digitalization - Determining The Literal Value Behind. Proceedings of the 13th International Conference on Wirtschaftsinformatik (pp. 484-498). St. Gallen, Switzerland: fin; Fraunhofer FIT. Phillips, L., Goodenough, B., Reis, S. & Fleming, R. 2016. Applying Knowledge Translation Concepts and Strategies in Dementia Care Education for Health Professionals: Recommendations From Narrative Literature Review. The Journal of continuing education in the health profession. Vol. 36 (1). p. 74-81. DOI: 10.1097/CEH.0000000000000028 Polit, D. F. & Beck, C. T. (2014). Essentials of nursing research: appraising evidence for nursing practice. 8th ed. Philadelphia: Wolters Kluwer Health /Lippincott Williams & Wilkins. Saunders, M., Lewis, P. & Thornhill, A. (2012). Research Methods for business students. Pearson Education Limited. Sixth edition. Savin-Baden, M. & Niekerk, van L. (2007). Narrative Inquiry: Theory and Practice. Journal of Geography in Higher Education, p. 459-472, DOI: 10.1080/03098260601071324. Retrieved from: https://doi.org/10.1080/03098260601071324 Schreckling E. & Steiger C. (2017). Digitalize or Drown. Article from the book: Oswald G. & Kleinemeier M. (2017). Shaping the Digital Enterprise. Springer, Cham.

42

Sher, A., Ehrenhalt, S. & Englert, J. (2018). Crunch time V Finance 2025. Deloitte Development LLC. Sim, J., Saunders, B., Waterfield, J. & Kingstone, T. (2018). Can sample size in qualitative research be determined a priori? International journal of social research methodology. Vol.21 (5). p.619-634. DOI: 10.1080/13645579.2018.1454643 Stefanuk, A. (11th February, 2021). Industry 4.0 And Its Impact On The Financial Services. Fintech Magazine. Retrieved from: https://fintechweekly.com/magazine/articles/industry-4-0-and-its-impact-on-the-financial-services#:~:text=McKinsey%20Global%20Institute%20has%20recently,about%20%243.7%20trillion%20by%202025.&text=There%20are%20numerous%20other%20sectors,hugely%20to%20the%20global%20economy. Tay, S. I., Aziati, A. H. N., Chuan, L. T. & Ahman, A. N. A. (2018). An Overview of Industry 4.0: Definition, Components, and Government Initiatives. Journal of Advanced Research in Dynamical and Control Systems. Webster, L. & Mertova, P. (2007). Using Narrative Inquiry as a Research Method: An introduction to using critical event narrative analysis in research on learning and teaching. London: Routledge Taylor & Francis Group. Westerman, G., Tannou, M., Bonnet, D., Ferraris, P. & McAfee, A. (2017). The Digital Advantage: How digital leaders outperform their peers in every industry. Capgemini Consulting with MIT Sloan management.

43

APPENDIX 1 GDPR THESIS STUDY CONSENT FORM

44

45

APPENDIX 2 INTERVIEW GUIDE

Explanation of the confidentiality and the GDPR thesis study consent; permission

to record the interview:

“Hello, my name is Rusne and I am a student at Jönköping University Business School.

Currently I am working on my Master thesis project and your participation in the

research is highly appreciated. I would like to start our conversation with information

regarding GDPR thesis study consent and confidentiality. We have already signed the

GDPR agreement, which implies that our conversation today will be used for this

particular research only. All personal data such as name, surname, organization and

any other information you prefer to not reveal will be strictly confidential. Also, it is

important to mention that in case you feel that your confidentiality was violated, you

can always contact the university by the contacts specified in the GDPR agreement.

Lastly, before we start our conversation, I would like to ask for your permission to

record (audio only) our conversation for the research analysis and quality assurance

purposes only. The record will be deleted immediately after submitting the master

thesis. Do you agree?”

Introduction to the interview and research:

“Topic of the research is “Digitalization of corporate finance: How Finance 4.0 is

changing the role of Chief Financial Officer (CFO)?”. Hence, I am having interviews

with CFOs from different backgrounds in order to identify what is the future of this

profession and what are the skills in order to be successful. I chose to address CFOs

precisely, because of the assumption that professionals in this position have gained a lot

of experience from different angles in the finance function and are capable of answering

questions that can lead to future predictions. Also, I do believe that with the radical

change of CFO role, the whole finance division will transform. I assure you that our

interview will be held strictly on the agreed time schedule and you can always decide to

skip questions you do not feel comfortable with. If you do not have any additional

doubts, let's move on to the questions”.

46

Interview questions:

Part 1: General information about respondent

- Age - Gender (Male/Female) - How many years of experience in finance function? - How many years as CFO? - What are your responsibilities at your current work? - Previous working experience? - What kind of organization/company are you working in? - How many employees do you manage?

Part 2: Role of the CFO and skills required

- What is your role as CFO and what would you identify as the most important tasks of your work? What tasks take most of your time?

- What would you identify as the most relevant issues for your daily work that could be solved by digital solutions?

- Please give examples of how digital disruption affected your work. - Do you think it is challenging to be CFO today when technologies are

progressing exponentially? Could you give examples of what exactly you find challenging and why

- What is your future vision for the CFO tasks and skills required for the position?

- What is your opinion on the future of finance relying more on outside sources? How do you think it can be used in your work? Who would be the most affected and how it will affect your role in particular?

Part 3: Finance division digitalization: challenges and opportunities

- What are the tools that you are using for your daily work? (such as excel, SAP, etc.)

- Have you heard about Industry 4.0 or Finance 4.0? If the answer is yes, what do you know about it?

- Do you think the finance division needs digital solutions? Why? (in general and particularly for finance)

- How do you see digitalization? What positive and negative effects does it bring to the industry that you work in? What do you see as the short and long term benefits of digitalization for the finance division?

- What digital solutions do you know that could improve finance division/your as CFO work?

- How can digitalization be challenging/stressful for finance function? Why? - How do other departments in your company deal with digital disruption? - Do you get enough support with daily work tools and digital solutions for

finance from your company? - What could help to reduce the stress and make the process toward

digitalization easier?

47

Closure of the interview: “Thank you for your participation. I found our conversation very interesting and beneficial for my research. Do you have any additional insights that can be relevant for further research?”

48

APPENDIX 3 DATA ANALYSIS FINAL CODING