2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag

2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
Microsoft Dynamics 365

2019 Finance
Trends Report

            Page 1
2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
It’s a new era. We’re ten years removed from the peak of
the financial crisis, a new generation has transformed the
workplace and every business is now a ‘technology’ business.
The rules of the game have changed. Organisations that fail to
evolve find themselves in a growing graveyard of companies
that were out-innovated by young, forward-thinking
businesses. And now, the role of finance must evolve, too.

Today, the stereotype of suit-wearing, number-crunching
finance personnel is being replaced by a new breed of finance
professionals. These finance leaders are the ligaments that
connect technology across the organisation, the muscle that
fights risk, the brains that drive innovation and they are the
heart that’s embracing a new generation of workers.

To thrive in today’s business environment, in a world with
growing complexity, organisations are increasingly relying
upon the technological and strategic prowess of their
financial leaders. Today’s finance professionals must navigate
a range of new challenges and responsibilities, reporting on
the past, managing the present and creating the future.

The following will explore six emerging trends in finance
that we believe will help empower finance professionals to
better evaluate and manage risk, build innovative corporate
strategies and grow their businesses.

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
            The role of finance grows
       Finance leaders take on more responsibility

Changing customer demands disrupt industries
     Empowered customers force companies to evolve

Technology makes finance smarter and faster
       New technologies are revolutionising finance

        Living in the age of uncertainty
         Uncertainty puts a strain on businesses

  Businesses adapt to an evolving workforce
         A new generation enters the workforce

  Companies face new risks and challenges
        Business leaders navigate new challenges

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
The role of finance grows
•   The CFO role continues to grow
•   Finance’s involvement in IT grows
•   Finance takes on technology risk management
•   CFOs lead business transformation
•   The COO role continues to disappear
•   Finance leaders become strategy leaders
•   Expectations from Wall Street evolve

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
The role of
   finance grows

The CFO role continues to grow                                                      Executive summary
The role of the CFO can be summed up in two simple truths: 1) if something          Finance and the role of the Chief
impacts the bottom line, it’s the CFO’s responsibility, and 2) everything           Financial Officer (CFO) have been
impacts the bottom line. From staffing and employee engagement to product           elevated and broadened in the
development and mergers and acquisitions, businesses increasingly rely on           past several years, a trend that will
the financial and strategic prowess of their most senior financial leaders whose    continue moving forward.
growing influence can be felt throughout the organisation.

Finance’s involvement in IT grows                                                   Highlights
Over the past decade, one of the most visible additions to the CFO’s                • Global IT spending is projected to
responsibilities has been the management of technology across the business.           reach $3.7 trillion in 2018, a 4.5%
This should come as no surprise given the growth of technology in all aspects         increase from 2017.
of the corporate world. Global IT spending is projected to reach $3.7 trillion in   • 64% of CFOs reported being
2018, a 4.5% increase from 2017,1 and this growth is projected to continue into       asked to take on broader
the foreseeable future.2 Today’s businesses spend an average of 3.28% of their        operational leadership roles
annual revenue on IT and in some industries, such as banking and securities,          beyond finance.
this rate can be as high as 7.16%.3                                                 • Nearly 70% of CFOs reported plan
                                                                                      to increase investment in digital
Due to the financial demands technology has created, both as a major                  transformation in 2018.
expense and as a capital asset, it is more important than ever for CFOs to
have a comprehensive view of these large financial line items. But technology
is now more than just a number on a balance sheet, it’s the lifeblood of
many organisations, presenting new risks and revenue opportunities that
will determine the future of the business. As technology becomes a critical
component in the financial success of an organisation, finance has taken a
more significant role in managing technology, particularly in the areas of risk
management and investment.

  Global IT spend is projected
  to reach $3.7 trillion in 2018.

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
In 2017, the average
           cost of a data breach
           was $3.62 million.

         Finance takes on
         technology risk
         You don’t need to look hard to find
         examples of companies who have
         been impacted by technology failures
         or data breaches. Beyond the many
         unquantifiable costs to a data breach
         – from customer trust to employee
         morale – the direct financial cost of
         a technology failure is significant.
         In 2017, the average cost of a data
         breach was $3.62 million; and with an
         average cost of $141 per lost or stolen
         record, this number escalates quickly
         for large businesses.4 In a recent
         survey by IBM, 48% of CFOs listed
         cyber risks as a major rising trend
         transforming the business landscape.5
         As a result, finance leaders are taking
         on greater responsibility in helping
         their businesses better manage this
         large financial risk; 57% of CFOs
         report that risk management will
         become a critical part of their role in
         the future, a number that jumps to
         66% among CFOs of companies with
         over $5 billion in revenue.6

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
64% of CFOs reported
                                                                      being asked to take on
                                                                      broader operational
                                                                      leadership roles beyond

                            CFOs lead business                      The COO role
                            transformation                          continues to disappear
                            Today’s    industry  leaders  are       Finance leaders are increasingly
                            leveraging technology in exciting       involved in operations. In a recent

                            new ways to transform their             survey by EY, 64% of CFOs reported
                            business models. This trend has         being asked to take on broader
                            been exemplified by the upsurge         operational leadership roles beyond
                            in Anything as a Service (XaaS)         finance.9 This transition has been
                            offerings and on-demand services,       partially driven by the decline of
                            which grew 7.3% in 2017.7               the Chief Operating Officer (COO).
                                                                    Today, only 29% of Fortune 500 and
CFOs planning to increase   With technology leading this            S&P 500 companies still have COOs,
   investment in digital    transformation, their newfound role     a decrease of 40% from 2000.10
 transformation in 2018.    as technology leader has also pushed
                            CFOs into the role of transformation    This COO decline can be primarily
                            leader,    evaluating      technology   attributed to the fact that the CEOs
                            investments, overseeing product         of many major corporations were
                            development and leading strategic       promoted from within and had
                            planning for the organisation.          previously served as COO, as is the
                            Accordingly, nearly 70% of CFOs         case at 48% of Fortune 500 and S&P
                            reported plans to increase investment   500 companies.11 Subsequent to
                            in digital transformation in 2018,      these promotions, many companies
                            with 40% planning an increase of        opted to eliminate the COO role
                            more than 10%. And with 56% of          and divide these responsibilities
                            senior leadership identifying digital   between the CEO and the CFO. While
                            transformation as critical to long-     the distribution of tasks between
                            term success, CFOs’ involvement in      these two executive leaders varies by
                            this area will continue to grow.8       company, often the CEOs, with their
                                                                    strong operational backgrounds,
                                                                    assume        responsibility      for
                                                                    manufacturing and the supply chain,
                                                                    while CFOs take over procurement
                                                                    and IT oversight.

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
Finance leaders
  become strategy
  CFOs increasingly find themselves                         Technology is ubiquitous in modern
  serving as strategic advisors within                      businesses, and while CFOs may not              Only 54% of technology
  their companies. One primary                              be able to code a website or set up a           investments are
  factor driving this shift has been                        database, like technology, CFOs have
  technology’s proliferation across                         also become ubiquitous throughout               actually controlled by IT
  all aspects of business. Where                            the organisation. Because CFOs                  departments.
  technology spending was once                              possess a deep understanding of
  primarily consolidated in the IT                          both the organisation’s technology
  department, today’s technology                            and its operational units, they are a
  budgets are generally distributed                         natural fit to drive corporate strategy.
  across the entire organisation. In                        And with a background in finance,
  fact, an early 2018 survey found                          CFOs possess a unique ability to
  that only 54% of technology                               apply a systemic and objective lens
  investments are actually controlled                       to business decisions. While CFOs
  by IT departments.12 With software                        remain saddled with a reputation for
  and analytics solutions making up an                      being penny pinchers and number
  increasing percentage of technology                       junkies, the shift to a more quantified
  spend,13 the average CMO now                              management approach provides an
  wields as much technology spending                        essential counterbalance to the gut
  power as a CIO.14                                         instinct style of previous decades.

   Worldwide IT Spending Growth




USD (Billions)



                                                                                                        Global IT spending is projected to reach
                   $500                                                                                 $3.7 trillion in 2018, a 4.5% increase from
                                                                                                        2017, and this growth is projected to con-
                     $0                                                                                 tinue into the foreseeable future.
                          2015         2016      2017        2018        2019          2020     2021

                 Data Center Systems      Software      Devices     IT Services    Communication Services

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2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
Expectations from
                                       Wall Street evolve
                                       Before the mid-1980s, managing a           report by Deloitte,15 today’s CFOs
                                       company’s investors was relatively         should plan on spending at least 20%
                                       easy for CFOs. Shareholders were           of their time on investor relations.
                                       generally an easily defined group with
                                       clear motivations and expectations.
                                       But with the growth of sophisticated       Of the emerging roles of the CFO, this
                                       private equity firms in the mid-1980s,     new public persona is frequently one
                                       coupled with a transformation of           of the largest challenges for many of
                                       share registers, CFOs suddenly had to      today’s finance leaders, who are often
                                       deal with institutionalised investors,     known more for their discretion than
                                       which comprised the majority of            their yearning for the spotlight. This
                                       shareholders at large firms by the         challenge can be compounded by
                                       mid-1990s. While the CFO’s influence
                                                                                  the competing interests of different
                                       had been growing internally for
                                       decades, this shift in stakeholder         investors; counter to the quarterly
                                       relations pushed many CFOs into the        pressures of the past decade,
                                       public spotlight for the first time.       companies like Amazon and Tesla are
                                                                                  now shifting some investor mindsets
                                       Since the growth of institutionalised      towards accepting short-term losses
                                       investing in the mid-1980s, CFOs           with the prospect of more substantial
                                       have played an important role in           long-term gains.16 Thus, it is the job
                                       managing relationships with private
                                                                                  of the CFO to set the strategy for
                                       equity firms. And as demands from
                                       Wall Street increase, so will the need     the business, both short and long-
                                       for CFOs to directly engage with           term, and to manage shareholder
                                       investors. According to a CFO Insights     expectations.

Get more done
CFOs and finance professionals are moving from number crunchers to strategic leaders. To make this transition,
finance teams must work faster and smarter. At Microsoft, we are empowering finance professionals to do more
with tools that streamline processes, provide greater visibility into operations and deliver actionable insights.

Streamline operations                  Get greater visibility                     Be more proactive
Transitioning     to      strategic    To      effectively     guide      their   To grow their businesses, finance
work requires that finance             organisations,      finance     leaders    leaders must look beyond the
professionals spend less time          require visibility into all areas of       past and into the future. Microsoft
on routine accounting tasks.           their business. By combining unified       empowers leaders with tools
From productivity tools, like          data in the cloud with powerful data       to help them identify emerging
Office     365,    to    workflow      visualisation tools, like Power BI,        trends, predict outcomes and
automation      capabilities     in    Microsoft provides finance leaders         automatically optimise workflows
Dynamics 365, Microsoft is             with a single source of visibility into    so that organisations can become
helping finance teams get more         their organisation – from a high level     less reactive and more proactive
done, freeing them up so that          down to a transactional level – so they    with their business strategies and
they can spend more time on            can make more informed decisions.          operations.
high-value strategic work.

                                                       Page 9
Changing customer
demands disrupt industries
•   Innovation raises customer expectations
•   Millennials evolve
•   Gen Z gains influence
•   Corporate responsibility gains momentum
•   The new X-economies disrupt industries
•   A-commerce (anywhere) becomes the new reality
•   Businesses try to take back margins

                                               Page 10
Changing customer
   demands disrupt industries

Innovation raises customer expectations                                             Executive summary
Stating that technology is changing customer demands feels like stating             Driven     by     technology      and
the obvious. Innovation – from the printing press and combustion engine             demographic shifts, today’s customers
to computers and wireless internet – has always been a driver of demand,            are more empowered than ever and
unlocking new possibilities and raising expectations. Today, we find ourselves      expect more from the businesses with
at the intersection of rapid innovation and a new generation of consumers           which they interact.
who have grown up empowered by technology.

Millennials evolve                                                                  • Millennials make up roughly a
The number and influence of Millennials continue to grow. Today, Millennials          quarter of the US population and
make up roughly a quarter of the US population,17 and according to the                will overtake Baby Boomers as
Pew Research Centre, they will overtake Baby Boomers as America’s largest             America’s largest population in
population in 2019 (73 million versus 72 million).18 On the surface, Millennials      2019 (73 million vs. 72 million).
look very different from their predecessors: they are more diverse,19 better
                                                                                    • Purchases via contactless
educated and more likely to be never married than any other adult generation
                                                                                      payments are projected to
was at the same age.20
                                                                                      increase to $1.3 trillion globally in
                                                                                      2019 and over $2 trillion by 2021.
They are also a generation who entered adulthood facing a strong headwind.
They have been crippled by student loans, with over 60% of students taking
out loans to pay for college.21 The average student loan debt for Millennials
graduating in 2017 was nearly $40,000.22 To compound this, many graduated
in the midst of the 2008 recession. As a result, they have been pressured to
take lower paying jobs and have lower employment rates compared to workers
of the same age in past generations.23
                                                                                      The average student
However, despite these challenges, Millennials are smart and savvy. They have         loan debt for
become a generation that is fiscally responsible, with 63% of Millennials setting
savings goals and 59% reporting feeling financially secure, higher rates than         Millennials graduating
Boomers or Gen X.24 73% of Millennials stick to their budgets every month and         in 2017 was nearly
16% have saved over $100,000.25                                                       $40,000.

                                                          Page 11
While their financial burdens have           Gen Z’s purchasing behaviours
led to lower rates of home and               precisely, but what’s clear is that
auto ownership,26 Millennials do             they already wield great spending
spend in other areas; however,               influence. There was $829.5 billion
they remain thrifty when they do.            spent on Gen Z in 2015, accounting
Case in point: Amazon accounts               for 6.8% of total consumer spending
for the largest volume of online             that year.28 Furthermore, over 70%
apparel sales for Millennials, nearly        of parents said their Gen Z children
17%, more than double that of the            influenced their buying decisions on
next largest seller, Nordstrom.27            clothes and food.29
This shift to thrift has also played
a role in the growth of on-demand            Gen Z is even more diverse than
services,    sharing    marketplaces         their Millennial predecessors and will
and online consignment stores.               become the nation’s first majority            By 2020, Gen Z will
                                             non-white generation.30 With this             be the third largest
Gen Z gains influence                        diversity comes a much more                   generation in the US.
As the size and influence of the             tolerant and inclusive generation.31
Millennial   cohort    grow,    they         Additionally, growing up with the
are proving themselves to be a               internet gave them much greater
generation of tech-savvy individuals.        visibility into global issues. As a result,
But where Millennials were digital           they are a very globally and socially-
pioneers, helping make technology            minded population. 26% of 16-to-
mainstream, Gen Z is the first               19-year-olds currently volunteer and
generation of digital natives, never         60% reported that they want their
having experienced life before               jobs to impact the world.32
computers and pervasive internet.

                                             Like Millennials, Gen Z is made up
                                             of savvy shoppers. According to a
                                             recent report by Interactions, 89%
                                             of Gen Z considers themselves
                                             price-conscious shoppers and listed
                                             price as the top factor in making

                                             a purchase.33 According to the
                                             report, 72% said they would switch
                                             from their favourite brand if they
                                             found a similar product at a lower
                                             price. Members of Gen Z also value
                                             community, with 59% preferring
                                             local stores over large retailers and
     Parents who said their Gen              72% saying they would be more
      Z children influence their             willing to shop at national chains if
          buying decisions.                  they had more of a local presence in
                                             their community.

By 2020, Gen Z will be the third-largest     The profile of Gen Z is lengthy and
generation in the US, just behind Gen        we have much to discover about
X and they are already accumulating          them as they mature. But for now,
significant purchasing power. With           one thing is sure: Gen Z will have a
their oldest members only in their           significant impact on both business
early twenties, it is difficult to predict   and the world.

                                                              Page 12
Corporate                              to share positive opinions about
                                       companies doing good (87%), are
                                                                               Should companies
responsibility gains                   more likely to protest to support       help address social

momentum                               a cause they care about (58%)
Over the last decade, there has been   and are more likely to buy from a
substantial buzz about Corporate       company which addresses social or
Social Responsibility (CSR), yet for   environmental issues (90%).35                                            94%
                                                                                 89%                 87%
many companies, the financial costs                                                       83%
of change initially outweighed the     In response, businesses are investing
benefits. But as Millennials and Gen   more      resources     in  corporate
Z become more influential, both as     responsibility initiatives. According
employees and consumers, they are      to PwC’s Global CEO survey, 64% of
pushing businesses to behave more      CEOs now feel that CSR is central
responsibly.                           to their business, rather than a
                                       standalone      programme.36     Even
While 86% of general consumers feel    institutional investors are getting
that companies should help address     on board, pushing firms to make
social issues, 94% of Gen Z believe    more responsible decisions.37 And as
that companies have a responsibility   Millennials and Gen Z assume roles
to do so.34 When compared to           of power in the corporate world, the
members of other generations,          impacts of CSR will only become          Boomers   Gen X   Millennials   Gen Z
members of Gen Z are more likely       more pronounced.

                                                     Page 13
The new
X-economies disrupt
Millennials, burdened by high              Sharing economy
unemployment, low wages and high           The sharing economy – where                  The sharing economy
debt, have rapidly embraced new            consumers “share” products and               is projected to grow to
business models that offer them the        services directly instead of purchasing
latest products with greater flexibility   via a retailer or distributor – is another   86.5 million US users
and lower costs. In today’s market,        business model that has grown in             by 2021, up from 44.8
start-ups have led the way with these      popularity over the last several years.      million in 2016.
new offerings, but large businesses        Perhaps the most commonly known
– either through acquisitions or           example of a sharing economy
internal development – are beginning       business is Airbnb, where travellers
to evolve their business models to         can rent rooms and homes directly
the needs of the modern consumer.          from other individuals. The sharing
These models fall into one of a few        economy is projected to grow to
categories:                                86.5 million US users by 2021, up
                                           from 44.8 million in 2016. 39
On-demand services
Projected to grow to nearly $57            Subscription box services
billion in 2018, on-demand services        Subscription box services have
represent perhaps the largest              become incredibly popular due to
of these categories.38 A model             their highly targeted nature and ease
popularised greatly by Uber, on-           of use. Companies like Birchbox, Winc,
demand businesses are launching            Stitch Fix and NatureBox are just the
for just about every category              tip of the iceberg when it comes to
imaginable, from printing and dog          the subscription box market, which
walkers to babysitters and massages.       now provides services for dog owners,
                                           coffee lovers, mountain climbers,
                                           gold miners and sock enthusiasts.

                                           Online consignment
                                           When eBay and Craigslist launched
                                           in the mid-1990s, they provided
                                           individuals with the opportunity to
                                           use the internet to sell used goods.

                                           Nearly two decades later, a new
                                           set of online consignment stores
                                           has emerged to help streamline
                                           this process. Sites like thredUP,
      Projected size of the on-            Swap     and    TheRealReal    allow
     demand economy in 2018.               shoppers to sell and purchase
                                           used clothes, jewellery, toys and
                                           luxury fashion accessories online.
                                                           Page 14
          As cloud computing becomes
          more ubiquitous, Anything as a
          Service (XaaS) business models
          are also becoming more popular.
          The principle behind XaaS is that
          businesses can provide better, more
          cost-effective solutions to customers
          via subscriptions or pay-as-you-
          go models than via traditional
          software licensing models. The
          most commonly known XaaS model
          is Software as a Service (SaaS),
          which provides individual software
          applications and services through the
          cloud; however, Platform as a Service
          (PaaS) and Infrastructure as a Service
          (IaaS) models have also gained
          traction as a way for technology
          companies to expand their footprint.

          While XaaS has historically referred
          to cloud computing, it is increasingly
          being used to define all service-
          based business models, from
          Transportation as a Service (Uber and
          Lyft) to Shopping as a Service (Trunk
          Club and Stitch Fix). Regardless
          of what you call it, it’s clear that
          customers’ needs are evolving, and
          businesses must adapt accordingly.

Page 15
A-commerce                                Today, idea-collection site Pinterest
                                          has 175 million users and 93% of
                                                                                     products on their posts. When
                                                                                     clicked, a tagged product takes the
(anywhere) becomes                        them use the site to plan purchases.       user directly to the product page.
the new reality                           More than half of them also use the        The programme has since expanded
Technology has granted customers          site to shop for products.41 Pinterest’s   to thousands of businesses and
access to a dizzying array of products,   ‘Shop the Look’ feature employs            the results have been promising.44
and customers expect to be able to        computer vision and human curation         Industry leader Nike has announced
purchase on their terms, whenever         to allow users to shop for Pinned          that it will sell certain products via
and wherever they want. From social       products on the web and their              Instagram in what they describe
buying on Instagram to v-commerce         mobile devices. Early tests showed         as a ‘seamless’ experience for
with Alexa, businesses are no longer      that users visit a company’s website       customers.45
forcing customers to their websites       two to three times more frequently
to make a purchase; instead, they         when ‘Shop the Look’ Pins are              One issue brands face in expanding
are turning every platform into a         deployed.42 Additionally, Pinterest        social media sales is that many
purchase platform.                        for Business offers a ‘Buyable Pins’       customers are not aware that they

Social media selling                      option, which allows customers to          can shop directly via social media
Social media continues to grow            purchase a company’s products              sites; in a recent survey, 26.4% of
in popularity; globally, 482 million      directly on Pinterest with a credit        respondents said they had never
people became new active users in                                                    heard of social commerce.46 However,
                                          card or Apple Pay.
2016. Today, a total of 2.789 billion                                                if social media platforms and retailers
social media users are spending an                                                   can generate better awareness – and
                                          Instagram continues to explore ways
average of 40 minutes to four hours                                                  remove barriers to purchasing with a
on social media sites each day.40 While   to turn its 700 million users into
                                                                                     smoother transition from browsing
customers have consulted social           regular consumers of its business
                                                                                     to buying – social media users will
media sites for purchase inspiration      partners.43 In 2016, Instagram piloted
                                                                                     readily become in-app consumers.
or research for years, we are only now    its Shopping Tags programme,
seeing the potential of these channels    allowing companies to upload a
to translate into direct sales.           product catalogue and tag specific
                                                          Page 16
Voice-first conversational
In 2016, nearly half of US smartphone
users consulted virtual personal
assistants (VPAs) – such as Microsoft’s

Cortana, Apple’s Siri, Amazon’s Alexa
and Google Assistant – and Gartner
predicts that by 2019, 20% of all
smartphone interactions will take
place via VPAs.47 While the shopping
capabilities of voice-enabled VPAs
are still nascent, as they evolve, they
will offer a powerful new platform           Smartphone interactions that
through which businesses can reach            will take place via VPAs in
customers directly.                                      2019.

In addition to living on mobile
devices and computers, VPAs now
                                          Microsoft’s Cortana, Amazon Alexa
exist on household devices like
                                          and Google Assistant are working
the Harman Kardon Invoke, Apple
                                          toward developing better user
HomePod, Amazon Echo and
                                          experiences for their voice-first
Google Home. A VoiceLabs report
                                          merchant ecosystems, adding skills
estimated that by the end of last
                                          and features that make the checkout
year, 33 million voice-first devices
                                          process easier and more accessible.
would be in circulation,48 and these
                                          In early 2017, only 28% of US
devices are beginning to drive sales:
                                          residents indicated that they would
Amazon Echo owners make 6% more
                                          use a VPA to buy goods and that they
purchases on Amazon than they
did prior to owning the device.49         were more likely to use their VPAs to       Amazon Echo owners
Shopping capability on Google             play music, give weather information        make 6% more
                                          or provide search results.51 As users
Home launched in February 2016
                                          increasingly rely on their VPAs, the
                                                                                      purchases on Amazon
and 18 months later, predicting the
growth of voice shopping, Walmart         trend towards voice interactions will       than they did prior to
partnered with Google to offer            continue alongside the development          owning the device.
hundreds of thousands of products         of other artificially intelligent systems
for sale via Google Assistant, with a     – based on gestures, biometrics and
vision that customers will use Google     more – that will make these types of
Home devices to reorder frequently        interactions easier and more natural
purchased items.50                        for users.

                                                          Page 17
Brands go direct-to-consumer               Gillette recently initiated its own        Globally, $590 billion was spent using
In order to pursue bigger profit           shaving subscription club, Gillette        contactless payments in 2017, and
margins and retain control of              On Demand. The new service allows          purchases via contactless payments
the customer experience, some              customers to order refills via text.58     are projected to increase to $1.3
brands are bypassing traditional                                                      trillion in 2019 and over $2 trillion
retail channels and going straight         Since the cost of entry is minimal to      globally by 2021.65
to the consumer. Cutting out the           existing retailers, the marketplace is
middleman allows retailers to build        already saturated with subscription        As mobile wallets become more
relationships with customers and           services;    as     of   early    2018,    broadly adopted, businesses are
collect more accurate data. This shift,    subscription box aggregator My             looking to capture a piece of the
in turn, enables brands to develop         Subscription Addiction indexed             mobile payment market, which is
more personalised experiences,             roughly 3,000 boxes.59 And now,            projected to grow to $112.29 billion
something that 75% of customers            even major retailers – including           by 2021.66 The list of mobile payment
prefer.52                                  Starbucks, Amazon, Macy’s, Walmart         providers is growing and now
                                           and Nordstrom – are joining in with        includes PayPal, Intuit GoPayment,
                                           their own subscription box services.       Barclaycard bPay, Chase Pay, Visa
  75% of customers                         To succeed in this sector, subscription    Checkout, Walmart Pay, CVS Pay,
                                           services must feature an offering that     Target Wallet, Starbucks, Kohl’s Pay,
  prefer personalised                      has the ability to surprise and satisfy    Square, Stripe, Venmo, LevelUp,
  brand experiences.                       customers on a recurring basis.            PayAnywhere, and more.

Having achieved a valuation of $1.2        Mobile payments go mainstream              Further pushing mobile payments
billion, Warby Parker has succeeded        Apple Pay launched to great fanfare        into the mainstream is the broader
with direct-to-consumer (D2C) sales,       in October 2014, but the public has        adoption of mobile wallets as a
initially via e-commerce platforms         been slow to adopt this technology.        whole. An increasing number of
and now with physical locations            In 2016, a study by Auriemma               businesses, from stadiums to airlines,
as well.53 Major multi-channel             Consulting Group reported that only        are leveraging mobile wallets for
retailers Nike and Adidas have             27% of users with an eligible device       paperless ticket distribution. As
doubled down on their D2C efforts.         had used contactless payments.60           adoption increases around the world,
Nike announced a new company               At the time, 39% said they would           it seems clear that mobile wallets are
alignment, the Consumer Direct             use mobile payments more if stores         the way of the future.
Offense, that includes the creation of     accepted it, but the study found that
a Nike Direct organisation, which will     even when a store did accept mobile
strategise ways to deepen one-to-          payments, less than a third (31%)
one relationships with customers.54        of users consistently used mobile         Number of Apple

In 2016, Adidas launched Avenue            pay, most frequently citing that they
A, limited-edition boxes that ship         simply forgot.61                          Pay, Samsung Pay

                                                                                                                                   150 million
curated selections of women’s apparel                                                and Android Pay
and footwear to subscribers.55             Despite its slow start, mobile
                                           payments may finally be reaching          Contactless
Direct-to-consumer         subscription    a tipping point. Apple Pay is now         Users
services have grown significantly          available in 20 markets around
in popularity; visits to subscription-     the world, works with 4,000 card
box websites increased 3,000% from         issuers and is available at 50%
2013 to 2016.56 Arguably one of the        of US retailers.62 This increased
most successful D2C practitioners          availability has driven growth in the
                                                                                     20 million

is Dollar Shave Club. The men’s            market; Apple Pay, Samsung Pay and
grooming company disrupted its             Google Pay currently have a user
sector, retaining nearly half of its       base of roughly 150 million and are
customers for one year after their         expected to exceed 500 million users
first subscription, and was purchased      by 2021.63 And these numbers don’t
for $1 billion by Unilever in 2016.57 To   even account for China’s leading
compete with Dollar Shave Club and         mobile payment provider, Alipay,           2015                 2016                  2017
online market competitor Harry’s,          which boasts 520 million users.64                      Android Pay   Samsung Pay   Apple Pay

                                                          Page 18
After a decade of downslide,
  many businesses have cut and
  optimised as far as they can.

Businesses try to take                      businesses were forced to become
                                            lean and mean, cutting costs and
back margins                                streamlining operations wherever
Over the past decade, traditional           possible. This quickly created a race
retailers have seen their profit margins    to the bottom, with companies
slowly disappear. Online retailers,         competing on price while trying
namely Amazon, are able to offer            to optimise operations enough to
a wider variety of products than a          stay profitable. After a decade of
bricks-and-mortar retailer can, while       downslide, many businesses have
simultaneously avoiding the overhead        cut and optimised as far as they can;
costs involved in running a physical        now, in a change of strategy, they are
store. To stay competitive, retailers       looking to increase profit margins,
were compelled to slash prices to           building value for customers through
match those offered on Amazon.              improved offerings, superior service
                                            and delivering amazing customer
This price slashing necessitated some       experiences.
drastic changes on the back end:

   Deliver amazing experiences
   Driven by new technologies and changing demographics, today’s customers demand more from brands than ever
   before. Businesses must be more responsive to new trends and deliver the seamless experiences customers now
   expect. At Microsoft, we’re helping companies meet changing customer demands with the tools and technology to
   better understand customer needs, become more agile and deliver amazing experiences for their customers.

   Understand customers                     Improve agility                          Exceed expectations
   As customer behaviours and               Businesses must work with greater        As the baseline for service
   expectations evolve, businesses          precision and agility to meet today’s    continues to climb, companies
   must gain visibility into their users’   rapidly changing customer and            must rely on technology to
   needs to get ahead. Microsoft            market demands. By connecting            deliver the amazing experiences
   Dynamics 365 enables companies           data from across the value chain,        that     customers    expect,   at
   to track product usage and               Microsoft Azure and Dynamics 365         scale. Microsoft is empowering
   performance so they can predict          help      organisations      improve     organisations with the tools and
   and prevent potential issues and         communication between business           technology to create innovative,
   create better, more engaging             units, predict and respond more          frictionless   experiences    that
   experiences for their customers.         rapidly to trends and better manage      delight customers and exceed
                                            changes on the fly.                      expectations every time.

                                                           Page 19
Technology makes finance
smarter and faster
•   Finance drives technology advancements
•   Blockchain becomes more than just a buzzword
•   Businesses establish a culture of data
•   AI and ML deliver instant intelligence
•   Automation streamlines operations

                                               Page 20
Technology makes
   finance smarter and faster

Finance drives technology advancements                                            Executive summary
Finance professionals have long been technology pioneers, a fact for which        Finance professionals have a history of
they rarely receive credit. The expansion of the telegraph in the US – from a     embracing cutting-edge technology,
single 40-mile line connecting Baltimore and Washington, D.C. in 1844 to over     leading the charge to adopt the tools
23,000 miles spanning the United States just a decade later – was driven by       that have revolutionised the business
exchange traders who needed a way to share market information faster. In          world. Today’s CFOs proudly follow in
1865, the pantelegraph, an early form of the fax machine, was originally used     their footsteps.
to verify signatures in banking transactions between Paris and Lyon, France. In
1918, the Fedwire Funds Service – a Morse code system sent via telegraph – was
established in the United States to transfer funds between the 12 connected       Highlights
Federal Reserve Banks, the Federal Reserve Board and the US Treasury.             • The global blockchain market is
                                                                                    projected to reach a value of $20
In 1958, Bank of America issued the BankAmericard, the first modern credit          billion by 2024.
card, which would change financial transactions forever. The 1960s brought        • 85% of CEOs reported that their
the ATM and the first electronic systems that could provide up-to-the-              CFO’s ability to gather and analyse
minute stock market information through desktop terminals. The 1970s saw            data was key to profit growth.
the launch of the Nasdaq electronic bulletin board, SWIFT and MIDAS, all of
which simplified, standardised and secured the way financial information was      • Businesses will generate $2.9
distributed around the world.                                                       trillion in business value from AI
                                                                                    by 2021.
The 1980s gave us electronic trading platforms, cash machine networks and
in 1984, Jane Snowball made the world’s first online purchase. Companies like
eBay and Amazon pioneered e-commerce in the 1990s, while direct trading,
Chip and PIN systems, contactless payment systems and the first version of
Bitcoin launched in the 2000s.
                                                                                    Finance professionals
Finance has long operated on the cusp of technology, and from digital               have been pioneering
spreadsheets to accounting software, finance professionals have pioneered
digital technology in the workplace for decades. Today, finance professionals
                                                                                    digital technology
are driving the adoption of new analytics tools and techniques to help improve      in the workplace for
operations, better forecast business performance and help their organisations       decades.
strategically plan for the future.67

                                                        Page 21
Blockchain becomes                        A recent study from Accenture
                                          reported that blockchain could help
more than just a                          cut costs and deliver savings of more
buzzword                                  than 30% across the middle and back
First described in 1991 by Stuart         office. This includes an estimated
Haber and W. Scott Stornetta,68           70% saving on central finance

blockchains     are   decentralised,      reporting and 50% savings on
shared ledgers where all transactions     compliance, centralised operations
are recorded securely by encryption       and business operations.75 Many of
in near real-time and are immutable       these savings are due to streamlined
(incapable of being altered or            processes, optimised data quality,
deleted). Blockchain technology           improved transparency and better

sparked a revolution in 2009 when         internal controls.
Satoshi     Nakamoto        leveraged
blockchain to provide the data            While blockchain has become popular
structure for a novel peer-to-peer        due to its efficiency in processing
electronic cash system, Bitcoin.69        financial transactions, companies
                                          are already looking to blockchain
Despite blockchain being nearly           to solve other business problems.
three decades old, we are still           A number of blockchain solutions
in the early adoption phase, but          now enable companies to build anti-      Businesses currently using
blockchain technology is expected         counterfeit databases, track stolen       blockchain technology.
to grow rapidly over the next six         products, or track items with specific
years,70 with the global blockchain       qualities, such as diamonds from
market projected to reach a value         conflict zones or luxury products
of $20 billion by 2024.71 Even today,     that rely on product authenticity.76
attitudes are changing fast. In AFP’s     One promising application of
2017 MindShift Survey, only 1% of         blockchain is with contract and
organisations had implemented             document management – digitising
blockchain, while 51% reported no         and moving the governance of
plans to do so.72 By their 2018 report,   paper certificates, warranties and
23% said they were currently using        contracts into a blockchain – which
blockchain technology,73 a huge           can automatically update the
year-over-year leap.                      documents when a triggering event
                                          occurs. And testing has already been
Businesses       are      discovering     implemented in the food safety
revolutionary     applications     for    industry, where blockchain allows
blockchain technology across many         food to be granularly tracked, so
industries, including a number of         when a producer identifies an issue –
areas impacting financial operations.     like a tainted batch of spinach – they
For example, a blockchain can connect     can contain the problem by isolating
ledgers from across an organisation’s     the source and issuing a recall for
supply chain (supplier, manufacturer,     only the affected products.
distributor, shipper, retailer and
end consumer) to make tasks like          Other potential benefits of employing
tracking a product’s journey much         blockchain     technology      include
more accurate and efficient. Tracking     reduced risk of fraud, reduced time
a product’s journey via blockchain        to complete transactions, better
can turn a manual process that once       networked loyalty programmes and
took days into an automated process       increased customer trust. Today’s
that takes only seconds.74                finance leaders must understand
                                          blockchain and the possibilities
Businesses are poised to see              offered by this disruptive technology.
significant returns from blockchain.

                                                         Page 22
Priorities of the future
finance function

    12%                13%                 14%                   17%                            22%                               23%
Drive efficiency   Refine risk        Reduce finance      Make significant         Meet the need for new skills        Improve big data and analytics
improvements       management         function costs      changes to the finance   by transforming how finance         capabilities to transform
through            capability,        through new tech,   function skill set.      talent is recruited, retained and   forecasting, risk management
offshoring,        including cyber.   such as robotics                             developed.                          and understanding of value
shared services                       and process                                                                      drivers.
and outsourcing.                      automation.

Businesses establish                               Beyond data analysis, CFOs face
                                                   another modern-day data challenge:
                                                                                                                   % of finance leaders that chose
                                                                                                                   category as number one priority
a culture of data                                  as they take on larger roles within
Big data has been a buzzword for the               IT and analytics, CFOs are forced
past few years, so it should come as no            to tackle the growing issue of data
surprise that finance leaders continue             management. This includes not only
to focus efforts on data and analytics             data storage, but also monitoring
programs. 85% of CEOs reported                     and managing data quality. These
that their CFO’s ability to gather and             critical tasks not only enable CFOs
analyse data was key to profit growth,77           to do their job, but they allow other
and in a recent study by EY, “improving            functions to operate more efficiently.
analytics capabilities to transform                Without data quality control, CFOs
forecasting, risk management and                   and other business leaders risk
understanding of value drivers” was                making decisions based on flawed
the top priority most commonly cited               information.
by CFOs (23%).78

                                                   As data and analytics play an
As finance professionals move                      increasingly important role in
into strategic business leadership                 business, companies – and their CFOs
roles, the importance of having                    – are working to establish cultures
quality data grows, and they must                  of data across their organisations.
increasingly rely on their technology              This means that measurement
counterparts to help them drive                    strategies and data collection plans
business intelligence. 73% of finance              are the starting point and not an
leaders said that closer CFO-CIO                   afterthought, there is a high level of
alignment was important to achieving               fluency in analytics across teams and
financial   transformation.79    With              business leaders have access to the
more intelligent and powerful cloud                data they need, whenever they need it,
computing, big data is finally moving              to make informed strategic decisions.
into new areas, helping finance
leaders close books faster, deliver
more accurate reporting and build
more intelligent business strategies.

                                                                     Page 23
AI and ML deliver                             definitions of AI, it can commonly
                                              be understood as a computer that
                                                                                            Intelligent systems can be used to
instant intelligence                          performs a function that requires             analyse large amounts of data and
Not long ago, artificially intelligent        some form of cognitive intelligence.          detect anomalies. In finance, this
machines seemed like a thing of               This may include visual perception,           may be used to help identify fraud
science fiction; even today, when             speech recognition or decision                by monitoring behavioural patterns,
people think of artificial intelligence       making. Machine learning is a type of         flag when a payment will arrive
(AI), many still envision human-like          artificial intelligence where computers       late or detect changes to market
robots. But in practice, artificially         leverage new information to improve           conditions. These tools are also
intelligent machines have been                their outputs automatically.82                being used to help mitigate risk by
around for decades, making our lives                                                        ensuring regulatory compliance

better, safer and more efficient. So                                                        and improving operations, flagging
why all the buzz now?                                                                       abnormal changes or anomalies for
                                                                                            further investigation.
In short, it’s because these systems
are only now getting really good.                                                           Classification
Correction: really, really good. In                                                         Artificially intelligent systems can be

2016, Microsoft’s Artificial Intelligent                                                    used to organise and classify data
and Research team reported that their                                                       categorically. Through classification
conversational speech recognition                                                           – often referred to as segmentation
system had reached human parity,                                                            or clustering – businesses can
                                                    Business value generated
i.e. their system made the same                                                             leverage AI to reconcile transactions,
                                                        from AI by 2021.
or fewer errors when converting                                                             categorise expenses and even
speech to text as a professional                                                            evaluate       interactions    between
transcriptionist.80 This system, which                                                      categories to identify correlations.
boasted a word error rate (WER) of            The power of these intelligent
5.9% in 2016, has since improved to           computers – which are frequently              Probability
a WER of 5.1%.81 As the processing            cloud-based – is in their ability to          These AI systems can be used to
power and accuracy of these                   process a large volume of information         conduct probability analysis. These
intelligent systems improve – from            at a speed which humans are not               tools give finance teams the ability
advancements in neural networks               capable of achieving. While reaching          to run faster, more accurate data
to natural language processing –              human parity in WER is excellent, the         models. This enables them to quickly
the opportunities to leverage these           true power of this artificially intelligent   test how changes to specific variables
technologies increase as well.                system is that it can transcribe hours        will impact outcomes, such as how
                                              of audio in seconds at that same WER.         different prices will impact revenue
To      understand     how       artificial   This proficiency makes artificially           or how changes to net payment
intelligence and machine learning             intelligent computers extremely               terms will alter cash flow.
will impact finance, it’s first useful to     effective in performing four categories
understand what these terms mean.             of tasks: detection, classification,
While there are many types and                probability      and        optimisation.

                                                               Page 24
Optimisation                            AI, Gartner predicts that businesses
Lastly, these tools can be used to      will generate $2.9 trillion in business
optimise systems, processes and         value from AI by 2021.85
decision making. Through real-time
data analysis, intelligent systems      The merging of big data with
can calculate the probability of        intelligent technology has made
various outcomes and optimise           processing large data sets easier
accordingly;     analytical   models    than ever, and from mining big
can weigh information and make          data to predictive analytics, finance
optimisations based on the results.     leaders are increasingly relying
In finance, this type of optimisation   on these new, intelligent tools to
can be used to maximise profits by      help them succeed. Today, finance
dynamically optimising prices at        professionals are being asked to
different times, reduce shop floor      apply their systemic approach
injuries by slowing down a machine      for numbers to data that reaches
when a sensor identifies a potential    far beyond the realm of finance,
issue or cut costs by automatically     including assessing consumer data
optimising resource allocation across   to forecast sales trends, economic
the organisation.                       indicators to predict market trends
                                        and operations metrics to help            Artificially intelligent
Despite its many benefits, just         streamline processes and cut costs.       computers are extremely
15% of businesses are currently         Beyond dollars and cents, finance         effective in performing four
leveraging AI, but 31% are planning     leaders possess the ability to extract    categories of tasks:
to implement intelligent systems        knowledge from numbers and apply
over the next year.83 83% of            that knowledge to make strategic
                                                                                  detection, classification,
companies said that AI is a strategic   business decisions, and now, with AI,     probability and
priority for them.84 As organisations   these leaders are becoming smarter        optimisation.
reap the efficiencies and insights of   and more powerful than ever.

                                                       Page 25
53% of companies
                                                                             outsource tax functions.

Main drivers for
outsourcing all or part of
the compliance function

  Need for additional
        assurance on
compliance processes

    Lack of in-house                                                       streamlines
    compliance skills

                                                                           As increasing transaction volumes
                                                                           and ever-changing regulations are
                                                                           making finance more complex,
                 Cost                                                      businesses are looking to reduce
                                                                           the costs of the many manual
                                                                           tasks required in bookkeeping and
                                                                           accounting. 53% of companies
Compliance activities                                                      in Deloitte’s most recent Global
    associated with
  business function                                                        Outsourcing Survey86 reportedly
        outsourcing                                                        outsource tax functions and 42%
                                                                           outsource certain finance functions.
                                                                           For compliance specifically, 41% of
                                                                           companies said the main reason they
                                                                           outsourced was due to lack of in-
                                                                           house skills, while 38% cited costs.87

                                                                           With the rise of AI, businesses are now
                                                                           turning to robotic process automation
     Lack of in-house
       language skills                                      2016   2017
                                                                           (RPA) to help reduce costs, speed up
                                                                           processing, improve quality controls
                                                                           and free up their employees’ time for
                         0%   10%   20%   30%   40%        50%       60%   more strategic work. 88% of businesses

                                                      Page 26
projected a moderate to high demand      employee expenditures – particularly      staff’s time, freeing them up to
for RPA in finance and accounting        on gifts and entertainment – to help      focus on more meaningful work, like
in 2018,88 while 66% reported that       identify potential areas of conflict or   predictive analytics and performance
automated AI applications would          policy abuse. Furthermore, they can       management.93 Before long, today’s
become applicable to their finance       help businesses manage financial          manual financial processes will be
and accounting over the next couple      risk through tasks like detecting         a distant memory, but automation
of years.89                              changes in risk exposure and              alone won’t transform finance;
                                         helping to determine the causes           successful finance departments will
Automation – enhanced by AI and          for such movement, as well as in          continue to need human oversight
machine learning – is streamlining       evaluating customer risk and making       and a knowledgeable workforce to
finance operations in many ways          recommendations on credit limits or       help drive strategic business growth.
and saving money by completing           maximum loan amounts.
previously manual tasks faster and

more efficiently. RPA – artificially     Companies are finding that digital
intelligent workers90 – can now be       assistants are reducing operating
used for many tasks, including digital   costs by as much as 80%91 and a study
invoicing, expense management,           by Accenture showed that robots will
fixed-asset accounting, conducting       be able to automate or eliminate up
general ledger account reconciliation,   to 40% of transactional accounting

evaluating customer risk and auditing    work by 2020.92 But this doesn’t
expense reports.                         mean that automation will be the
                                         end of the finance professional. To
Beyond faster speeds and lower costs,    the contrary, automation, AI and RPA
automation is playing a larger role in   are elevating the finance function,
                                         allowing workers to spend less time
compliance. Automated, intelligent
                                         on tedious manual tasks and more
systems can review employee
                                         time deriving higher-value strategic        Robots will be able to automate
disclosures, open accounts and
                                         insights for their businesses. These          up to 40% of transactional
paper statements to flag any trades
                                         technologies are estimated to recover         accounting work by 2020.
or transfers for the appropriate level
                                         between 25% and 75% of financial
of review. They may also review

   Work faster and smarter
   From risk management to strategic planning, finance professionals are taking on new, important challenges in
   the workplace. To meet these changing demands, they must leverage innovative, intelligent tools to combat new
   threats while fostering growth. At Microsoft, we’re making finance smarter and safer with unified data that powers
   intelligent, automated systems.

   Unify business data                    Get predictive insights                  Automate workflows
   Finance leaders need real-             To succeed in today’s competitive        As the pace of modern business
   time visibility into business          business environment, business           accelerates, finance teams are
   operations and performance to          leaders need better financial            looking to streamline processes
   make informed decisions. From          forecasts and foresight into             and get more done. With Azure,
   cloud-based data solutions on          emerging market trends. With             Dynamics 365 and Microsoft 365,
   Azure to intelligent analytics         artificial intelligence and machine      we’re providing businesses with
   tools in Dynamics 365, we’re           learning embedded, Dynamics 365          tools to automate workflows
   helping businesses turn data into      allows companies to be less reactive     and simplify communication
   actionable insights so they can        and more proactive and provides          so they can improve efficiency,
   optimise operations and make           them with the knowledge to make          productivity and compliance.
   more strategic business decisions.     smarter risk and investment choices.

                                                        Page 27
Living in the age
of uncertainty
•   The age of uncertainty
•   Regulation changes create uncertainty
•   Businesses brace for Brexit
•   Leaders try to navigate a highly politicised environment
•   Uncertainty takes a toll

                                                   Page 28
Living in the age
   of uncertainty

The age of uncertainty                                                            Executive summary
From Brexit negotiations and trade tariffs to immigration reform and              In an incredibly polarised political
environmental policies, the unpredictability of today’s political and social      environment, attitudes can shift on a
landscape reigns supreme among the factors concerning finance leaders.94          dime, making it difficult for companies
                                                                                  to plan for the future.
As the future of various regulations around the globe remains unclear in a
highly politicised environment, uncertainty is placing a great amount of
pressure on businesses; 49% of finance leaders feel that they are exposed to      Highlights
more uncertainty today than they were three years ago.95 This uncertainty can     • 49% of finance leaders feel
be seen in the amount of cash US businesses are accumulating, an amount             that they are exposed to more
that continued to climb through 201796 despite projections of steady US GDP         uncertainty today than they were
growth in 2018,97 signalling that finance professionals remain cautious about       three years ago.
the economy.                                                                      • 42% of global CEOs reported
                                                                                    over-regulation as a top concern.
Unfortunately, the waters on the horizon appear no calmer than those of
                                                                                  • 66% of consumers felt it was
the past year, so finance leaders need to prepare their businesses for more         important for brands to take a
uncertainty ahead.                                                                  public stand on social and political
Regulation changes create uncertainty
Over the last 18 months, a string of major regulatory changes has been
initiated and enacted. From GDPR to tariffs, these regulations span across a
wide range of disciplines and touch nearly every business. As business leaders
adapt to comply with the latest regulations, they remain concerned over the
impact of additional pending regulations that could upend their operations.
In 2018, 42% of CEOs globally and 50% of CEOs in North America reported             49% of finance leaders
over-regulation as a top concern,98 with 54% citing rising risk levels due to       feel they are exposed to
industry-specific regulation.99
                                                                                    more uncertainty today
Finance regulation                                                                  than three years ago.
Finance professionals continue to face an onslaught of changes to financial
regulations. Last year, new revenue recognition rules went into effect for most

                                                        Page 29
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