Over the past few weeks, we have released posts describing how different members of the C-suite can make use of data and analytics. We started out discussing five ways CMOs can use data and then talked about the CLO and lending analytics. In this post, we want to highlight the ways that a CFO (Chief Financial Officer) can make use of data and analytics.
How Can a CFO Use Data?
CFOs can benefit in several ways from data and analytics. From near real-time access of key data to addressing data quality issues, CFOs – especially in community banks and credit unions – have great opportunities to leverage data and analytics.
1. Lose the Overly Complex Excel Workbooks
As a CFO, does your finance team have incredibly complex Excel workbooks? When data and/or requirements change, how time-consuming is it for your team to quickly deliver you updated results?
With the growth of data and analytics and the increasing use of data warehouses in combination with visualization tools, CFOs and their teams can lose the overly complex Excel workbooks. Using industry-standard (and affordable!) visualization tools, ad-hoc reporting can eliminate complexity and manual effort to get even some of the more complicated data points. Working with your internal business intelligence team, processes can be automated to allow your financial analysts to spend less time fussing with Excel files and more time actually analyzing the data.
2. Repeatable, Automated Processes
Similar to some of the concerns mentioned in the first point, CFOs and their teams tend to have manual, multi-step processes built to create reports and retrieve information daily, weekly, monthly, and quarterly. Now imagine giving that time back to you and your team to increase productivity.
With a data and analytics platform, a CFO can enable his team to automate what tend to be very time-consuming and cumbersome processes. If a team member is out for some reason, the automated process still gets completed. This eliminates concerns that may arise if there is turnover in the CFO’s team as processes are removed from any one individual. Processes to gather information and produce reports are created more quickly, more efficiently, more accurately, and in an automated fashion.
3. Integration of Data
With a data warehouse, CFOs can begin to understand their organization’s operations more holistically. With an integrated data and analytics platform, a CFO can examine financials while “drilling across” to view loan, deposit, or channel usage details. As more community banks and credit unions look to stay competitive in such an evolving industry, the insights provided by an integrated data platform will become critical for CFOs.
4. Data Quality
How many CFOs trust the data they get from their MCIF? Probably not a ton of you, right?
But many community banks and credit unions use an MCIF as their primary and sole tool for business intelligence. This naturally presents a challenge for CFOs because an MCIF (Marketing Customer Information File) is primarily designed for marketing. Sure they may have some financial capabilities built into them, but MCIFs are not designed to be a financial reporting tool.
With a enterprise data and analytics program built, a data warehouse or central data repository of some kind will be created. This platform will enable CFOs to look at data without the MCIF’s scope and filters affecting data quality and accuracy.
5. Compliance and Regulatory Reporting
It’s no secret that compliance and regulatory pressures will continue to impact community banks and credit unions. As a CFO, these pressures will become increasingly important to monitor, audit, and track.
With a well-defined data and analytics platform, CFOs can help their teams do a better job of tracking and ensuring compliance for key policies. For example, dashboards can be built to automatically track Risk-Based Capital ratios and other financial details auditors will undoubtedly be focused on. As CECL implementation and standards timelines inch closer, data and analytics will enable CFOs to monitor, track, and conform to the appropriate standards.
6. Data-Driven Pricing Models
Companies like Deep Future Analytics are starting to bring this idea to many banks and credit unions. By leveraging your historical data, statistical models can be applied to optimize pricing while maintaining (or even reducing) your organization’s credit risk. Based on past loan performance, your bank or credit union can identify whether or not you can offer better rates on C or D quality loans while ensuring adequate ALLL.
We anticipate a sharp increase in the number of community banks and credit unions performing this type of price modeling as data and analytics become more commonly leveraged throughout the industry. Large financial institutions have been doing this type of work for years; as data and analytics technology becomes more practical for smaller organizations, these advanced models should become more frequently adopted. Increased collaboration between the CFO and CLO can maximize the power and effectiveness of these pricing models.
CFOs, like all members of the executive team, can benefit from data and analytics in several ways. We believe that all community banks and credit unions can and should become data-driven. By understanding some of the ways the CFO can use data and analytics, our hope is that your organization takes a more focused approach to building out your business intelligence program.