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CFO skills and tools for digital transformation

Industry 4.0 is giving rise to a new genre of CFO, with a deeper understanding of digital transformation. A new white paper by Siemens Financial Services (SFS) – CFO 4.0: Essential financial competencies for successful transition to Industry 4.0 – outlines five of the key skills that CFOs need to drive their organisations forward during the digital revolution:

1. Understanding the financing options

CFO need a comprehensive understanding of the available financing options that can enable a commercially sustainable transition to Industry 4.0. The SFS report says that a wide range of financing techniques are now available to manufacturing organisations, from simple equipment and technology finance to total solution finance, as well as options such as pay-to-use or pay-for-performance. It says: “Specialist knowledge of the available financing tools, paired with a holistic view of the sector value chain, has the potential to shape the company’s approach to the investment process and can ultimately underpin the business’s goal to outperform the competition in the longer term.”

2. Early assessment

CFOs need to make sure they assess their financing options early in the strategic steps toward Industry 4.0, in order to access and take advantage of the range of potential sustainable digital/automated technology solutions. The SFS report says that first-movers can have a critical advantage and CFOs should use using their specialist knowledge to “create sustainable financing structures that address the cash-flow/working capital/budgetary challenges that might otherwise narrow the company’s technology investment outlook and choices”.

3. Assessing opportunity vs risk

CFOs need specific Industry 4.0 knowledge and expertise – related to financial, technology, operations and market analyses – in order to accurately assess digitalization opportunity vs digitalization risk. The report says: “CFO 4.0 needs to systematically understand the working capital impacts/ enablers of the different investment dimensions and alternatives as well as potential options for risk mitigation.

4. Create new business models

CFOs much be able to build predictive Industry 4.0 return-on-investment models and performance monitoring processes. The report states: “In collaboration with the Chief Executive and the Chief Engineering/Operations Executive, CFO 4.0 is the prime mover in building a return-on-investment model that judiciously estimates, monitors and measures the commercial benefits resulting from an Industry 4.0 investment.”

5. Create a phased plan

CFOs will then need the proficiency to create an effective phased plan to operationalise the business’s move to Industry 4.0. According to the report: “CFO 4.0 will have anticipated the impact of over- or underperformance and will have set up financing arrangements that ensure built-in flexibility. Typical examples of flexible financing that addresses Industry 4.0 challenges include transition finance, which smooths cash flow while legacy systems are maintained and new systems tested.”

Financing tools for CFO 4.0 

The report also looks at a number of specialist financing methods that are being deployed by CFO 4.0 to upgrade to the digitalized, automated operating platforms of Industry 4.0. They are as follows and more information is given in the report:


This item appears in the following sections:
Financing
Financing Short-Medium Term Deficits
Operations
Best Practices & Benchmarking in Operations
Treasury Careers
Investing Short-Medium Term Surpluses

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