Future of Finance in Hungary

The coronavirus pandemic has proven that it is time to retire unwieldy, passé business models that are not cutting it anymore in the financial sector. As economic uncertainties take center stage the world over, Hungary’s financial managers place their hope in automation and digitalization to weather the storm.

The challenges and expectations of financial managers have been thoroughly reshaped by the coronavirus epidemic. Economic uncertainty has become the leading factor among external risks, preceding the lack of an available and qualified labor force, which has been a key concern in the sector in the past years. A recent survey conducted by PwC Hungary shows that Chief Financial Officers (CFOs) are more and more worried about the economic outlook in the wake of the pandemic and an increasing number of managers expect layoffs in the near future. While labor scarcity topped their list of concerns in recent years, the economic outlook and the efficiency of IT infrastructure are the most important issues that CFOs have named in this year’s survey.

New situation
“There is a new situation. This sentence is probably the most accurate summary of the current assessment of the situation by CFOs,” according to the PwC survey that contains the answers of 120 financial managers from Hungary. The majority of financial managers (70%) interviewed by the consulting firm indicated that the greatest risk this year is undoubtedly the uncertain economic environment caused by Covid-19. The reorganization of internal process, business and financial challenges caused by the coronavirus have significantly transformed the lives of financial organizations. As a result, new considerations have emerged and the focus changed. This year, the key objectives of CFOs concern the following four themes: the motivation and reaction to the new situation of the financial team; the effectiveness and sustainability of processes; the adequacy of finance support systems and infrastructure; the value-creating role of the financial function within the company. Last year's survey identified changes in IT systems and the business environment, as well as automation, as the main challenges for CFOs. In line with the deteriorating economic outlook, pessimism about the size of financial departments has also increased somewhat. Some 25 percent of respondents expect a reduction in their headcount, due primarily to automation and partly to cost cuts, outsourcing and weaker business performance.

Automation in the limelight
We live in an age when new competitors are transforming entire industries within brief periods of time and new services are taking the place of long-established business models. Innovative technological developments are displacing entire ranges of products – a trend not restricted to any one industry or sector. According to the survey, the response to these changes lies in automation and digitalization. The executives interviewed by PwC voiced their conviction that the majority of financial processes can be automated over the next 5 years. They estimated that as much as 30-40% of the time currently spent on financial tasks can be saved through automation and employee training. This, however, raises a challenging question: how to boost the ratio of automation while also maintaining the motivation of the financial team.
According to respondents, one of the most difficult tasks if to ensure that the financial function spends most of its time and resources with high value-added tasks that facilitate high-level decision making. International data show that the global financial departments of the world's leading technology companies spend more than 50% of their time supporting decision-making and only 15% recording transactions. In Hungary however, recording and managing transactions takes up nearly 50% of the resources of financial departments. Compared to the previous year, there is a significant increase in the number of respondents that consider themselves to be advanced in the field of digitization and automation. Nevertheless, only 7% of respondents see their companies as being pioneers in this respect.
Finance is the natural hub for the most strategic asset of the digital age, one that holds unprecedented opportunities for business growth: data. The highest transformative value can be achieved by monetizing data as a product, specifically by generating measurable economic benefits using enhanced data analytics. If this transition is implemented in an efficient manner, financial departments will become the engine of growth within the company.