Finance Observability - What is it and how is it revolutionizing Finance Operations

Whenever I talk to Finance leaders about what we do at Bluecopa, it's interesting how our approach to "Finance Observability" gets them excited. The questions range from – How Observability is different from the KPI reporting to how Finance teams can benefit from it.??

So, here I am, trying to clarify the confusion around the buzzword – "Finance Observability" – what it is and how Finance teams can leverage this capability. In this blog, I will try to decrypt this often talked about but less understood buzzword.?

What has changed?

Before we dive deep into what Finance observability is, it is helpful to understand the context - the evolution of the Finance paradigm. While the last few decades were all about periodic monitoring, and reporting, the coming times belong to cross-function problem-solving and continuous improvement.

The one factor driving this changing role is – Availability of Data in the right format at the right time. With tons of data produced by multiple systems, it is only natural for leaders to want to exploit this resource.?

With a constantly changing business environment, it is only natural for Business leaders to turn to their Finance departments to differentiate the noise from the signal.?

"The role of the CFO is becoming critical in having data on-demand, anytime, anywhere. The role of the CFO is to be the architect of where you should put all the enterprise data for management and operational decisions. – Big4 Partner

What is Finance Observability

Imagine having a crystal ball that tells you what has happened, what is happening, and what might happen simultaneously. Or picture a Quentin Tarantino movie – where multiple individual storylines somehow connect into a single grand narrative.

Finance Observability is precisely that – and more.?

Finance observability is all about 'context-awareness'. The Finance organization serves as the organization's brain, receiving data from multiple nerve-like functional tools and turning it rapidly into actionable insights through advanced analytics.?

Information is handled in real-time, and cross-functional data is stitched together seamlessly.

"Based on an analysis conducted by Gartner, only 3% of companies have strategic, operational, and financial planning processes that are fully aligned and integrated."

In short, Finance Observability does the following:

1- Methodically crunching data to decision cycles

2- Actionable insights to drive outcomes?

3- Continuously monitor to uncover & prevent risks

The 3 Pillars of Financial Observability

Finance observability focuses on 3 broad pillars to transform how organizations use data.

1. Data – At its very core, Observability connects, validates & marries multiple data sources. As a first principle, Observability requires centralized data to access and leverage data across systems.? Data focuses on the following:?

• Contextualized data availability?
• Data Normalization & Standardization
• Single pane of truth

???????2. Analysis - Finance observability focuses on delivering insights through Metrics/KPIs (both out of the box and on-demand adhoc). A metric-based reporting ensures the standardization of metadata structures and rules. Here the focus is on the following:?

• Data logic and data relationships
• Contextual insights/reports
• Continuous monitoring & alerting

???????3. Personalization – Information is only helpful in the right hands. Observability focuses on building information cockpits based on user roles and access. This pillar focuses on the following:

• Data Governance (role-based & need-based access)
• Personalized reporting cockpits

What's in it for Finance?

1. Finance turns Storyteller – Let's face it, as Finance leaders, you are more and more expected to understand and solve business problems requiring collaboration from other departments. With Finance Observability, you get a 360-degree view of the organization through data from all systems. You are not just equipped with the "what", but also the "why". This lets Finance tell the "entire story" about business performance and events.?

Based on a CFO study conducted by Everest in 2022, 62% of CFOs agreed that "improving data management, including data maintenance and organization-wide visibility" is a high-priority item.

2. Outcome-oriented business partners – Automating rule-based KPI computations and reports allows Finance teams to focus on what is needed to do the most – becoming the Decision Experts. Advanced analytics help decode the root cause faster and drive business action. Access to operational data brings Finance closer to business – helping make the right decisions at the right time.??

3. Democratized insights, Centralized controls – Gone are the days when data was not available or erroneous. Observability aims at putting information in all hands, with adequate security guardrails. The metadata structures and definitions are all controlled centrally, making Finance teams the Data steward for the organization.?

Based on a Study conducted by Gartner, "73% of finance functions favor a centralized tightly governed source for data."

?4. Faster time to value – Finance folks are very ROI driven and would need solutions that are faster and simpler to be adopted. The right observability solution should have a plug-and-play approach for that reason.?

Conclusion

I hope my 2-page summary of hours of conversations with Finance leaders helps you understand the nuances of this revolutionary concept. Finance Observability, when combined with the right business partnering mindset, can be exceptionally transformative.

#cfo #financeoperations #financeobservability Nilotpal Chanda