Technology, data and analytics are regarded as critical value drivers
In previous years private equity may have held back the financial industry in terms of the uptake of new technology and automation. As more data becomes available, the requirements for reporting and transparency have increased and businesses are continuing to diversify their investment plans, and realising that having strong expertise in analytics is a necessity.
Technology has become such a significant part of every industry, including the finance sector. In regards to the growing role of data and technology, industry specialists have emphasised the shifting position of the chief financial officer (CFO) within private equity firms. Technology and innovation have become critical across the industry in general. The CFO is becoming pivotal, a highly valuable asset within a business is data. This role has more responsibility concerning how to utilise data and apply the benefits to a business.
Portfolio Analytics and technology and key functions CFOs highlighted as required to shift from standard to strategic planning. The EY 2020 survey discovered that 70% intend to increase time spent on portfolio analytics and a further 69% plan to spend more time on technology.
CFOs are leveraging technology to manage routine tasks in their business. In the future, we’re likely to see CFOs continue working strategically, focusing on analysing data across the entire business.
Deal and portfolio executives are becoming increasingly popular so CFOs are taking on more responsibility and moving beyond finance into several new areas, such as data protection, resilience, digital strategy and ESG.
In a report named Delivering Value from Data, data-driven decision making has become a critical element of business as data-focused leaders have displayed the effective use of data to leverage new opportunities, disrupt markets and generate a competitive advantage.
The increase in fund sizes and expansion of portfolios in regards to funding size and location has spurred a need to utilise technology to manage these changes. Companies that can leverage data, utilise predictions and decisions, will be positioned to create a more competitive advantage.
The desire to increase the benefits of technology is also being experienced with institutional investors. As wealth and pension funds get bigger, more complex and competitive, their capacity to use technology is paramount. The availability and quality of data are becoming crucial, assisting funds in making better investment choices in today’s rapidly transforming global market.
Anything that makes funds more efficient at selecting the best investments is a major competitive advantage, and this is where data comes into play. Being agile and responsive is key and being capable of adapting and managing the pace of data demand.
This increase in data, analytics and technology is influencing hiring strategies and developing a finance workforce that includes relevant data analytics and technology skills. The conventional workforce of private equity is accustomed to standard systems like Excel but today employees need training on new tools as the technology landscape continues to transform.
The skill sets needed for the talent pool are much more technology-focused, with higher data analytics experience. CFOs are now focusing on how, in this competitive market, you’re not just competing against other private equity firms, but actually against other industries, like technology. So with this in mind, it’s critical to remain focused on attracting and retaining the best talent. Private equity CFOs recognise the need for them to accelerate the pool of talent within the business, especially as data analytics takes on a more important role in an organisation.
David Alich, director of analytics and technology at PwC recently gave his view on the future in a panel discussion. Alich believes the investment will continue to increase in data and analytics technology solutions. He anticipates that every fund will have its analytics and data experts or data science teams who focus on high-value projects and implementing analytical solutions into portfolio businesses.