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InsideNOW

6 Challenges CFOs of Real Estate firms will face in 2020

CFOs strategic leader role requires a 360 degree view on the strategy of the firms they operate in and forward thinking approach to future challenges. The post-Covid-19 world and this new decade will bring many new trials to Real Estate firms and some of them will require very thoughtful considerations and a whole new set of skillset from its Chief Financial Officers.

Authors

Authors

Alexandre Prost-Gargoz - Partner - Corporate & Accounting - Deloitte

Bjoern Herberger - Director - Corporate & Accounting - Deloitte

Published on 25 June 2020

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In recent years, the role and requirements of a Chief Financial Officer have changed significantly and especially after the COVID-19 sanitary crisis hit the world with much uncertainty, drastically changing the office environment. From an essentially accounting and numbers focused one, the involvement of CFOs nowadays is much broader and multifaceted and moved towards a rather strategic leader position defining the path for the company’s future. Here are 6 important challenges they will have to face in the start of the new decade.

New ways of working

Due to the Covid-19 sanitary crisis, many businesses had to shut down or embrace remote working. The health, safety, and business implications are all very demanding.

Teams that normally go to the office had to find efficient ways of working from home. At times like this, it is important to revisit the ways of communication and IT infrastructure.

For a prolonged homeworking period, clear communication architecture may prevent many fails and misses and indicate frequency by which information flows between people, teams, and systems in your organization.

Remote working also puts a major strain on the company’s IT infrastructure and tests its security systems.

A cultural change in ways of working is therefore inevitable and necessary.

Cyber security and Smart cities

The obvious benefits of digital transformations highlighted the weaknesses linked to the unstoppable trend of smart buildings. The technology to run smart buildings more efficiently and create synergies is inherent with risks, also known as cybersecurity.

The huge data traffic pouring in and out of organizations’ made senior executives extremely aware of the importance of securing corporate systems and networks. Still now, the cybersecurity of real estate and building control systems is often ignored or not taken seriously enough.

Hands on the data

Digital transformation made the approach to running corporations challenging to re-imagine.

The shift to digital from manual led to a very different mindset in terms of approach to technology and how it can assist the use of data in a more efficient way while boosting collaboration.

Another key word is integration of systems and applications. There is an untapped opportunity in interfacing IT systems and software directly ‘communicating’ with one another rather than creating two independent and interchangeable ‘data cemeteries’.

Considering these, it is vital and salable that the use of the readily available data is not just lying around but that it is processed, understood, and when possible, enhanced.

Tax & regulations

Another topical issue will be the necessity to scale up companies’ reporting skills. The increasing pressure on more efficient and transparent financial reporting and analysis might be a good starting point. It is increasingly important to provide accurate data in a timely manner and very often on an ad-hoc basis.

GPs are keen on getting more insights on untapped data as well as being able to provide investor reporting quicker. Additionally the growing regulatory requirements put further pressure on companies to identify how to do the right things and how to do them right.

ESG

The trend from ‘nice to have’ to ‘state of the art’ for consideration of environmental, social, and governance (ESG) risks altered considerably the demand for CFOs to put ESG on their agenda. Companies that are not considering ESG in their strategy will fall behind, as these pre-financial risks are key elements to the investment and business strategy.

To add to the demand from investors and tenants, successful ESG programs enable real estate entities to optimise operational performance, identify and mitigate risks and gain a competitive advantage in the industry.

Valuation

The most important role of the appraisal of a real estate property is to identify the purchase price to complete a sales transaction. Other than that, estimating the value of a real estate property is also crucial for a variety of actions such as financing, sales listing, investment analysis, property insurance and taxation.

The effects of the evolving ESG requirements and the related responsible investing aspects are also making an impact on the demand of real estate to comply with the increasing regulatory requirements. Consequently, this will have an impact on the valuation of the property as well.

Conclusion

  • The shift to digital from manual led to a very different mindset in terms of approach to technology and how it can assist the use of data in a more efficient way while boosting collaboration.
  • For a prolonged homeworking period, clear communication architecture may prevent many fails and misses and indicate frequency by which information flows between people, teams, and systems in your organization.
  • The increasing pressure on more efficient and transparent financial reporting and analysis might be a good starting point. It is increasingly important to provide accurate data in a timely manner and very often on an ad-hoc basis.
  • Companies that are not considering ESG in their strategy will fall behind, as these pre-financial risks are key elements to the investment and business strategy.
  • The obvious benefits of digital transformations highlighted the weaknesses linked to the unstoppable trend of smart buildings. The technology to run smart buildings more efficiently and create synergies is inherent with risks, also known as cybersecurity.
  • The most important role of the appraisal of a real estate property is to identify the purchase price to complete a sales transaction. Other than that, estimating the value of a real estate property is also crucial for a variety of actions such as financing, sales listing, investment analysis, property insurance and taxation.

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EMEA Centre of Excellence for Real Estate Funds Corporate Services

Real Estate asset managers today face a rapidly evolving landscape including regulatory change, the adoption of more sophisticated approaches by investors, and swift advances in technology. Real Estate asset managers today face a rapidly evolving landscape including regulatory change, the adoption of more sophisticated approaches by investors, and swift advances in technology.

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