At our first CFO lunch of the year we
discussed the impact of technology on the finance function. Everyone agrees
that technology such as Artificial Intelligence (AI), including robotics and
machine learning, are the future but what does that future look like and what
is the place for humans alongside it?
The Group CFO of a FTSE 30 bank
opened the discussion by saying; at many points in time over the last few years
it has been very easy to look at technology and say “Oh my goodness what is
happening?” and yet somehow it is something that is manageable. Today is no
different and we can look at things like robotics and view them as both threats
and challenges. Amusingly, he recounted his Head of Regulatory Reporting
saying; he was completely unafraid of robots as they would take one look at his
job and decide it is too boring!
We highlighted a recent survey of CFOs
where 90% of respondents said; business information and analytics were
impacting the role of finance. This represented the views around the table
where it was generally agreed technology will have a profound impact on both
business and finance. This impact would be particularly felt with regards to
the future skill sets that will be needed and the speed of data analysis plus
the predictions which will be possible. These combined have the potential for a
real impact on EBITDA.
Predictive tools to play a bigger
The Finance Director of a major infrastructure business pointed out
that AI is a natural evolution for the finance function. The path to this
started with shared services and the large amount of manual processing absorbed
by them, thus automating many activities. The theme was continued by our
opening speaker saying that a lot of businesses are looking to have finance
systems that are 'evolutionary', being more adaptable and capable of constant
change, rather than having to do major upgrades. He also said; data will play a
much bigger role, quality of that data would be key and once you have a unified
data set the reporting and the anaylsis can easily be standardised, providing
Lots of artificial but not much
The Group Corporate Finance Director of a major retail bank
pointed out it is important to embrace robotics as part of the organisation
before using them and that 'it' must be integral to organisational thinking.
This requires taking the whole business on a cultural journey which can be
hugely challenging as people will see AI as a threat to their roles.
theme that everyone agreed on was the importance of having clean data and as
the Finance Director of a leading private bank commented; not only is it
important to start off with good data but it is also critical to protect the AI
and business data against cyber risk or criminal use. Another CFO commented;
whilst there are clear advantages with AI it also comes with risks. Most
notably, whilst it is easy for an algorithm to predict the future, it can be
dangerous if it heads you off in the wrong direction.
need for 'Data Officers' is increasing
The CFO of another bank pointed
out that AI can create real time information that can predict trends. This is
in contrast to finances' traditional role of being a 'journalist' and simply
reporting the past. He also mentioned that in financial services there is so
much regulatory change that these demands often interfered with the benefits of
technology and speed of change.
Another important theme that created a
lot of discussion was the ability of AI to predict the future and thus drive
efficiency. One CFO said; AI helps the right people make the right decisions at
the right time. He talked about how his business, a real estate consultancy,
embraced technology and how their interpretation of the data allowed them to
make better business decisions. In particular the data enabled the business to
predict market forces and forecast work flow predictions so they could better
deploy their workforce, which represented 80% of their costs. This proved a
significant driver in improving EBITDA from 3% to 10%. He concluded by saying;
the most powerful thing they did was to use non-financial information to
predict the future.
AI and robotics 'being a part of the
team' and a 'digital colleague'
A well known CFO spoke of when he was
with a major gaming business and how he had a team that sat between business
information and finance providing deep business analytics. Within a couple of
weeks of acquiring a new customer they were able to analyse and predict their
behaviour and using a discounted cash flow calculation, know the predicted
lifetime value of a customer. This in turn gave them more detailed market
segmentation information and therefore, more targeted marketing campaigns.
There was broad agreement about who should be responsible for the data with
one guest saying; someone has to be responsible and that this usually falls to
the finance function. Another energy sector CFO, said; ultimately the need for
'Data Officers' has increased, as they will be the ones that enable
transformation in this area but it is still the role of the CFO to safeguard
the finance data and be the guardian of FP&A.
Another CFO said; it
is less about the ownership of data and much more about AI and robotics 'being
a part of the team' and a 'digital colleague' so to speak.
is also fair to say that AI is still at an early and formative stage with one
Finance Director saying; as far as AI was concerned he had seen “Lots of
artificial but not much intelligence.”
Our opening speaker summed up by
saying; “Automation allows you to do things much faster than people can do them
and this will change things and will move the onus for finance into being a
more commercial and advisory function. The use of algorithms will also allow
finance to look into the future and enable predictive tools to play a bigger
part.” He finished by saying “There are a lot of interesting things going on if
you are prepared to grab them.”
To conclude everyone agreed that
technology has always impacted the finance function and that AI and all its
strands, robotics being one, is just the latest stage of technological
development. Although still at a formative stage, everyone agreed that its
impact will be profound. In particular, the ability to bring together both
financial and non-financial data in real time, will enable businesses to
predict the future. However, whilst this points to an exciting future it was
universally recognised that for AI and robotics to be successful it required
clean and accurate data which would in turn drive an increasing need for 'Data
Officers.' For finance, a different skill set with more interpretation and
judgement is becoming business critial.