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Are the Bots taking over Finance?

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 part

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 rich insights.

Lots of artificial but not much intelligence

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.

One 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.

The 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.

However, it 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.