Artificial Intelligence and the finance function

AI has moved out of the research lab into consumer and commercial applications. But what impact is it having on the finance function and the CFO – and what will the finance function of the future look like?
A World Economic Forum report published in January 2016 estimated that 5.1 million jobs would disappear by the end of 2020 because of new technologies. In the ensuing two years the so-called Fourth Industrial Revolution has galloped ahead. Artificial intelligence (AI) has been propelled out of research labs into proof-of-concept stages and real-life applications faster than many could have imagined.

Faster than humans

The impact of AI is hugely significant to world economies because the technology has the ability to capture, digest and distill immense quantities of data in vastly quicker times than humans. These tools are beginning to change the role of the CFO and the finance function.
PwC research (Sizing the prize – PwC’s Global Artificial Intelligence Study: Exploiting the AI Revolution) shows global GDP could be up to 14% higher in 2030 as a result of AI – the equivalent of an additional $15.7 trillion – making it the biggest commercial opportunity in today’s fast-changing economy.
Indeed, finance executives in the Middle East are quickly waking up to this fact. At November’s CFO Strategies Forum MENA in Dubai, Bernd van Linder, CEO, Commercial Bank of Dubai, told finance executives that AI would sit above any system or process that can be automated. In other words, CFOs need to become more strategic and understand complex data.

Small steps

Companies have been quietly trialling AI in small pilot schemes within specific parts of their businesses over the past few years.

To achieve operational benefits and cost savings from AI, organisations’ systems and processes must be standardised and automated.

Audit is one of the areas where AI can have a huge impact on efficiency, speed and costs. AI can sift through reams of documents in search of key words, differences and concepts to provide real-time analytics. AI will be able to carry out audits with 100% coverage instead of the usual small samples that current audit teams provide.

Fraud detection will also be accelerated through improved audit coverage.

In general, because it is highly automated, the finance function is one of the areas of business that is ripe for AI. This is also the area where many job losses are expected as any transactional, process-driven work that can be automated can also be done by robots.

According to McKinsey Global Institute’s automation research Bots, algorithms, and the future of the finance function, technologies can fully automate 42% of finance activities such as cash disbursement and revenue management and mostly automate a further 19%.

However, this is not necessarily a disadvantage to the CFO and their finance team. Much of what is considered the less inspiring work in the finance function can be taken over by robots, freeing up finance professionals to focus more on strategic, value-driven tasks. In turn, the CFO can become a more strategic adviser to the CEO and the board.

An example of how AI is being applied in financial services can be found within one online insurer that is using an AI bot to automate the claims process from beginning to end. Instead of the days or even months it traditionally took to settle a claim, the AI bot is able to complete the entire pipeline in just three seconds.

Another financial services organisation has used machine learning to develop time-series clusters of its policyholder transactions. The machine-learning solution has helped the company to identify common customer transaction patterns and better understand the key triggers driving variances.

Act now

There are of course challenges to overcome, such as bias, poor decision making, job losses and security, and cost.
Robots and AI systems are built by humans. As such, if in their building humans inject their own biases and poor decision making then robots will also end up with those human traits.

But in terms of productivity and commercial gain the benefits outweigh the risks. One of the more immediate challenges is how to secure the talent, technology and access to data to make the most of this opportunity.

By now CFOs should have evaluated the potential impact of AI and be considering new structures and workflows. KPMG’s paper Artificial Intelligence opens the door to the creative CFO states that it can take a typical finance function 12 to 18 months to go from decision to full implementation of commercial AI systems:

“The scale of this technological change is as big as the first outsourcing of transactional processes in the early 1990s. At that time, few believed that this would become the norm. Nor did they think it would bring such significant savings to early adopters.”

Retraining and recruiting finance staff with the right skillset for the future will be a critical step in the evolution of the finance function. Communication, strategic business partnering and commercial awareness will be vital skills for future finance professionals. And of course, additional technical skills will also be required.

Expect disruption, but when was change ever easy? The difference this time is that the upheaval will involve more advanced technologies and the speed of change is happening faster than we’ve ever experienced before. What is critical now is for CFO to understand how their organisations will function in the future and begin to apply small AI pilots to areas that will offer quick and easy gains.