THE application of robotics in finance functions is moving faster than predicted. Although, companies are cautious in how they are applying artificial intelligence to ensure results first, many are stepping up their investigations.
The term ‘cognitive technology’ has been bandied about with increasing frequency for a number of years and although CFOs are reticent to speak openly about what they are doing on robotics, the most progressive finance chiefs are testing the waters – albeit firmly behind closed doors – of how digital tools can and will transform their finance organisations, and in turn the wider business.
Businesses are at various stages in the technological transformation and different organisations are at different points in that journey. But as a snapshot of how finance teams are preparing for the “age of disruption”, of the 643 global finance chiefs interviewed in IBM’s latest CFO survey, the technology giant identified a small group of CFOs with finance teams that were “particularly efficient and adept at producing business insights”, accounting for just 19% of the companies interviewed in the research.
But those 19% were 55% more likely than other finance teams to secure strong revenue growth and 57% more likely to be very profitable. This illustrates how CFOs are only just dipping their toes in, but those that are enjoying efficiency gains, and arguably competitive edge. The study also pinpointed an “elite subset” of CFOs, accounting for just 4% of the finance divisions represented by the CFOs in IBM’s sample.
Elementary dear Watson
One of the most well-known cognitive technology computers is IBM’s Watson, which is already being used by many organisations around the world to make processes more efficient and increase insights. The US not-for-profit Cleveland Clinic is using Watson in a personalised oncology programme at its clinics, reducing to minutes what can take doctors weeks to find out. Watson continuously ‘learns’, gaining in value and knowledge over time, from previous interactions.
It is also understood that one of the world’s largest publishers is exploring how Watson can be used to develop a product on government regulations. This is potentially a huge area of interest for CFOs in dealing with risk and regulations in different jurisdictions in which they operate.
“A lot of companies that are working in this area are not comfortable about talking about this yet because they believe they can get some competitive advantage. We believe the way to start talking about this is through experiments – starting small and growing fast. We can get over the trust barrier and show evidence of proof of success,” says Paul Campion, IBM director of global financing.
If CFOs are investigating how cognitive technologies can improve their finance functions, then it should be no surprise that professional services firms are too. In January KPMG announced plans to apply IBM’s Watson cognitive computing technology to its services.
KPMG has built a cognitive engine called Astrus using IBM Watson technology. Astrus can carry out due diligence on things like new suppliers or M&A targets for FTSE 100 clients in minutes where whole teams used to take weeks to complete.
“The myth is becoming the reality slowly. The hype of two to three years ago is translating into reality,” says Shamus Rae, head of innovations and investments, KPMG.
Currently, KPMG is offering this kind of service in only a number of its service lines such as audit but Rae says the firm is working towards automating all of its content – data and intellectual property – so that it can offer more service lines through digital labour.
One of the critical advantages of cognitive technologies is in the ability to use unstructured data as well as structured data to gain insights. The benefits of these new technologies include lower costs, smoother workflows and the ability to scale services rapidly for little or no additional money.
Deloitte is using robots in its Milton Keynes-based shared service centre to do things like management reports. The cost savings are staggering. Robert Cullen, the lead partner of Deloitte’s global technology, media & telecommunications finance transformation practice, said that the technology saves a ninth of the cost of a UK-based accountant and a third of the cost of hiring someone in, say, India.
“It’s fantastic. They are like any user. They download spreadsheets, create reports and email them out to partners. And you find that the amount of errors made is a lot less as well,” said Cullen.
The virtual business partner
Considering that cognitive technologies in the business-to-consumer world are well advanced with the likes of Amazon’s Echo and Google’s Home, which could be arriving in UK homes by this Christmas, it is not difficult to imagine more and more business services run by robots.
KPMG will be releasing five more engines over the next 12 months. Each engine will do different slices of work with Kai – the virtual finance business partner – at the front end. As these engines are “released” they will take up jobs.
“I think all CFOs are awake to this issue and there are lots of discussions going on. Cognitive technology has moved from pipedream to reality and most CFOs we talk to are actively looking at it,” Rae says.
For those CFOs that are investigating cognitive technologies it seems the favoured approach is one of caution. The first step is automation in the areas where they think digital tools can bring them clear benefits, then they are using AI on narrow and specific areas.
“Most people are doing this now. People are piloting this in specific processes. We are seeing clients starting to think about using some of these cognitive technologies either to self-correct a task or where processes or controls might have failed or in the procurement process,” Cullen says.
It is critical for CFOs that this kind of technology can cut costs, but more importantly it can boost revenue through new opportunities. The technology is also scalable, as are the costs.
CFOs “think they have the secret source and they want to keep the recipe for it to themselves, and they are quite right,” Campion says.
The classic technology adoption curve is already taking place whereby a small number of leaders’ pilot small sections of a business or project. If they succeed, then they adopt more or apply it to more projects. That curve will accelerate upwards very soon, says experts.
The only significant business transformation that Rae compares the rise of machines to is offshoring but “this will happen faster and have a much bigger impact than offshoring in the 1990s”.
Companies’ readiness and appetite for this kind of change varies hugely. This is just the beginning of a long and deep cultural change not just to the workforce but to society. The companies that are the first movers have advantages in exploring what this technology can do for their businesses, while those that wait and see could miss big opportunities because unlike previous technological breakthroughs the changes that cognitive technologies promise to bring will be faster, and arguably more brutal, radically changing the landscape of business forever.
What skills will you need in the modern finance function
There is no getting away from the fact that the era of digital labour will reduce the size of finance teams. Any job related to process will be redundant within five to 10 years time. Currently finance teams spend 80% of their time on process and 20% on analytics. That will slowly be reversed so that 80% of a team’s time will be focused on analysis and 20% on process. KPMG predicts that 30% of corporate jobs could be done by robots by 2026.
“Any finance job that is highly skilled but repetitive will be automated. Those jobs will be the first thing to go,” says Rae.
But it’s not all bad news. Finance functions will be undeniably smaller in size but staff will have a higher quality skill set. Digital assistants will be used to do the grunt work leaving finance teams to focus on the analysis.
“In order for CFOs to play bigger roles in the business, the skills of individuals in their team will have to grow,” says Champion.