Digital Transformation » Can COOs perform the CFO role using intelligent automation?

If ‘intelligent automation’ machines were people, they would be on the executive fast-track program in any organisation and would have got promoted before anyone else. They work harder, learn faster, cost less, and are full of limitless untapped potential. It is a similar situation to the industrial revolution which helped overcome the limitations of human muscle power.

Now, two hundred years later, we are in the early stage of having a similar revolution (Industry 4.0) with our mental capacity – thanks to new automation technologies. It is a revolution that may change the role of the CFO and COO in the organisation.

What is ‘Intelligent Automation’?

Today’s organizations are upping their competitive game using various forms of automation such as chatbots, virtual assistants to Robotics Processing Automation (RPA). These technologies are transforming the way we operate, are available 24 hours a day, seven days a week, although the results are mixed.

The combination of Artificial Intelligence (AI) and RPA is called ‘Intelligent Automation’. In short, it can not only reproduce any manual activity (automation) but also make intelligent decisions like checking of errors and exceptions just like humans, based on dynamic information. Hence, they have ‘understanding’ of business processes and variations which they take into account when executing automated business process validation to verify that the right business outcome occurred.

Challenges to the finance function

The finance function is always about managing inflows and outflows to improve the bottom line. The entire journey starts by getting an accurate view of the amount spent and earned, then we make a financial plan to achieve the financial goals. We then execute a financial plan and start monitoring and controlling to ensure the organization sticks to the plan. One can do year-on-year comparisons or compare against a benchmark to check the performance of the organisation over a period of time.

But, instead of focusing on strategic initiatives like analytics, finance functions have been overblown with other work like data collection. A recent EY survey said 56% of global CFOs cannot focus on strategic priorities due to time spent on compliance, control and cost initiatives.

Why finance is ripe for automation

Finance plays a major role in driving the direction of the business. The C-suite and different departments like sales, marketing, HR and operations  look to finance to provide raw data or sophisticated analysis to understand the inflow/outflow of the cash. Automated ERP/CRM systems provide a lot of structured data about customers, employees, product, and sales but does not provide a complete picture, for example, of unstructured data like social media which provide additional insights. Finance functions that struggle to keep up using spreadsheets and manual methods, without automation, will have little time left for analysis and strategic recommendations.

Will the CFO role be impacted by Intelligent Automation?

CFOs are responsible for planning, budgeting, and forecasting, financial reporting, accounting, allocations/adjustments, reconciliations transactions in the organisation. But per the EY report, 80% of finance tasks could be automated. Intelligent Automation that can consolidate data  across different sources such as social sites will mean the growth of data analytics capabilities will become a reality.

It means organisations may not need monthly or quarterly close processes as data will be available real-time. Forecasts could be be generated instantly and made available to department heads to make the right decision at the right time. Continuous tracking of sales, cash flow, inventories, and more will be the norm. Hence, CFOs in the future will look to provide deeper, real time insights and create operational value.

The Chief Operating Officer (COO) role

The exact job description of the COO changes from company to company. The specialized skills of the COO  is usually a mix of strategy and execution, with the overarching purpose of keeping the business running smoothly while assisting the CEO in refining and realizing their vision.  Hence, it is very handy for anyone like the COO to understand key drivers and use advanced analytics to hedge against volatility, make predictions, manage risks, and to respond faster, and with greater insights. We can achieve all this with the help of data analytics. In other words, we may have the possibility that we may not require a specialist such as the CFO as similar work can be easily done using AI and deep learning.

Can the COO also be the CFO?

As suggested in the EY survey, CFOs may have barriers to understanding technology when they need to be digitally savvy. The COO always needs to be visionary and  forward-looking, through adopting new technologies and undertaking optimisation of an organisation’s resources. There is even an argument for merging both the roles.

The combined CFO-COO would fully understand the financial and operational elements in any situation, and would understand the key drivers of the business and how they are interrelated, which would help them to take a strategic decision and avoid internal conflicts.

CFO to COO

On the whole, I think ‘intelligent automation’ won’t push the CFO out the door, provided CFOs adapt but it will require finance leaders be more creative. It will definitely change the way CFO works, how they seek to add value and will cause a major shift in the balance between humans, machines, and their definition of work.

Finance leaders should be focussing more on additional intelligence,such as advanced analysis which will improve the business partnership between finance and business. Ultimately, CFOs may be faced with the stark choice between being left behind as Chief Accounting Officer (CAO) or adapting  themselves to the changing technology landscape, which may mean becoming the COO.