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Software & Systems

8 Digital Techs Changing Corporate Finance

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January 25, 2017

Deloitte: 8 technologies that could disrupt and revamp corporate finance.

CloudA long list of digital technologies are likely to disrupt corporates and their finance departments, and while some of those technologies are still in early stages, finance should begin prepping systems to digest massive amounts of data as well as the talent to run them.

“Twenty-four months ago, digital finance did not even figure in the transition lab as a priority,” said Ajit Kambil, managing director at Deloitte LLP, referring to the consultancy’s service designed to help newly appointed CFOs transition to their positions. “In the last year, it’s dramatically increased as a priority.”

Mr. Kambil was one of several Deloitte professionals explaining the findings of a year-long Deloitte study about the impact of digital developments on corporate finance functions that engaged top executives and analyzed academic research.

“We found that digital is not just another technology advancement but an exponential transformation to core business and core functions, such as finance,” he said. “Finance teams must understand the world is moving ever faster, and they must prepare themselves for a business they haven’t yet seen.”

Deloitte identified eight different technologies likely to disrupt how business is currently conducted, if they haven’t start to already, and potentially transform finance departments. The first of four questions asked participants throughout the presentation was which technology is creating the most value for their companies today. Unsurprisingly, cloud computing, which has been a godsend for newer companies short on capital as well as established firms seeking more efficient operations, was the first choice for 46.7% of respondents. Advanced analytics and cognitive computing tied at 33.1%, and the others fell to single-digit percentages or were not included among the choices because deployment in companies so far has been minimal.

The biggest obstacles for companies confronting these disruptive and potentially game-changing technologies, Deloitte found, will be developing the ability to digest and use massive volumes of data and finding employees that are fluent in these new and rapidly evolving technologies.

“Many companies don’t have the right people in place to make the shift, and they’ll have to upscale their finance groups,” said Anton Sher, a principal at Deloitte Consulting.

In the webinar, Deloitte detailed the current status of each specific technology, provided current finance-department use cases, and in some cases predicted the technology’s eventual impact.
 

  1. Cloud computing provides essentially limitless computing power and data storage, and corporate finance departments have quickly recognized its potential. Deloitte’s research found nearly 80% of companies surveyed had implemented some form of cloud computing, with half of CFOs saying it is used in a few areas and 30% more broadly. Despite security concerns, many applications delivered via the cloud are simply too valuable to ignore, said Adrian Tay, managing director at Deloitte Consulting. He noted that early adoptions of cloud solutions by corporate finance have included planning, budgeting and forecasting; time and expenses; and payroll. A 36.1% plurality of webinar participants saw cloud computing as having the greatest impact on their organizations within three years.
  2. Robotic process automation wasn’t on the current radar screens of finance executives surveyed during the webinar, but more than 10% said it will have the most impact on the delivery of their companies’ finance function within three years. Those “robots” are software programs that mimic human computer interaction and executive repetitive rules-based tasks, such as gathering and comparing data from multiple systems, reading and writing into databases, entering data into enterprise resource planning (ERP) systems, and extracting and reformatting data into reports and dashboards. “CFOs have found the field of finance ripe with use cases for robotics,” Mr. Tay said, adding use cases include maintaining master data, processing invoices and general entrees, such as intercompany and accruals entries, and performing project and fixed-asset maintenance and accounting. Mr. Tay noted a large bank that has deployed 100 robots running 18 processes to handle more than 185,000 requests each week, equal to about 230 full-time employees and producing at 30% of the cost of recruiting more staff. “Process robots can be implemented in weeks and rapidly deployed,” Mr. Tay said, providing viable alternatives to costly systems implementations. “More companies are starting to leverage process robotics as an alternative to business processing outsourcing.”
  3. Visualization tools enable the display of key insights in an easy to understand manner, and they can bring analytical tools to the enterprise faster and reduce development time. Mr. Tay said one company that has employed such tools for its monthly management and executive reviews, has found the meetings becoming more interactive and real-time in nature, with greater focus on key issues. “The enhanced drill down and data exploration capabilities of visualization tools allowed for rapid investigation of areas of interest,” Mr. Tay said, adding, “Gone were the frequent delays when the finance team had to ask for a recess to run the analysis off-line before coming back to the table to answer the questions asked during the executive review session.” Such tools have been implemented by 30% of webinar participants, with another 12% evaluating or piloting the technology.
  4. Advanced analytics, grouped along with visualization and cognitive computing, was second to cloud computing in terms of impact within three years, according to surveyed webinar participants. Deloitte’s research found upwards of 45% of CFOs have already invested in advanced finance and accounting analytics, and 52% say they will invest in more in the future. Deloitte’s research points to finance departments investing in tools designed to improve forecasting, where business colleagues expect the most support, as a key initial step. 
  5. Cognitive Computing refers to machine learning, natural language generation, speech recognition, computer vision, and artificial intelligence—tools that simulate human cognitive skills and enable the exploration of “mountains of data” to automate insights and reporting in real time. An example that applies to corporate finance is the use of “natural language generation to provide ad hoc analysis and supplement reports with standard commentary using personalized text,” Mr. Sher said. Deloitte research shows that cognitive computing and artificial intelligence has been implemented by 17% of companies, with another 20% piloting the technology.
  6. In-memory computing refers to storing data in main memory, in a compressed and non-relational format that allows for faster processing of queries, and since the data is compressed memory storage requirements are significantly reduced. Mr. Sher said in-memory solutions can respond to queries up to 20,000 times faster, handling large volumes in a mix of structured and unstructured data. “Every major ERP vendor has revamped or is revamping its backbone to take advantage of the reduced data latency provided by in-memory, to create a more responsive and real-time system,” Mr. Sher said, pointing to a major retailer that used in-memory to modernize its 20-year-old budget and forecasting system. “The new solution has the ability to draw down from totals to transactional detail, and it delivers better analysis, reduced time spent on financial processes, and enhanced output views as options.” Only 10% of companies say they use in-memory technology today, Deloitte says, but 64% plan to introduce it over the next three years, and more than 80% believe it can be used to help address common system performance issues that impede them from unlocking value from big data.
  7. Blockchain, providing the storage of immutable and independently auditable records of transaction data through distributed networks, is still in its infancy, and only 4% of corporate finance executives reported using the technology. Financial services companies are adopting it quickest, to support cross-border payments and other intercompany agreements. “While still in its infancy, blockchain can potentially have the most significant impact on the [corporate] finance and accounting function,” Mr. Sher said, because adoption of the technology “has great potential to drive simplicity and efficiency through the establishment of new financial services infrastructure and processes.”
  8. Internet of Things implements sensors and identification of all physical objects with the potential to dramatically reduce the cost of tracking inventory and movement across the supply chain, potentially also generating predictive information. Perhaps the least developed of these disruptive technologies, it could provide a new level of transparency across the entire value chain, Deloitte says, enabling companies to manage risk better, especially around commodity costs. An example, noted Mr. Kambil, is a major producer of consumable chocolate that could track cocoa yields using satellites and sensors on cocoa suppliers, and forecast them with significant accuracy. “This in turn could give the company an edge in locking up secondary sources of supply, if [the forecast] predicts the yield from its primary suppliers is going down, and get better prices than it would have otherwise,” Mr. Kambil said. Three considerations about this technology for finance executives are: How can it lower the cost of finance, auditing inventory, and ensuring high value assets are used effectively; how can finance derive strategic insight to manage supply and distribution better; and how might it change the business model to increase value and profitability.

In talking to corporate finance executives, Deloitte consultants found two “extreme” scenarios for how corporate finance will evolve going forward. One is the “lights out” model, in which companies whose businesses are mostly digital minimize human intervention in the finance function and therefore finance staff, and the other when digital technologies are viewed as having little impact.

The webinar’s third polling question of participants asked which path they see their organization’s pursuing, and nearly 65% choose a middle path, in which the corporation implements the new technology over time, drops finance staff headcount, and “re-aligns” remaining staff to deliver real-time predictive insights.

Ultimately, that means the heads of most corporate finance departments have to think not only about funding the acquisition of these new technologies but hiring the staff to use them. “Finance departments are already starting to look at new sources of talent, such as engineering schools, as a composition of work for a digital finance function becomes much more technical and integrated with technology,” Mr. Tay said. “The technologically and data savvy new hires complement the traditional MBA and CPA skill sets.”

Another consideration is that millennials will make up 75% of the workforce by 2025. “As digital natives, they expect consumer-grade technology to be a part of their everyday work lives,” Mr. Tay said, adding, “The people you need won’t want to work at a place that’s not cutting edge, or doesn’t give them the chance to learn, grow and innovate.”
 

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