Leading Trends in Finance - 2018
Finance as a function, in my view, is becoming more and more invisible andI will explain how.
The role of the finance head in the beginning of the millennium was still around being the gate keeper with a touch of business partnering. That is completely transformed now. The CFO is now expected to be not only the business partner but also the enabler of the long term strategy along with being a quint essential agent of transformation across the entire organization.
The world is moving towards digital. The organizations have no choice but to follow. The cycle time of the advent of new technologies is also crashing. The customers are becoming more impatient. Acceleration is becoming the norm.
In such a scenario,the role of Finance in 2018 has to be commensurate with the changing needs both internally and externally.
Here I wish to talk about a few areas where Technology plays a major role in helping this transition.
RPA: Though robotic process automation has been in vogue for the past decade, the speed of deployment has picked up in the last couple of years. It is now being increasingly used in multiple processes within finance. Savings of the order of 40 percent consistently is not unheard of. I have personal experience of deploying bots across payment processes, supply chain operations and treasury operations with meaningful savings. STP(Straight Through processing) for example, of employee claims crashes the time between the spend and re-imbursement, and therefore has a great effect on the employee satisfaction levels.
The challenges one need to be careful in RPA deployment are about any future system/process changes across seemingly unconnected areas (which could have an impact on the working efficiency of bots deployed). Also, one needs to be careful that complex processes are deprioritized as the benefits would not normally be commensurate withthe cost incurred. The key insight is to deploy bots in stages after you start seeing the targeted savings.
Big data analytics could be meaningfully deployed particularly in B2C businesses wherein there is a need to deep dive into customer behavior and profitability. Even if there are millions of customers,the organization can, using the analytics engines (currently a host of them are available), get to a micro level view of the individual customer and determine whether he/she is profitable. This is becoming increasingly used across many customer centric organizations. Specific insights across the segmented customer base would give clear directions to either increase the revenue from the customer,or, if the customer is drain on the profitability, take mitigation measures (including letting the customer go). We are seeing a trend towards prescriptive analytics moving from predictive analytics.
"Big data analytics could be meaningfully deployed particularly in B2C businesses wherein there is a need to deep dive into customer behavior and profitability"
Cybersecurity is another area where we find organizations are starting to invest. The instances of corporate hacking are on the rise. As the saying goes, organizations are either hacked or they do not know yet that they are hacked. The loss could be multiple – including negative brand image apart from the financial exposure. Again, we find that this area has a rich scope for the Finance teams and they are gearing up both in skill sets and investing in pre-emptive technologies.
GDPR(General Data Protection Regulation) is now becoming a reality and mean that the customer data privacy is of paramount importance. From May 2018, this is being implemented across Europe and I see India coming under GDPR in the next 12 months.‘Right to be forgotten’(which means that the customer can decide as to when his data needs to be deleted), easier access to data and the right to know when one’s data has been hacked are clear customer needs for which technology has to be a key enabler. This cannot be done at the customer level without significant investment in Big Data.
The other big area with an immense potential to automate and ease the operations is on logistics and warehouse management.This is again based on the personal experience. Warehouses without any human monitoring are already in vogue in many parts of the world. Logistics in particular has again seen AI play a major role with resultant cost optimization of at least 25 percent. Companies across the globe have invested over 30bn$ in 2016 on various AI initiatives. Many CFO’s tend to oversee the Supply Chain function and they have their task cut out.
The effect of all the new technologies, if properly implemented is as follows:
The operating business teams do not need to perennially depend on finance for their needs as they are fulfilled automatically with minimum time. This would enable the business teams to concentrate on their core deliverables as they do not need to chase or follow up with Finance for many of the processes or approvals.
Once all the key outputs are automated,finance could develop simplified dashboards that can be used by the operating teams.'Selfcare'would become the mantra.
This would make the job of the finance teams easier as they do not need to spend time sending MIS and sharing the analysis. This would in turn free up their time that could be more meaningfully deployed for long term strategic initiatives, thus creating a virtuous cycle.
In effect,there is a possibility that the finance team of the future would largely become invisible by fully deploying already available technologies.
It is a different question as to whether this trend would mean that many people and jobs would become redundant but I am an optimist. So I believe that there would be newer skillsets that the finance teams would equip themselves with that would keep them in good stead for the foreseeable future.