Towards Finance 4.0: As CFOs Know, It Will Take Much More Than Just Robots

CFOs are no strangers to change, but the complexity, speed, and scope of change brought about by the Fourth Industrial Revolution is unprecedented. All around, we hear of digital change and transformation emanating from Industry 4.0, which is characterized by the fusion of technologies that is blurring the lines between the physical, digital, and biological spheres, as the World Economic Forum describes it.

The smart technologies of this latest industrial revolution are being deployed on production floors to achieve cost efficiencies and integrated in marketing functions to improve the customer experience. With technology delivering concrete results in practically every other business function, the hype surrounding the digitization of the finance function, or Finance 4.0, is also growing.

The challenge for CFOs is to move past the hype to set practical goals and make wise decisions on the usage of emerging and available technologies like artificial intelligence (AI), advanced and achievable data analytics, and robotic process automation (RPA).

Contrary to popular imagination, Finance 4.0 of the future will not be manned by a robot army. It will instead comprise a team of trusted advisors in the organization

Start with robots

Of all these technologies, RPA is arguably the quickest win for finance function digitization because it can be easily embedded within the existing IT infrastructure to realize significant time savings in just a few weeks. Robotic process automation can also help accelerate the finance team’s digital journey by addressing a key digital challenge – how to process growing volumes of data within a shrinking timeline.  

Faced with outsourcing and ongoing headcount reduction, a handful of RPAs or “bots” can help free the finance team – even if it is just for a few hours per week – from doing less meaningful and repetitive work. Resources could then be made available to focus on providing better business insights.   

But while bots are able to add incremental value within a short span of time, mistakes made during implementation can thwart the full potential. One of the most common pitfalls is the risk of not carefully selecting the processes best suited for RPA or trying too hard to automate the entire process. In the early stages of RPA implementation, it may be more efficient to retain some manual steps along the process flow.

Another risk is underestimating the skills required for a successful roll-out. Deploying RPA requires a diversity of skills. The most important are those of the analyst who understands and knows how to optimize processes for RPA development, scrum masters who develop and coordinate the overall implementation effort, developers, and finally solution architects.

The right mix of technologies

Even if firms are able to free up resources through the successful automation of finance processes, does this automatically mean that they have transitioned into Finance 4.0?

It is important for CFOs to take a step back and ask: Why are they on the Finance 4.0 journey and what is the end point? A common mistake is to focus solely on technology and on implementing digital for its sake. 

Contrary to popular imagination, Finance 4.0 of the future will not be manned by a robot army. It will instead comprise a team of trusted advisors in the organization. New technologies are simply tools to help finance professionals extract relevant insights, from both financial and non-financial data, for fact-based decision-making.

But given that CFOs are not technologists, how will the CFO strategically select, plan and implement the appropriate mix of technologies to develop this insights-driven function?

It starts with plugging knowledge gaps about technology. In a recent global survey, 58% of finance leaders told EY that they “need to build their understanding of digital, smart technologies and sophisticated data analytics” to deliver against critical strategic priorities.

Knowledge is critical for CFOs to discern the limitations and possibilities of each technology. Take RPA as an example. It is able to speed up the processing and quality of data, but on its own, it is not able to transform data into insights. To achieve the latter, CFOs will need to deploy other emerging technologies such as AI, analytics, cloud technologies and blockchain in the right strategic mix.

The successful adoption of new technologies is a complex process. The many challenges ahead can only be overcome when the business model itself is transformed

Consider the value of analytics tools in extracting insights from large amounts of data, which can be used by finance professionals to develop recommendations. When artificial intelligence is used in conjunction with analytics, these technologies can recognize patterns and learn, which makes sense for large structured and unstructured data sets. This can help the company evaluate predicted outcomes to better understand the financial impact of key decisions.

New technologies can also be harnessed to better manage risks. When organizations replace outdated, fragmented and inflexible legacy systems with a connected, flexible system based on cloud technologies, they would be better positioned to address financial and business risks.

Another technology that improves security is blockchain, which records transactions using a distributed ledger, giving every network participant a secure audit trail of all financial transactions made in near real time.

A business transformation journey

The successful adoption of new technologies is a complex process. The many challenges ahead can only be overcome when the business model itself is transformed. The capital investment needed to support some of the new technologies like blockchain could be extremely significant.   

By outsourcing data processing and analysis to technology, the role of the Finance 4.0 professional of the future will shift from reporting about the past to providing insights for the future. As the CFO embarks on the Finance 4.0 journey, the adoption of new technologies will change processes, challenge traditional governance and board structures, impact resources and create risks.

This will require the CFO and the entire finance team to undergo a mindset change to embrace their new dynamic roles, which are constantly and quickly evolving. Therefore the CFO has to make sure that the right people with the right mindset and soft skills are available both in their team and across the organization.

It is only when the finance team has a digital mindset, and when there is strong partnering with other parts of the business such as IT, that Finance 4.0 transformation becomes a journey rather than just a one-off project.

About the Authors

Joon-Arn Chiang is EY Asia-Pacific Financial Accounting Advisory Services Managing Partner and Christoph Klimczak is Senior Associate at Ernst & Young LLP. The views in this article are those of the authors and do not necessarily reflect the views of the global EY organization or its member firms.