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5 digital themes reshaping finance departments

5 digital themes reshaping finance departments

Last updated 19th Jan 2022

If companies are going to adapt to and thrive in the digital world, they best recognize five key digital themes currently shaping corporate finance departments, Genpact’s vice president of strategy Saurabh Gupta believes.

The first is the irrelevance of cycle time, Mr. Gupta said. It used to take companies days to close the books on a transaction, but with technological advances the time frame has shrunk to hours.

“With advancements in robotics, artificial intelligence, the blockchain and distributed ledgers, that whole conversation (about the amount of time to close transactions) will become irrelevant,” Mr. Gupta said. Companies are looking at how to create value from these tasks too, and not considering them simple functions any more.

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Saurabh Gupta
Saurabh Gupta[/caption]

Companies are also moving away from a single finance platform to a mosaic of micro services, Mr. Gupta explained. In the past it was sufficient to employ one standard architecture, back when such issues were solely considered an IT problem.

“Now they are looking at the problem differently,” Mr. Gupta said. “What is the business problem they are trying to solve?”

When approaching a problem this way managers are not considering that one specific technology issue in a vacuum, they are looking at the impacts on related business functions and the entire organization. That limits the effects of patchwork technologies which struggle to interact across the entire system, though Mr. Gupta said standardization remains a challenge.

The blockchain can help with this and Genpact is investing heavily into it, Mr. Gupta said. Once standardized regulations are implemented widespread adoption should occur much more quickly, he believes, while advising that recent history with the cloud and other advancements show there are always challenges with new technologies but adoption evolves over time.

One area Genpact is working on applying blockchain toward is collections, Mr. Gupta said. Friction occurs due to errors on invoices, but if both parties agree to terms and sequencing on the blockchain, those errors, and therefore the need for collections can be virtually eliminated.

“I consider (a technology’s) value creation level,” Mr. Gupta said. “Thirty years ago centralization reduced workforce duplication and shrunk the pie. Robotics shrunk the pie. Blockchain can eliminate the pie.”

Companies are transitioning away from past data analysis and toward predictive modeling, Mr. Gupta said. Predictive modeling remains in its early stages, especially in finance and accounting, he explained.

One area where predictive modeling can help finance is in developing rolling forecasts.

“The technology exists to integrate transactional systems,” Mr. Gupta said. “We can use big data and Natural Language Processing to create reports and analyze data.”

Artificial Intelligence’s capabilities have evolved to the point where it can be employed to crawl through invoices and documents to identify past and future savings through the identification of patterns, combinations and anomalies and conducting better forensic audits. Past scanning system were limited by needing to know exactly where specific items were in documents in advance. Misplaced data or other areas required human involvement.

“Enterprise performance management has not been disrupted in 20 years,” Mr. Gupta said. “Now CFOs can become predictors and not just comptrollers.”

Risk management is moving away from a static activity to an analytics-driven approach happening in real-time instead of retrospectively. That allows for a continuous analysis of transactions via a centralized risk management cockpit.

“It’s no longer about a one-time audit but is an ongoing, dynamic program,” Mr. Gupta said. Artificial intelligence can, for example, help to identify compliance policy violations.

Operating models are evolving from being segmented to center of excellence driven. Finance is increasingly being considered as a value chain rather than a function where it can inform and transform the business.

That means the roles of the CFO and finance function will change, Mr. Gupta said. Risk management becomes a dynamic process. Current risk management algorithms can now catch 80 to 90 per cent of errors upon submission and detect bribery and other forms of corruptions.

“For me this is the most exciting trend,” Mr. Gupta said. “So what do you need to be a successful CFO for tomorrow – do you (just) need accounting skills, or also imagination, creativity and the humanities?

“Those will become important. That’s the biggest thing you have to realize.”

Tony Zerucha

Tony Zerucha

Tony Zerucha was the managing editor of Bankless Times. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years, making him one of the senior writers in the alt-fi sector. "The evolution of the crowdfunding and peer-to-peer lending scenes is absolutely fascinating to chronicle. It is a joy to be around people with such passion and vision." Learn More about Tony Zerucha