Let us imagine for some time that if ‘intelligent automation’ (machines) were people, then they would be on the executive fast-track program in the organization and would have got promoted before anyone else. They do work hard, learn fast, cost less and are full of limitless untapped potential. It is similar like we had seen the industrial revolution which took place in the 18th and 19th centuries which had helped us to overcome the limitations of our muscle power. Now, after two hundred years later (Industry 4.0), we are in the early stage having a similar revolution with our mental capacity. Thanks to the virtue of new automation technologies! In this article, we will be talking about how it is will change the role of CFO / COO in the organization. Now you might be wondering why CFO /COO? Let us come back to that topic after understanding more about ‘intelligent automation’
What is ‘Intelligent Automation’?
Today’s organizations are upping their competitive game using various forms of automation like chatbots, virtual assistants to Robotics Processing Automation(RPA). They(‘Intelligent Automation’) are transforming the way we operate (available 24 hours a day, 7 days a week). Although the results are mixed, the combination of Artificial Intelligence (AI) and automation (RPA) is called ‘Intelligent Automation’. In short, it can not only mindlessly reproduce any manual activity (automation) but also make intelligent decisions (AI) like checking of errors/exceptions just like humans, based on dynamic information. Hence, they have ‘understanding’ of your business processes and variations which they take into account when executing automated business process validation to verify that the right business outcome occurred.
What is ‘Finance’ Function & its Current Challenges?
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 spend and earned, then we make a financial plan to get the financial goals. We then execute a financial plan and start monitoring/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 organization over a period of time. The challenge of all this – legacy systems and process, quality of data and availability of data and skills/talents availability. Thus, instead of focusing on strategic initiatives like analytics, they were always overblown with other work like data collection.
Why Finance function is Ripe for Automation?
Finance function had long been data-driven and the availability of dynamic, real-time planning and getting data from different data sources was always missing. But it always plays a major role in driving the direction of the business. That is why C-suite and different departments of the organization like sales, marketing, HR and operation look for finance to provide raw data or sophisticated analysis to understand the inflow/outflow of the cash. Automated ERP/CRM systems to provide a lot of structured data about customers, employees, product and sales but it still not provides a complete picture, for example, unstructured data like social media which provide additional insights are still missing. They (finance team) always struggle to keep up using spreadsheets and manual methods. Without automation, the time left for analysis and strategic recommendations is little and that is the challenge.
How CFO Role will have an Impact due to Finance Automation?
CFO’s are responsible for an area like planning, budgeting, and forecasting, financial reporting, accounting, allocations/adjustments, reconciliations transactions in the organization. In short, CFO is a strategist, catalyst, steward, and operator. Currently, CFO is swapped with mundane tasks like collecting the data rather than spending time on analyzing it. As per the EY report, 80 percent of its tasks could be automated. Technology (Intelligent Automation) will provide them a viable option to automate it (collecting of the data). Thus, automation, AI, consolidation of data using big data across different sources like social sites and the growth of data analytics capabilities will become a reality. It means the organization may not need monthly or quarterly close processes as data will be available in real-time. Actuals/Forecasts can be generated instantly and make it available to ‘related’ stakeholders (department heads) and to make the decision at the right time. Continuous tracking of sales, cash flow, inventories, and more will be the norm. Hence, CFO in the future will be looked to provide deeper, real-time insights and create operational value.
What is the role of Chief Operating Officer (COO) in Organization?
I love the definition of it from Keith Rabois, former COO of Square – “COO is like a ‘doctor’ in the emergency room, constantly fixing things, training and diagnosing issues to determine if they are minor or potentially fatal”. The exact job description of COO changes from company to company and CEO to CEO. We require specialized skills for COO which is usually a mix of strategy and execution, with the overarching purpose of keeping ‘business’ run smoothly while assisting the CEO in refining and realizing his vision. COO is a key advisor to the CEO who understands the business operations of the organization. Hence, it is very handy for anyone (like COO) to understand key drivers and use this readily available advanced analytics to hedge against volatility, predict future, 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 (like CFO) as similar work can be using easily done by AI and deep learning. It clearly gives the direction that among C-Suites, CFO’s can simply core internal transactions through automation and work more effectively.
Can COO also be CFO?
CFO always tends to think ‘technologies’ as a cost center. As per the EY survey, CFO has barriers in terms of understanding of ‘IT and digital’. In the new world of AI, new CFO need to be IT/ digital (technical) savvy excepts its strategic mindset. COO always needs to be visionary digital savvy and very forward-looking (demand of the role). Thus, it is much easier for COO to adopt new technologies and do optimization of the organization’s resources. We will have cost savings in terms of logistics and business operations by merging both the roles (CFO/COO). For example, if they need some financial data instead of calling an accountant he/she can directly access the data. Another advantage will be that CFO-COO will fully understand the financial/operational situations which will help him to take a strategic decision and avoid internal conflicts like, one party rejected another party’s proposal. Hence, they (COO) have a better understanding of the pulse of the organization, for example, understanding the key drivers of the business and how they are interrelated. I think that is why a lot of companies had recently merged both the roles into one.
On the whole, I think ‘intelligent automation’ won’t push CFO out the door, provided CFO adapt but it will make its profession more creative. It will definitely change the way CFO does what he/she does today, where he/she adds value and will cause a major shift in the balance between humans, machines, and his/her definition of work. And he/she will be focussing more on additional intelligence, such as advanced analysis which will improve the business partnership between finance and business. Hence, CFO might have 2 choices in future either become COO or be left behind as Chief Accounting Officer(CAO) to manage finances or adapt himself with the changing technology landscape.
The views and opinions expressed in this blog are those of the author.