We are currently entering what many are calling the Fourth Industrial Revolution, with artificial intelligence (AI) and cognitive computing driving unprecedented changes in business that will leave the landscape unrecognizable. Cognitive computing presents huge opportunities to senior executives in all fields, and none more so than the CFO. In a recent IBM report, 38% of CFOs surveyed said that it would be one of the technologies most likely to transform their enterprises within the next few years. In another report by the World Economic Forum, ‘Technological Tipping Points’, which asked 800 executives when they thought that ’30% of corporate audits would be performed by AI’, 75% said 2025. It is difficult to see how those who answered no to either question could do so unless they just believed it would be longer before it happened.
The difference between artificial intelligence and cognitive computing is that, with AI, the system analyzes the data, finds the problems, and then decides on the next course of action. In cognitive computing, the system conducts the analysis but the decision on how to proceed remains with the human. For the immediate future, it is cognitive computing that will have an impact, but the speed at which technology is advancing means it will surely be a matter of time.
In Financial Planning & Analysis (FP&A), manual processes are both resource-intensive, costly, and error-prone. The last decade has seen automation essentially take over many of the the more basic auditing and bookmaking processes, such as counting inventories and processing confirmation responses. This has pushed the responsibilities of FP&A professionals up the corporate ladder towards a more strategic position. Advances in cognitive computing of the like seen in IBM’s Watson is further intensifying this, helping to pinpoint cost-savings and solutions even faster.
There are many advantages for CFOs through the use of cognitive computing. Cognitive computers can now analyze all sorts of data of almost any scale to discover patterns, even unstructured data such as that found in social media streams and in emails. It can also play out the impact of various scenarios to determine what will happen if certain courses of action are enacted, giving CFOs the kind of predictive insights that are vital when making a decision. This is particularly useful when it comes to running forecasting scenarios and adjusting them for changes to variables like market conditions, regulations, and risk models.
Cognitive computing also provides a better idea of your future revenues. In a recent study, over 50% of organizations said they feel their pipeline forecast is only ever around 50% accurate. If you’ve projected $10 million in revenue and come in even just $1 million short, investors and employees are going to feel like you’ve led them on as to the success of the company. CFOs can work with their sales departments and marketing to identify the success of their campaigns and likely future revenue streams, not only benefiting both of those departments and helping to direct their efforts, but also enabling the CFO to set more realistic targets and budget accordingly.
Another area that cognitive computing can benefit CFOs is in their cybersecurity and anti-fraud efforts. According to FireEye data, the average large enterprise generates in excess of 12,000 security events per second - almost a billion events every day. This is simply impossible for humans to analyze and discover irregularities in anything like the time taken to prevent a threat. Cognitive computing essentially enables issues or deviations to be flagged up in real time, so that any unknown threats can be disrupted as and when they arise.
Ultimately, cognitive computing and AI represent a great opportunity to finance professionals. Where humans sit in this new world remains to be seen, but it is unlikely that we will simply hand over the keys to machines without humans having a look in. CFOs are, however, going to have to review various aspects of their organizations and put in place a strategy to take advantage of these technological advances to maintain their competitive edge, ensure they keep costs down, and increase their profits. If they haven’t, it won’t be the machines that have rendered them redundant, they’ll have done it to themselves.