Organizations have more data than ever before. At the same time, there are new tools and technologies that allow them to consume, process and analyze that data to make more informed decisions. That's raised expectations for the finance function to provide more insights to stakeholders, including the audit committee.
Most organizations were already on the path to digital transformation, or at least thinking about it before the pandemic hit. But COVID-19 has forced them on that path, whether they were ready or not. More than ever before, a successful enterprise is a "Connected Enterprise."
During COVID-19, many finance functions moved from forecasting monthly or quarterly to forecasting on a weekly, daily or even hourly basis. This amplified the need for the right tools and processes as audit committees saw their organizations struggle to generate timely, accurate forecasts.
While the finance function still requires a core transactional system, there are other complementary technologies that enable greater analysis and insight. The challenge is figuring out how to piece together these technologies into an ecosystem that will support what you need to do without driving unnecessary complexity.
While organizations rushed to create instant work-from-home (WFH) solutions, this wasn't necessarily done in a systematic way. Moving to the cloud is a more sustainable, flexible solution for key finance applications, but it isn't easy to do in a short period of time. The priority for finance functions now is to mature those pandemic-driven fixes into more permanent solutions, including the cloud.
Recognizing WFH as the new normal, organizations need to either replace those 'duct tape and baling wire' solutions with something more fit for purpose for the long term or invest in new solutions they weren't able to do in the rush to deliver on immediate needs.
Forecasting and predictive analytics through emergent technologies such as artificial intelligence, cognitive and machine learning are also changing the game. In the early days of COVID-19, these cutting-edge solutions didn't always perform well because there was no previous precedent to learn from — we'd never experienced anything like this before. Now that we're further along in the pandemic cycle, the technology is catching up. Intelligent forecasting solutions are able to do a better job of identifying the underlying drivers of performance and more accurately predict future results.
To support the finance function's controllership and stewardship mandate, AI and machine learning also have huge potential in terms of risk management. With these disruptive technologies, we're moving towards 100 percent sampling, where tools can analyze every single transaction processed in a given year. They can immediately identify any anomalies, patterns or unusual transactions worthy of more human-centric investigation. This will be useful for risk identification and mitigation as much as it will be for forecasting and forward-looking analysis.
For audit committees, AI and machine learning have huge potential to identify potential risk and provide greater insights.
We hear about blockchain a lot in the finance function. As a distributed ledger technology, there's an obvious use case for blockchain in finance: reliably tracing and authenticating transactions either within or between organizations. But before this can happen, there needs to be greater alignment around which distributed ledger platforms will be adopted as the standard, and how they will be used. That takes time.
In the world of audit, blockchain has huge potential to be a certifiable, lock-tight source of data, but that evolution is going to take longer than some of these other disruptive technologies. While the finance function should consider diving into all emerging technologies, there is greater short-term momentum behind cloud and AI than blockchain.
It's important to be intentional about these investments in innovation. Since the ROI is less certain, you can expect to have some fast fails — but if you're not investing in innovation, then you risk being left behind. Organizations finding that right balance between investment and cost containment will be key to weathering the COVID-19 storm and coming out on the other side stronger than their competitors. As the owners of the capital budget and forecasting process, finance has a critical role to play in ensuring that the right investment profile is maintained, and business cases are robust.