Introducing new technology into finance functions: why CIOs are the right sparring partners

Tony KlimasBy Tony Klimas, Global Finance Practice Leader, EY.

Having worked in industry and then consulting for a number of years, I can’t help but observe that history often repeats itself. This is especially true for the technological advancements happening today — their impact being analogous to the transformation from mainframe computing to client-server models in the early- to mid-90s.

Back then, this transformation brought new challenges, but also capabilities that changed the face and core of all businesses. Today’s technologies have the same potential to alter the finance function significantly in a positive way. And today’s CFOs need to be very involved in understanding how these technologies will empower not only the finance function itself, but also the relationship between finance and the rest of the business, especially when it comes to investment decisions and strategic implications.

For the CIOs, this will be an opportunity to guide CFOs proactively through technological advancements, introducing them to new and useful tools and ultimately equipping them with the right knowledge to succeed.

I believe there are five technologies that will play a significant role in transforming the finance function:

  • Advanced data analytics and forecasting can help in managing strategic risks through scenario analysis and sophisticated modeling techniques. This technology enables leaders to have a better understanding of the financial implications of key strategic and operational decisions, and to provide better and faster information to relevant stakeholders.
  • Robotic process automation (RPA) helps reduce cost by automating key processes, and improves quality through reduction in error rates. RPA can help maintain consistency, control and traceability while performing large volumes of repetitive tasks — at a lower cost. Automation will have a significant impact on the transactions performed in the “back office.”
  • Cloud-based infrastructure and cloud-based SaaS applications will streamline operations, reduce costs and increase flexibility. These technologies help facilitate data storage and application distribution in a way that can be accessed anywhere and improves disaster recovery capability.
  • Artificial intelligence (AI) systems are capable of ingesting information and instructions, learning from interactions with human beings and responding to new situations and questions in a human-like way. AI is useful for analyzing large amounts of unstructured data and finding patterns in large data sets that might indicate fraud or other concerns. Many AI-based customer service applications also exist.
  • Blockchain technology is not yet widely understood but, in some ways, it is the most important emerging technology for the near future. In finance functions, blockchain will not only simplify audits and improve the control environment, it will also create new and innovative ways to increase transparency and conduct external communication, leading to increased valuations and value creation.

To support CFOs properly, there are several actions that CIOs should consider:

Partner with the CFO: Often, the CIO reports to the CFO. We’re also seeing an increasing number of CIOs reporting directly to the CEO. In any case, the CIO and the CFO need to share strategic objectives and work together to avoid underinvestment in technology – which is easier said than done. The responsibility for maintaining cost disciplines, and insufficient understanding of IT issues, can often lead CFOs to disagree with CIOs on adopting new technology. Shared strategic vision and goals will help avoid this problem.

Look for emerging technologies and understand their role in creating value: One way of enhancing the CIO-CFO relationship is to demonstrate expertise in identifying emerging technologies and staying one step ahead of the competition in harnessing them. In addition to extra time enjoying that competitive advantage, this will also help ensure that investment decisions can be made in a thoughtful and nuanced way.

Do not wait and see: Historically, there have been times when it was best to wait and see how others would approach new technologies before jumping in. Today, it is not one of those times. Transformation is inevitable, and a conservative wait-and-see approach could lead to a distinct competitive disadvantage making your company lag behind more aggressive competitors.

New technology is having significant impacts on how business is done, and smart companies are realizing that technology can provide strategic advantage by driving new business models, opening new markets and creating new capabilities. As perceptions about IT change from “cost center” to “strategic asset,” CIOs are playing a more important strategic role. CIOs who understand this and position themselves to help the CFO and other top executives will find a large degree of both personal and professional success.

Learn more at The DNA of the CFO – 2016. In this report, we look at how technology changes the finance function and what that means for the workforce. I am looking forward to contributing another blog post about this interesting topic soon.

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