Leaders of finance functions across the globe expect a shift to a smarter and more automated operating model for corporate reporting, according to a new EY survey of more than 1,000 CFOs and financial controllers across 26 countries.
For many organizations, a shift to a work-from-home environment as a result of the coronavirus pandemic has resulted in operational changes. Coupled with technological advancements related to data analytics, blockchain, and artificial intelligence (AI), the new environment has many finance executives rethinking how their organizations will structure and deliver reports.
A majority (53%) of finance leaders surveyed say that more than half of finance tasks currently handled by people could be performed by AI over the next three years, according to results published this week of the sixth annual EY Financial Accounting Advisory Services survey. Fifty-four percent said it is likely that blockchain-based systems will underpin finance.
“The COVID-19 pandemic has accelerated the transformation of finance functions and made the use of smart technologies increasingly the norm,” Tim Gordon, EY’s Global Financial Accounting Advisory Services Leader, said in a news release. “The challenge for finance leaders now is to map out how finance and reporting are to be delivered in this new reality.”
While most are embracing the approaching changes, many also have concerns about building trust around the technology. Almost two-thirds (63%) of respondents have concerns about the risks of using AI in finance and reporting, and 68% say that governance, controls, and ethical frameworks still need to be developed and refined for AI.
Amid these changes, the recognition of the finance function as a contributor to organizational excellence is rising. Sixty-nine percent of respondents said senior finance leaders are seen by key stakeholders as the stewards of long-term value in their organization.
Finding ways to harness the technology, particularly for use in forecasting, has the potential to raise finance’s profile even further. During the pandemic, finance often has led the way in quickly providing data for critical operational adjustments that needed to be made extremely quickly.
Finance often advised businesses on multiple possible scenarios to plan for based on analysis of rapidly shifting data. New technologies present the opportunity to further refine this type of planning.
“Building trust into smart technologies can unleash a tech-powered future for finance functions, where digitally savvy people work seamlessly with smart machines to provide the forward-looking insights that stakeholders require,” Gordon said.
Finance continues to prioritize technological investment to support such operational changes. After a brief, severe dip in tech spending plans after the start of the pandemic, CPA decision-makers in the fourth quarter of 2020 projected that their investment in IT spending would increase 2.8% over the next 12 months, according to the AICPA Business and Industry Economic Outlook Survey. That number had almost recovered to pre-pandemic levels, which had held steady at about 3.5% over several quarters.
Organizations whose finance functions had completed automation of their operations experienced fewer difficulties as a result of the pandemic, according to a survey of 530 finance leaders by finance thought leadership publisher FSN.
Forty-three percent of transformed finance functions experienced no disruption to their budgeting, forecasting, and planning as a result of the pandemic, while just 20% of those that had not transformed said they were not disrupted.
Meanwhile, respondents to the EY survey said that financial reporting users are looking for new insights on nonfinancial factors of corporate reporting. Fifty-five percent said that over the past 12 months demand has increased for nonfinancial or environmental, social, and governance (ESG) data, which increasingly is a focus of investors and companies amid concerns about climate change.
“Finance leaders should rethink the role that reporting is expected to play in helping to tell the story of the value that the enterprise creates,” Gordon said. “If finance fails to play a central role in meeting these changing expectations, reporting could become increasingly irrelevant. There is an opportunity for finance leaders to establish their functions as a source that can provide what is expected by the business, with the speed and flexibility required.”
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.