Why the CFO and AI were made for each other

21 Jan 2021

Why the CFO and AI were made for each other

There’s a lot in our 2020 AI report that explains why the CFO is in a good place to take a leading role in the adoption and exploitation of AI.

Since CFOs are responsible for finance and control, including budgeting and forecasting, as well as risk management. AI affects these tasks in a fundamental way, and certainly raises some challenges.

But AI will provide CFOs with an entire new set of tools, making them one of the most powerful ‘information managers’ in the company with a decisive contribution to steering the corporation.

The CFO’s pivotal role is just one of the subjects we consider in our report, Artificial Intelligence for Boards - Gearing up for the Future of Business. Read how AI will impact company boards (management and supervisory), role by role, individually and collectively. There is also guidance on managing this massive opportunity.

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Artificial Intelligence for Boards - Gearing up for the Future of Business

How CFOs and Boards can prepare for the coming AI revolution.

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Uncertainty is part of the process

Of course, AI is an investment, so any CFO will want to be close to that process.

But adopting AI is never going to be an entirely certain process. Applying AI to specific challenges and opportunities carries an inherent uncertainty. And this uncertainty increases with the complexity (and, normally, the value) of the AI solution.

As Mathias Weber, CFO, Sandoz Germany, explains, “You have to leave the traditional approach, because an AI project does not have such a clearly measurable return, especially in the beginning. Therefore, you have to put money aside in the investment budget and say with that we develop and explore now.”

AI is not the same as IT

“AI investments should be treated similarly to investments in innovation or agile product development. In other words, a staged process with regular milestones. And finance should be at the table from the start. The overall agreed budget should be stable, but the precise direction (and potentially even termination) of the process should be considered at each milestone.” says Emanuel Pfister, Principal at Odgers Berndtson Germany.

CFOs are mistaken to treat AI as just another IT investment and expect a full-fledged sched- ule, list of deliverables, and so forth right from the start.

Ultimately, CFOs must have the ability to navigate the uncertainties that are typical of the contractual arrangements with third party providers for AI services. For many, this is truly counter-intuitive.

New rules, new risks

Financial risk management is high on any CFOs agenda. Whilst AI might improve ways of spotting risk, it does introduce a new category of risk that will need to be understand around action liabilities, regulatory, and legal issues.

Compliance too can be tricky, since most such regulations are set-up in a rules-based way—with all of the challenges this entails.

In addition, those regulations often demand ‘code transparency’ in order to ensure that such rules are observed. However, AI often doesn’t naturally lend itself to such rules-based transparency. It’s a level of complexity the CFO must appreciate and be able to apply to legal safety, for example.

A lead position for the CFO

In some areas, CFOs are potentially the prime lead users of AI.

Take planning, forecasting, and risk detection. All are excellent candidates for automation through AI solutions.

Detecting fraud and money laundering, as well as ensuring compliance, these can hardly be addressed at all anymore without AI.

Spotting irregular patterns and outliers in financial data or market data, pointing to other potential risks, are standard applications for AI. Add to that other functions such as physical and financial forecasting, planning and fully-automated order processing. All this makes the CFO excellent lead users of AI, whilst the strong statistical knowledge in their teams allows them to interpret results correctly.

“It isn’t uncommon these days for CFOs to demonstrate to their board colleagues concrete AI applications in internal processes, all in support of pushing forward the necessary data-driven discussions and persuasion.” says Manuela Klos, Associate Partner at Odgers Berndtson Germany.

To discuss your leadership requirements, or personal career as a CFO, in the light of our report, please get in touch. We will be happy to discuss how we can help.