A 2024 survey by Gartner indicates a striking trend: 71 percent of CFOs plan to extend their investments in AI by 10 percent or more in comparison with 2023. The rapid advancement of Artificial Intelligence (AI) is ushering in a brand new era for CFOs, presenting them with unprecedented opportunities for innovation and efficiency. This signifies a pivotal shift, demanding a mix of novel skills and a transformative mindset from today’s CFOs.
AI’s Impact on Finance
Integrating AI into financial processes has led to significant advancements in automation. Automation now accounts for 70 to 80 percent of the accounting or transaction operations previously managed by financial controllers and CFOs. The hassle and bandwidth required for monitoring and governing these areas can even be reduced dramatically. For instance, an entity that used to run 2,000 to three,000 journals a month will soon find that around 90 percent of this work is finished by machines.
Reconciliations are experiencing an analogous transformation as a result of AI’s prowess in predictive modeling and its proficiency in pattern recognition. This permits for the accurate alignment of transactions that are usually not a precise match, a task beyond the reach of traditional computing power.
Rethinking the CFO’s Role in an AI-driven World
“AI is prompting CFOs to reimagine not only their day-to-day working practices, but the chances for the operational and strategic financial evaluation and decisions.” says Ian Young, CEO Canada & MD – US North East, The CFO Centre Group. “As organizations develop their AI strategies they’ll need to come to a decision on their ultimate ambition for the technology.”
The shift toward AI allows CFOs to pivot from traditional financial oversight to assuming much more pivotal role in enterprise-level decision-making. By adopting a more forward-looking and strategic stance, CFOs can higher influence decisions on capital restructuring, mergers and acquisitions, business divestments and planning. This transition enables them to contribute rather more to shaping these decisions proactively fairly than managing the financial implications post-factum.
Within the context of today’s geopolitical and economic uncertainties, such a comprehensive and strategic perspective from CFOs is required much more to assist their corporations manage risks, equivalent to supply chain shocks, consumer price fluctuations, inflation effects and even state bankruptcy in real-time.
Shifting Skill Sets for Tomorrow’s CFO
To embrace this more forward-looking, strategic role and harness the complete potential of AI, CFOs must undergo significant changes of their work practices and skill sets. Currently, managing financial risks dominates the CFO’s time. In keeping with a 2023 McKinsey survey, 38 percent of CFOs have dedicated most of their efforts on this area during the last 12 months in comparison with 29 percent who’ve devoted most of their time to identifying growth opportunities. While technologies equivalent to predictive analytics offer a path forward, transitioning from a guardian of monetary health to becoming a catalyst for growth demands a broadened skill set.
To attain this, CFOs must shift their self-perception from accountants to data scientists. Nevertheless, only 20 percent of 150 global CFOs surveyed by management consultancy Horváth have “developed a solid data culture,” despite 85 percent recognizing that it might enhance decision-making quality. Moreover, 71 percent consider it might speed up decision support, and 67 percent see it improving financial planning and forecasting.
Adopting the mindset and skills of knowledge scientists involves not only acquiring latest capabilities but additionally adjusting to the work approach. The utility of Generative AI (Gen AI) across various professions is undeniable, yet it introduces latest risks. Consider the case last yr of the US law firm which was fined after it used ChatGPT for research – only to search out that the cases cited by the app didn’t exist since it had made them up.
To effectively manage these risks and the opportunity of errors in reporting and decision-making, CFOs must make sure the transparency, data privacy, explainability and traceability of AI-driven processes. Understanding the workings of Gen AI is imperative to avoid decisions based on inaccurate information. Hence, comprehensive training is crucial for CFOs to take care of control over decision-making processes, improve usage of obtainable tools and justify the rationale behind AI-influenced decisions.
Change Management and Cultural Transformation
The appearance of AI also heralds an important need for enhanced change management and cultural transformation skills amongst CFOs. Despite significant investment in AI systems for data generation and report creation, many business leaders remain reluctant to make use of them. Instances where finance teams depend on Excel sheets for analyses, even after implementing S/4HANA, underscore the difficulty. This resistance signals a necessity for a cultural shift, one which CFOs are uniquely positioned to steer, necessitating strong change management and team leadership skills.
This latest mindset and culture implies that CFOs and their colleagues are more willing to make use of insights provided by latest tools and find ways to adopt as a substitute of resist them. They must also be able to defend the accuracy and relevance of the insights provided by AI if the board and others challenge them. Furthermore, the power to adapt AI-generated data to align with the corporate narrative or strategy, considering various aspects within the business environment, is important.
Future Directions and Opportunities for CFOs
As AI and automation help shoulder the burden of manual and repetitive tasks, CFOs must reimagine their roles and the way they allocate their newfound time. This reevaluation transcends what they do inside the organization on a day-to-day business. For some, this technological liberation might translate right into a higher work/life balance, possibly through transitioning to part-time work. Nevertheless, for others, it could open up avenues to approach their work with renewed creativity and strategic foresight.
Consider, as an example, the scenario of a burgeoning start-up with lofty aspirations. A small enterprise with a turnover of a couple of million dollars today might harbor a vision of expanding right into a half-billion-dollar organization inside the following few years. To attain this goal, it’ll need an experienced strategic finance leader, someone with a big-picture, big-company vision who thinks just like the CFO of a USD 1 Billion business. Nevertheless, can the start-up afford such a senior person? Probably not full-time, but they might employ them on a part-time or consultancy basis. That is where the concept of a portfolio profession becomes relevant and attractive for today’s CFOs.
From CFO to COO and CEO: Expanding Leadership Horizons
The evolving role of CFOs reflects a broader trend in the company leadership landscape, with many crossing into the realms of COO and even stepping up as joint CEOs. Their deep insights into the financial and operational underpinnings of an organization position them to align core functions with strategic goals.
This trend can be preparing CFOs to take the highest job – 8.4 percent of CEO positions were filled by CFOs at Fortune 500 and S&P 500 corporations in 2023, the very best percentage since 2013. Meanwhile, in line with recent research, 30 percent of FTSE 100 chief executives were previously finance chiefs, up from 21 percent in 2019. Recent examples of this move from CFO to CEO include Margherita Della Valle at Vodafone and Murray Auchincloss of BP.
The increasing reliance on AI inside finance functions is a key driver enabling CFOs to broaden their influence and contribute more significantly to their businesses. Nevertheless, capitalizing on these opportunities demands continuous learning and adaptation. CFOs must actively update their skills and adjust their perspectives to maximise the opportunities.
