The Fourth Industrial Revolution and the Role of Smart Finance

Learn how digital technologies impacting the office of Finance today and which benefits CFOs can reach using them properly

The World Economic Forum has recently ended and one of its main themes was around the so-called “Fourth Industrial Revolution”. The term refers to a new era in which a range of new technologies fuse physical and digital worlds, thereby impacting all disciplines, economies, and industries.

We’re already experiencing the beginnings of this new era. For instance, Airbnb, Netflix, and Uber have significantly impacted the hospitality, entertainment, and transportation businesses. Amazon and Alibaba are leveraging thousands of robots in their warehouses and revolutionizing the world of logistics. Recent machine-learning efforts by pioneers such as IBM Watson now allow us to diagnose patients more efficiently and accurately by learning from millions of past use cases. 

Any revolution implies disruption, which in turn fosters both opportunities and risks. The Fourth Industrial Revolution is not an exception. CFOs and their finance teams must prepare for the changes ahead and learn how to adopt digital technologies in order not to be left behind. And just like in our everyday life, the evidence of these digital technologies impacting the office of Finance is all around us:

• Data analytics: We currently produce more data than we can consume. This is particularly true for the office of finance. Analytics technologies now allow the capturing and processing of data at a level of granularity, speed, and efficiency that we once thought was not possible. Finance professionals need to tap into those sources and start mining available data to gain more insights into their companies and discover trends and patterns to formulate strategies.
• Artificial intelligence and machine learning: Artificial intelligence and machine learning take data analytics to the next level. By processing billions of bytes, these technologies allow for automatic data interception, evaluation, and extrapolation of new behaviors through a continuous learning approach. Finance organizations can now leverage these technologies to predict operational drivers that reflect common buyers’ behaviors or react to changes in consumption in a way that has historically required weeks of work.
• Robotics: The use of machines to assist in performing repetitive, standard tasks goes back to the Second Industrial Revolution with the widespread use of electricity and focus on mass production. We definitely don’t envision the use of physical robots sitting at desks in the Office of Finance. Instead, what will supplement human staff is smart software that does not require performance reviews or compensation adjustments for the delivery of low-value, back office, repetitive tasks such as high-volume reconciliation accounting or expense reports auditing.
• Blockchain: Although in its infant stages, this new technology impacts one area the Office of Finance deeply relies on: the network of intermediaries required today to conduct business. With blockchain’s ability to provide a digital, public ledger where transactions are recorded and confirmed anonymously by sharing the same record between all parties involved, it is natural to see how this could help the finance function. From intercompany transparency to common reconciliation efforts, these areas could leverage the principle of an immediate, distributed ledger that is at the basis of the blockchain technology.
• Cloud: Cloud technology has already revolutionized the way many finance teams operate, and the number of financial solutions being managed on cloud-based infrastructures continues to grow by the month. The advantages of this technology are clear even to the most conservative minds. From high reliability to architectural standardization and cost savings, cloud technologies are commoditizing many tools in use by finance professionals and are quickly replacing old, intrusive legacy systems.

The benefits presented by the Fourth Industrial Revolution come with concerns and inevitable resistance to change. Cybersecurity is one concern, especially given that some of the newest technologies have yet to prove impenetrable security protocols. Team composition and staff profiles will also change. Finance departments will not necessarily rely on fewer people as a result of these smart technologies, but they will have to nurture different skills and mindsets.

As it is often the case, change management will probably be the fiercest impediment to the formation of digitally integrated businesses. Research proves that legacy systems might be too “comfortable” and ingrained in the business for some organizations to give up. Others will likely see modernization of their finance function as a daunting, costly and overly complex exercise – and therefore choose the status quo.

No matter how brave you are as a CFO, reality is that the Fourth Industrial Revolution is upon us, and its benefits are on track to outweigh its downsides. Are you ready to be part of history?