Over the last 18 months there have been a number of high profile scandals centred on the financial services industry, the ramifications for which have gone far beyond the sector itself. The collapse of Carillion in the UK is estimated to have cost the taxpayer up to £150 million, while mainstream media have reported extensively on allegations of financial misconduct levelled at C-suite executives from well-known local and global brands.
As a result, debates surrounding transparency, reliability and accountability within finance are no longer confined to finance professionals, CFOs or industry watchdogs. In fact, the industry’s own regulatory body, the Financial Reporting Council (FRC), came under fire itself last year, after being accused of several conflicts of interest, and of being too close to the companies it regulates to be an effective watchdog.
Many companies are understandably concerned about shoring up investor trust in their financial reporting processes. But as we progress into 2019, it may not be large-scale investors that businesses need to worry about.
Looking at the number of start-ups that race through multiple, high-value funding rounds but ultimately fail, one could argue that investors are just as concerned with future potential as what is happening now. Ultimately investors may not care about company reports as long as they can turn a quick buck – although of course, they should care. There are multiple examples of companies that have continued to lumber on unchallenged as they spiral into debt they cannot recover from, while investors, it appears, ignore the red flags.
Meanwhile, consumers are becoming much more aware of the risks associated with inaccurate reporting and bad audit practices. It’s not only because cases like Patisserie Valerie are hitting the headlines. Often, consumers are the ones who end up ‘on the hook’ when failings within the sector impact jobs, savings, pension funds and other company investments they depend on.
The accounting and auditing industries will need to find a way to re-build trust, not only with investors or shareholders, but with a broad range of stakeholders who are more exposed than ever to the potential pitfalls of inaccurate reporting.
The year of the integrator: the new skills and job roles businesses will need to transform
The ubiquity of technology is changing the way businesses operate, but closing the gap between a specific sector and the contemporary technology industry can be challenging. Digital transformation will continue to top the agenda for most organisations in 2019, however what many won’t realise is how critical attracting and retaining the right talent will be to this process.
In order to stay relevant, businesses need to focus on recruiting individuals who not only have sector-specific expertise, but also the technical and soft skills required to implement the technology that will help their sector to evolve. These integrator roles will be hugely important in professions like finance and accountancy, where new technologies have the potential to transform the role of the finance professional and their relationship with the rest of the business.
At a time when most businesses operate in a fiercely competitive environment, understanding financial data in real time can provide a make-or-break edge over the competition. Technology is making it easier than ever to automate manual processes, freeing up time for analysis and ensuring financial data can be used strategically and effectively. However, businesses need people who can not only implement, but also use and integrate this technology with other systems and processes within the finance department. A major issue companies will continue to face in the coming months is that this combination of skills is not yet available through traditional education paths.
While this is an obstacle for recruitment, it does represent an opportunity for the individual. Within finance, it’s likely that these roles will be filled by intelligent self-starters who seize the opportunity to become an expert – carving out a new role for themselves and defining a new category of finance professional.
The ethical implications of AI innovation within the finance department
It is now widely accepted that automation, AI and machine learning have the potential to transform the role of the finance professional, freeing up time and talent which can be better used for financial forecasting and business analysis. However, as the industry strives to become more IT-centric, it is perhaps time to consider the down-stream implications of these innovations.
The impact of AI on society has been discussed widely in technology circles for some time. However, as the World Economic Forum pointed out on several years ago, these conversations should be as much about ethics and risk assessment (the latter of which finance professionals will be particularly familiar with) as they are about the positive potential of emerging technologies. Today, AI has become a bit of a catch-all buzzword encompassing a number of different technologies; but consider for a moment what a truly intelligent, automated system could look like in a finance setting.
What if one day we develop algorithmic processes capable of making independent business decisions using real-time financial data? If that algorithm makes an error, who is at fault? Is it the algorithm, the person who fed the algorithm data sets – or the person who designed the software? Or should the CFO ultimately be held accountable? Clearly these questions will still be hypothetical for many organisations. Nonetheless, they highlight the potential risk new technology could introduce to a naturally risk-averse sector.
As technology like AI evolves it is likely that regulation and control surrounding its implementation and usage will be defined, at least in part, by precedent-setting legal cases – reactive instances where something has gone wrong, but it is not clear who should be held to account.
2019 should be the year the finance industry starts thinking seriously about the rules, legislation and regulation it will need to survive such technological innovation intact. After a challenging decade for the industry, beginning with a large-scale financial crisis and culminating in government-mandated reviews of some of the sector’s biggest players, approaching the next decade with a more proactive approach to our own evolution will probably serve us well.
Andy Bottrill, Vice President EMEA, BlackLine
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