The rise of A.I in Finance: “A human being can alter their life by changing their attitude.”

From last week we noted that technology is increasingly becoming important in the finance function from data input, processing, output, storage and retrieval. With advances in technology, we can expect greater accuracy, less risk of manipulation in processing and reporting, more efficiency and faster decision making through the enhancement coming from artificial intelligent systems.

Finance and accounting practitioners must increasingly plan for their future careers by considering skill sets which will likely be in demand when mainstream organisations begin to embrace technology focused on automation of routine tasks and elementary decision making. Whereas the previous trend had been to outsource basic bookkeeping to emerging markets where there are excess skills and labour is less expensive, it is now outsourced to automated and artificial intelligence systems.

Whilst there are some who hold the view that technology being developed should be seen as a threat to the job market within the finance and accounting field, we hold the view that the role of technology is to enhance the accounting profession’s ability to provide more credible and timely insights to decision makers.

Therefore, for the future of the finance function, we see routine tasks being automated for obvious reasons around greater efficiency:

• less human error from repetitive tasks,
• faster analysis over copious volumes of data fields such as bank statements, and, resultantly,
• related cost savings.

Certain tasks, at least for the foreseeable future, will require human capabilities since there is no commercially-reliable technology that is close to fully having the dexterity of humanity.

Finance function leaders are therefore encouraged to prepare their support staff for a future where there will be greater human-to-machine interdependence as one will not be able to function without the other. What this means is that the skill set of the past finance function staff member will not be able to carry human resources into the future.

Since the timeframe is uncertain for local institutions to catch up with these global developments given the economic challenges which they have been facing, it is important to ensure that staff members are encouraged to continuously develop their skill sets in preparation for the future. However, for those organisations that want to increasingly participate in regional and global markets, which are extremely competitive, it becomes imperative for them to embrace these emerging trends on human-to-machine interdependence.

For finance functions to realise the full potential of technology efficiency and effectiveness, the leadership needs to ensure that its staff members are not only able to utilise the tools availed through technology, but keen to work with and learn from them.

The old adage, GIGO rings a bell: garbage in, garbage out. Almost always when technology fails, people have to bear the consequence of the glitch.

To hammer this point home we refer to a case where a system malfunction in the automated trading system of Knight Capital Group in August 2012 almost wiped out the company’s entire capital base by causing a US$440 million dollar loss in a matter of minutes. The Economist described the event as a “dramatic manifestation” of what occurs in many parts of the financial sector, including banks and insurers, when something goes wrong in the interaction between information technology and the humans who operate it.

Professor Sarah Sharples of University of Nottingham notes that human factors will play an essential role in the future of technological advances, where people and technology are being integrated more closely and more intensively than ever before. Consequently, it is essential that finance function leaders carefully plan and implement how best to harness their teams’ human and technological capabilities, whilst planning for fail proof mechanisms that indemnify the organisations from any potential losses that could arise.

Some roles that have been assumed by technology used to rely heavily on the humans.

The banking experience has changed with limited interaction with people as bank tellers are being sacrificed for internet banking and POS/ATM systems. Furthermore, banks have adopted the use of advanced analytics systems to analyse data on whether an individual qualifies for a loan or not. This has increased the speed at which such a decision can be made. However, the downside is that qualitative factors could increasingly be omitted from the decision making process, should full automation be achieved. Retail banking services have been traditionally a people-centric business. The experience of getting a loan used to be a very personal one, which involved meeting the credit manager and discussing your business plans and negotiation of credit terms.

In a survey by The Economist’s Intelligence Unit, Deutsche Bank noted that one of the things we miss when we are automating social human processes is subtlety. When conducting a debtor’s assessment, an analyst might meet with the senior management of an off-take company. During the conversation with the firm, management will disclose the information that they are legally allowed to disclose. But during the meeting, the analyst may be able to pick up additional information in that conversation, either through body language or the inflection of the voice, which cannot be captured within a quarterly filing or the annual accounts, which will be crucial in long term sustainability of the debtor-supplier relationship. In as much as finance functions can automate analysis of an audit trail, technology cannot replace intuition in an audit interview and deduce personality related traits which may have a bearing on credibility, amongst other factors.

The application of human factors in designing finance function activities is vital to ensure that we are creating integrated systems that can effectively work and interact with people. For example, most finance function teams are made up of team members coming from diverse experiences and backgrounds, a situation which brings about high levels of unpredictability in responses and behaviour.

Humans are able to respond to unusual or unexpected situations, and contribute towards the resilience of an organisation’s system. Mark Coeckelbergh, assistant professor at the University of Twente, noted that there will always be the need for a human to decide and act in more complex situations.

Technology is being developed to complement humanity’s efforts and is giving finance function teams an opportunity to grow into roles which are more effectual for organisational success. The main benefits of having machines working alongside humans are the ability to access the best of both worlds, that is,

• productivity and speed from machines,
• emotional intelligence, resolve to overcome obstacles and misfortune and the ability to adapt, respond and react to new experiences from humans. Humans have access to creativity through interaction with nature and other humans.

At the end of the day, humans and their tools (technology) integrate into a single system which is able to create more value and achieve better results than when working unilaterally. Effectively, technology is being developed to compensate for humanity’s inadequacies.

In typical SAFiM Africa fashion, a few questions for you to ponder until our next instalment:

• how often do you carry out a formal evaluation of your finance team members?
• do reports from your finance team offer you sufficient insights to improve your strategic decisions? — on a scale of 1 to 10, how effective is your finance department (all components included) in achieving its objectives consistently? — do you believe you have the best staff in every position in your department?