Can COO perform the CFO role using “intelligent automation”?
Intelligent automation will compel the profession to become more creative
If “intelligent automation” (i.e. machines) were people, then would they easily get on the executive fast-track programme in an organisation and stand to get promoted before anyone else?
It goes without saying that they do work harder, learn faster, cost less, and are full of limitless untapped potential. We experienced something similar during the industrial revolutions of the 18th and 19th centuries, where mechanisation enabled us to overcome the limitations of our own muscle power.
Now two hundred years later (Industry 4.0), thanks to the virtue of new automation technologies, we are in the early stages of a similar revolution where it comes to our mental capacity,
In this article, I will discuss how automation can affect the role of the chief financial officer (CFO) and chief operating officer (COO) in an organisation.
What does “intelligent automation” mean?
Today’s organisations are upping their competitive game using various forms of intelligent automation such as chatbots, virtual assistants to robotic process automation (RPA). Being available 24×7, intelligent automation is transforming the way we operate.
The combination of artificial intelligence (AI) and RPA is called intelligent automation. In short, it can not only mindlessly reproduce any manual activity (automation) but just like humans, also make intelligent decisions (AI) such as the checking of errors/exceptions, based on dynamic information.
Hence, they have an understanding of your business processes and variations which they take into account when executing automated business process validation to verify that the right business outcome has occurred.
The finance function and its current challenges
The finance function is about managing inflows and outflows to improve the bottom line. The entire journey starts by getting an accurate view of the amount spent and earned, and then devising a financial plan to achieve financial goals.
A financial plan is then executed and monitoring/controlling begins to ensure that the organisation sticks to the plan. One can do year-on-year comparisons or compare against a benchmark to check the performance of the organisation over a period of time. The major challenge of all this lies in legacy systems and process quality and availability of data as well as skills/talents availability.
So, instead of focusing on strategic initiatives like analytics, CFOs are usually overburdened with mundane tasks such as data collection.
Why the finance function is ripe for automation
The finance function has long been data-driven and the availability of dynamic, real-time planning as well as attaining data from various data sources has always been missing. In spite of this, it has always played a major role in driving the direction of the business.
That is why C-suite and different departments of the organisation like sales, marketing, HR and operations look to finance to provide them with raw data or sophisticated analysis to understand the inflow/outflow of cash.
Automated ERP/CRM systems provide a lot of structured data about customers, employees, product, and sales but it still does not provide a complete picture. For example, unstructured data sources such as social media, which provide additional insights, are still missing.
The finance team always struggle to keep pace using spreadsheets and manual methods. Without automation, the time left for analysis and strategic recommendations is little, and that is a challenge.
How the CFO role will be impacted due to finance automation
CFOs are responsible in areas like planning, budgeting, forecasting, financial reporting, accounting, allocations/adjustments, and reconciliation transactions for the organisation.
In short, the CFO plays the role of strategist, catalyst, steward, and an operator. Currently, most CFOs are lumbered with mundane tasks such as collecting data rather than spending time on analysing it. Intelligent automation will provide them viable options to automate the collection of data.
Thus, automation, AI, consolidation of data (across different sources like social sites ) using big data and the growth of data analytics capabilities has become a reality.
The availability of this data in real time will mean that organisations may not require a monthly or quarterly close process. Actuals/forecasts will be generated instantly and made available to the relevant stakeholders or department heads resulting in decisions being made in a timely manner. The continual tracking of sales, cash flows, inventories, and more will become the norm. Hence, automation will result in the CFO of the future to be looked upon as a provider of deeper, real time insights which create operational value.
The role of COO
According to Keith Rabois, former COO of Square, “the COO is like a ‘doctor’ in the emergency room, constantly fixing things, training and diagnosing issues to determine if they are minor or potentially fatal”.
The exact job description of the COO changes from company to company and CEO to CEO.
Specialised skills are required for the role of COO which usually is a mix of strategy and execution, with the overarching purpose of making the “business” run smoothly while assisting the CEO in refining and realising his/her vision.
The COO is a key advisor to the CEO and has a good understanding of business operations of the organisation. Therefore, it is very important for the COO to understand key drivers. The majority of the advanced analytics like hedging against volatility will be easily available due to advances in technology (AI and ML). It will also help the COO to predict future trends, manage risks, and respond faster, with greater insights.
Can COO also be CFO?
CFOs tend to think of “technologies” as a cost centre. Many CFOs have barriers in terms of understanding of IT and digital. In the new world of AI, however, they need to be tech-savvy.
As per the demands of their role, COOs are usually required to be visionaries, digital-savvy and very forward-thinking. Therefore, it is much easier for the COO to adopt new technologies and optimise the organisation’s resources.
By merging the roles of CFO and COO, there will be cost savings in terms of logistics and business operations. For example: if any financial data is required, instead of calling the accountant, COO can directly access the data themselves.
Another advantage is that CFO/COO will have a full understanding of the financial/operational situations which will help them to take strategic decisions and avoid internal conflicts. This way, they will have a better understanding of the pulse of the organisation as well as the key drivers of the business and how they are interrelated. This may be the reason why a lot of companies have recently merged both the roles into one.
Conclusion
On the whole, I believe that intelligent automation will not make the CFO’s role completely obsolete, provided that they adapt well to the changes. In fact, I believe the introduction of intelligent automation will compel the profession to become more creative.
By Amit Agrawal, VP at a Singapore-based regtech company
I completely agree that the finance function is ripe for automation, but to suggest that intelligent automation will infringe on the CFO role is ridiculous. The CFO is becoming a more strategic role that must lean into technology and partner with either the COO or build technology muscle (we are seeing this in the form of hiring a Finance Ops Director with tech background). The CFO’s we are working with at Sigma IQ are learning fast on what machine learning and intelligent automation can do for their organizations.
The potential uses of RPA in finance are nevertheless beneficial and also exciting and, hence, they should be pursued. While embracing the potential of robotic process automation in finance, a wise executive who considers RPA implementation should also bear in mind its limitations. Still, I would agree that either CFO or COO that wish to remain competitive should take advantage of effects like increased productivity, efficiency and cost-effectiveness, customer and employee satisfaction. Thank you for sharing this very informative article.