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Prepare For Disruption

May 24, 2017
AFP_Mindshift_Blog_AFPSITE

Jim Kaitz, President and Chief Executive Officer, AFP

Will you help move technology and innovation, or will it move you?

Moore’s law that processing speeds will double about every two years is starting to prove true in the finance and treasury functions. While we’re not talking about transistors and circuits, we are talking about a dramatic exponential growth in technology such as blockchain, artificial intelligence (AI), data analytics, cybersecurity and the Internet of Things.

Banking, insurance companies, technology companies, venture capitalists and private equity companies are spending big on a breadth of technologies that they believe will help the finance profession and the organizations they serve become more efficient and profitable—and enriching the technology providers along the way. But will the technologies they’re investing in find a receptive customer base? And, will those customers have the skills and culture in place to make best use of these tools? Are they equipped to adjust, turn and pivot as technology evolves, turning new developments into assets rather than detriments?

I’m seeing a trend on the horizon, and it doesn’t necessarily bode well for finance and treasury practitioners. Too many are spread thin as their roles expand and are so focused on checking off the next task on the list that they don’t take the time to think about the future. Disruptive innovation is occurring all around them, yet they don’t consider these developments and embrace how to use them to move their organizations forward. Only a select few are recognizing the opportunity—or need—to adopt these technologies and leading their organizations toward future growth. Unfortunately, those who are slow to adopt will find themselves falling behind fast.

At no time in our industry has it been more important to stay ahead of the tech curve. But the data suggest that we are slow to adopt technology—and, more worrying, even slower to maximize its full power.

Perhaps more troubling is the idea that we’re not aligned on our tech needs and goals. According to a recent Marsh/RIMS survey, a stunning 52% of companies’ risk professionals say they don’t “use or plan to use the Internet of Things.” And yet, according to the same study, a far higher majority of these companies (despite what their risk professionals believe) say they “will be using Internet of Things technologies within two or more years.”

Where is the disconnect here? According to the Marsh/RIMS report, it is mostly due to “organizational misalignment,” studded with classic dysfunctionality symptoms such as “lack of awareness of key risk management concepts, lack of cross-organization collaboration” and “lack of senior management commitment.”

For the finance and treasury functions, these misalignments can be fatal. Without the proper tools—or without the talent to maximize these tools’ full value—treasury and finance will not be able to deliver the strategic value their companies will increasingly demand to stay competitive and turn a profit.

Asking the right questions

That’s why it’s more critical than ever to look at technology with a long view—how will this help us not just now, but five years from now? At the same time, we don’t have the luxury of waiting to evaluate technologies such as AI, new computing architectures, and blockchain and distributed ledger. According to the World Economic Forum, we need to proceed with haste, but wisely. “We need to become better at managing technological change, and we need to do it quickly,” WEF said in a recent report.

Smart finance and treasury organizations are teaming with banks and technology companies to determine their future rather than wait for it to be thrust upon them. They see tech—particularly fintech—as a key element in improving the efficiency and effectiveness of the profession and freeing up their time to deliver desperately-needed strategic insight and analysis.

These organizations are asking the tough questions, getting to the essentials that stand between them and higher profit margins, seeking to use the smartest tech to bridge the gap. It’s about taking a 12-, 24- or 36-month view of what technologies will have the biggest impact on their business.

Finance and treasury organizations need to look at the fintech market to understand the efficiencies their offerings provide. They need to figure out quickly which tools offer the most value at the lowest costs and risk. They should seize opportunities to connect with the innovators, disruptors and macro-trend experts who are transforming technology. Particularly, the technology that is having the biggest impact in corporate finance and treasury. They need to look at the very solutions that drive future profitability, reduce risk and improve operating efficiency.

A smart tech strategy starts by assessing how your company plans to adapt to challenges, opportunities and new market conditions over the near term—say, the next 12 months. Then you need to figure out where tech plays a role. The next step is to assess which technologies will have the most positive and lasting impact on your P&L. And which technologies will boost your business as whole?

As you put a solid tech assessment/strategy together, you must think about potential hurdles and implementation barriers:

  • Which technologies can deliver the greatest value to your organization?
  • What are the main the challenges to adoption?
  • How is your organization’s culture affecting innovation?
  • What organizational or cultural barriers to technology implementation do you face—both within your organization and among your customers?
  • Does your team have the skills to leverage the advantage of the technology?

There is no question that ever-evolving technology is reverberating loudly within the finance and treasury community, affecting every single job. Change is just a matter of when, where and how it affects corporate treasury and finance, and whether the profession will proactively lead the coming changes, or passively react to the unavoidable technological advancements that are already underway.

It will become increasingly important to identify emerging technologies and applications that will affect treasury and finance—and the future of our work. Once these are identified, the trick is to prepare and educate, with a focus toward concrete action to address pain points, reduce costs, increase throughput and generally improve the efficiency and effectiveness of the profession.

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So do you want to help define the future of finance? AFP MindShift is doing just that. Learn how you can become a founding member by watching this recorded webinar.