Disruption caused by the COVID-19 pandemic and the resulting geopolitical and macroeconomic uncertainties are providing an opportunity for leading finance executives to rethink the role of their function and how corporate reporting can be structured and delivered. This is according to the sixth annual EY Financial Accounting Advisory Services (FAAS) survey, How can corporate reporting connect your business to its true value?
The survey of more than 1,000 CFOs and financial controllers across 26 countries shows that finance leaders anticipate their function to look very different in the future, with a major shift to a smarter operating model. Fifty-three per cent of respondents think it is likely that more than half of the finance and reporting tasks currently performed by people will be executed by artificial intelligence (AI) over the next three years. Similarly, 54% think it is likely that blockchain-based systems will underpin finance.
To make the most of smart technologies in corporate reporting, however, respondents identify building trust as a key prerequisite. As such, more than two thirds (68%) of responding finance leaders say that governance, controls and ethical frameworks still need to be developed and refined for AI.
Without those frameworks, finance leaders (63%) are concerned about the risk implications of using AI in finance and reporting, from security threats to regulatory risk. At the same time, many respondents do not have complete trust in the output of these systems, with 47% saying that the quality of the finance data produced by AI cannot be trusted in the same way as data from traditional finance systems.
Guillaume Macczak, Associate Partner CFO & GBS Services, EY Romania: “Awareness of technology breakthroughs in finance operations is growing. This change brings new risks for Accounting or Reporting professionals. Therefore, the main focus should be to build trust in AI outcomes and build the “story of value” through data sets interpretations.
In Romania, an important part of accounting and reporting activities are still manual in some organizations. Therefore, this could be a leap forward towards catching up with best practices with a limited investment, through modular Proof of Concepts for instance, and thus building the foundation, brick after brick, for a “Finance of the Future” organization. This could also shrink the gap perceived by young professionals, at their start of their career between their personal and professional life, accentuated by remote working for the last 12 months.
Blockchain is still perceived as a “hype” and also an expensive technology. Nevertheless, blockchain is also building trust as a financial model, while new decentralized architectures make it more affordable.
Finally, being able to digest more data opens the door to non-financial indicators and reporting, which supports the implementation of sustainable business initiatives and allows business leaders to quantify their financial, social, environmental impacts.”
Putting finance at the heart of sustainable long-term value reporting
As investors and other stakeholders are looking to organizations to adopt a longer-term perspective and focus on long-term value creation, the survey shows that the majority of responding CFOs and financial controllers (72%) are embracing this shift. More than two thirds (69%) of respondents say that CFOs and senior finance leaders are increasingly seen by key stakeholders as the stewards of long-term value in their organization.
Two thirds (66%) of finance leaders also say that demand for forward-looking financial analyses and forecasts has increased over the last 12-months. Respondents to the survey report that stakeholders are also looking for new insights on nonfinancial factors of corporate reporting, such as environmental, social and governance (ESG) data (55%). This increasing focus on high-quality nonfinancial information is reinforced by 65% of respondents, who believe there is significant value for their organization that is not measured or communicated using traditional financial KPIs, such as brand value and human capital.
Finance leaders should rethink the role that reporting is expected to play in helping to tell the story of the value that the enterprise creates. If finance fails to play a central role in meeting these changing expectations, reporting could become increasingly irrelevant. There is an opportunity for finance leaders to establish their functions as a source that can provide what is expected by the business, with the speed and flexibility required.
The full report can be viewed here.