The rise of artificial intelligence in the corporate finance world is inevitable. AI will soon be able to perform many tasks that would have been unthinkable just a decade ago.
This begs the question: how will this affect corporate finance? And more importantly, what are some ways finance professionals can prepare for it?
To answer these questions, let’s look at five possible scenarios for how AI could impact corporate finance in the near future.
Scenario 1: AI Will Automate Many Finance Tasks and Processes
One way in which artificial intelligence will affect corporate finance is by handling the tasks that are currently done by people in finance.
Beyond eliminating manual processes, AI will be able to do these tasks faster and more efficiently than human beings.
For example, in an attempt to use their findings to help companies make business decisions, financial analysts spend a lot of time poring over financial data. Auditors do the same searching for anomalies that could indicate fraudulent activity.
This takes a lot of work and is time-consuming enough that it limits the number of data they can analyze.
However, AI programs are able to do this automatically and provide meaningful insights in minutes instead of hours or days.
In addition, AI can provide a more accurate and nuanced view of financial data than any human could. Not only will this free up resources, but it will also allow employees to focus on revenue-generating activities rather than routine tasks.
Scenario 2: AI Will Differentiate Between the Noise and the Signal
Another possible scenario for how AI will affect corporate finance is by reducing the noise in finance.
Because of the sheer amount of financial data generated by organisations, it’s almost impossible to make good decisions without first having to analyze heaps of information to try to make some sense of it.
This means executives often spend too much time beating their brains out about the numbers and not enough time acting on the most important information.
However, AI will be able to filter out the noise in finance and provide stakeholders such as investors, auditors, and management with only the information that’s relevant to them.
This will allow finance executives to focus on long-term objectives instead of analysing nonessential data.
Scenario 3: AI Will Enable New Opportunities in Corporate Finance
One way in which artificial intelligence will affect corporate finance is by enabling business opportunities.
By using AI, companies will be able to use predictive analysis to identify hidden patterns and opportunities for growth. For example, AI will be able to predict future demand or supply changes based on current data.
This will allow forward-thinking finance executives to identify and exploit emerging business opportunities and new revenue streams.
To illustrate, a company can use its own data to create a unique product that it can then sell back to the market.
For finance professionals, this means that AI will not only touch areas such as accounting and budgeting, but also product development and marketing.
Scenario 4: AI Will Affect the Way Financial Decisions Are Made
When it comes to making financial decisions, there’s often a trade-off between short-term and long-term goals.
Traditionally, financial leadership falls on the side of caution and makes short-term decisions at the expense of long-term growth.
However, AI is able to better assess risk and provide a more accurate picture of the future. In addition, it can be used to create alternative scenarios so that stakeholders have a clear idea of what could happen if they take different actions.
In the future, financial leadership will be more driven by data instead of emotion and intuition. It will also lead to more innovative and collaborative processes rather than being bogged down in bureaucracy.
Scenario 5: AI Will Reduce the Likelihood of Audit Failures
Finally, AI has the potential to significantly reduce the risk of audit failures.
When auditors look at financial and regulatory reports, they unfortunately only pay attention to high-level results and fail to delve deep enough into the numbers.
AI will be able to provide auditors and regulators with accurate and complete information about an organisation’s financials by drawing on disparate sources of data.
In addition, it will be able to predict outcomes that auditors would never have thought possible and provide a full analysis of risks and opportunities that they might otherwise miss.
The Bottom Line
Overall, artificial intelligence will affect corporate finance in the near future and these five scenarios are just a few ways that AI could change the industry.
But regardless of what kinds of changes arise, one thing is certain: finance professionals must be ready to embrace this change and stay up to date with any advancements in technology.
Since the market is advancing at a rapid pace, finance professionals must be flexible and able to adapt their skillsets quickly in order to keep pace and take advantage of the many opportunities that AI presents to enhance their performance and grow their organisation.