GENERATIVE AI IN THE FINANCE FUNCTION OF THE FUTURE: A CFO'S GUIDE

Unleashing the Power of Generative AI in Finance

In today's dynamic technological landscape, generative AI tools like ChatGPT and Google Bard are revolutionizing various industries. For CFOs and finance professionals, understanding and harnessing the potential of these tools is crucial. Now is the perfect time to explore how generative AI can reshape the finance function and prepare to leverage its emerging capabilities.

Current and Near-Term Applications

Finance teams are currently using generative AI to enhance existing processes by generating text and conducting preliminary research. Tasks such as drafting contracts, supplementing credit reviews, and offering initial insights for financial statements during month-end closures are now more efficient with AI assistance. As generative AI's accuracy in numerical analysis improves, its utility in finance will grow exponentially.

Real-World Applications

1. Supplementing Credit Reviews: Generative AI can draft initial credit reviews, which are then refined by finance professionals, streamlining the process.
2. Investor Relations: AI tools can prepare draft responses for quarterly earnings calls, saving time and improving efficiency.

Transformative Potential of Generative AI

Looking ahead, generative AI is set to revolutionize core finance processes, reinvent business partnering, and enhance risk management. AI "copilots" will work alongside finance professionals, seamlessly integrating with traditional AI tools to provide comprehensive insights and recommendations. This will empower finance teams to make more informed strategic decisions and improve operational efficiency.

Transforming Core Processes

Generative AI will enhance core finance functions such as contract drafting, invoice processing, and general-ledger reviews. Initial efficiency gains are expected to be around 10% to 20%, with even greater improvements as the technology advances.

Reinventing Business Partnering

Generative AI will provide valuable insights into financial forecasts, scenario planning, and business intelligence, enabling finance professionals to generate rapid and clear insights and enhance their strategic decision-making.

Managing and Mitigating Risk

AI is already being used to identify anomalies that might indicate fraud or noncompliance. The next generation of generative AI will predict and explain anomalies, allowing finance teams to proactively mitigate risks.

Overcoming Challenges

Adopting generative AI in finance comes with challenges, such as ensuring data accuracy, safeguarding proprietary information, and establishing robust governance models. Early versions of AI tools may struggle with accurate calculations and risk data leaks when training models in the public cloud. Additionally, generative AI can sometimes produce highly convincing yet incorrect responses, known as "hallucinations."

Preparing for the Future

CFOs must take proactive steps to embrace generative AI, including:

• Creating Proofs of Concept: Start with low-barrier use cases like investor relations and contract drafting to gain experience and refine approaches.
• Identifying and Training Talent: Assess existing talent, identify skill gaps, and provide training to ensure finance professionals can effectively utilize generative AI.
• Developing In-House AI Capabilities: Establish a center of excellence or embed AI capabilities within technology teams to integrate AI effectively.
• Collaborating with IT: Partner with IT to drive implementation and address data security concerns.
• Championing Generative AI: Encourage creative thinking around potential use cases beyond the finance function to promote cost efficiency and effectiveness.

Generative AI is advancing rapidly, and finance leaders must stay ahead of this curve. By closely monitoring AI's evolution, gaining hands-on experience, and developing organizational capabilities, CFOs can unlock the full potential of generative AI in the finance function.

Embrace the future of finance with generative AI. How do you envision generative AI transforming your finance function?

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Inspired by insights from Michael Demyttenaere, Alexander Roos, Hardik Sheth, Marc Rodt, Matt Harris, Shervin Khodabandeh, Ronny Fehling, Daniel Martines, and Juliet Grabowski of the Boston Consulting Group (BCG).