Generative AI is topping headlines, as companies from every sector race to figure out how they can use the technology to gain an edge—and at what cost.
But if you ask finance chiefs their views on the potential role of emerging technologies like generative AI, machine learning and natural language processing in their function, few view it as a game-changer.
When asked to rate, on a scale of 1-5 where 5 is Critical and 1 is Irrelevant, the importance of digital and emerging technologies to their company’s financial strategy, the 170 CFOs we polled, as part of our quarterly CFO Confidence Index conducted with BlackLine, returned a weighted average value of 3.5—right down the middle of the scale.
But looking at the average may be misleading because the data shows a large discrepancy between those who rated it as Critical (a 5 out of 5), 22 percent of polled CFOs, and those who rated it as Irrelevant (1 out of 5), 2 percent of the respondents.
“The entire range of data automation, process automation and AI have reached a tipping point, like no other digital tipping point in 20 years,” said one of the participants in our survey. “The API is important, and RPA needs to be part of the strategy. ChatGPT is changing how we process documents and code.”
What the data shows, instead, is that many—and not just finance chiefs but leadership teams in general, according to the surveys we’ve conducted with CEOs, CIOs and CHROs as part of our C-Suite Confidence Index series—fear the risks involved with being an early adopter. Some said that while they see the benefits of digitalizing the finance function, the transformation “is not impacting significantly enough to overcome switching costs to upgrade ERP or accounting software,” for instance. Others said changing ingrained inefficient behavior also remains a challenge.
“I take somewhat of a ‘wait and see’ approach to investing in technology,” said the CFO of a transportation company, echoing several of his peers.
When we asked CIOs about these challenges, the “risk of introducing new errors/misinformation” ranked top on their list of reasons—which, for the finance function, can have dire consequences.
“It is true and prudent that for the emerging elements of digitization, low-risk use cases be thoughtfully prioritized to prove efficacy in advance of broad adoption,” said Michael Polaha, SVP finance solutions and strategy at BlackLine, our partner in this research. And there are elements of automation and digitization that are well established practice that prove to be low risk and further delaying their adoption “can put an organization at a competitive disadvantage against their peer set, as it relates to both business performance and talent retention,” he said.
Another challenge is finding the best use cases for the technology in the finance function. When we asked CEOs and CIOs to share where they see emerging tech having the greatest impact in their companies, both groups ranked finance fourth on the list, behind operations/back office, marketing/customer service and product or service innovation/R&D.
So, where should CFOs focus their efforts? According to those we polled, digital technologies are seen being particularly useful in three areas:
- Automating resource-intensive tasks (81 percent)
- Helping avoid data duplication to reduce reconciliation (70 percent)
- Enabling the integration of planning, budgeting and reporting (69 percent)
“Once again, prioritizing use cases with proven track records of efficacy in the marketplace eliminate manual work and improve data quality, integrity and completeness,” Polaha said. “For companies that have already harvested this fruit, thoughtfully identifying proof of concept use cases around emerging digitization components (such as generative AI) would be the logical next step.”
Despite the challenges, CFOs are far from complacent about investing in technology and moving their organization’s digital transformation forward.
Overall, 80 percent of those polled said they were either leading the charge for the company on that front or a key member of the team that was doing so. In fact, nearly three-quarters said their involvement in the company’s DT strategy had increased over the past two years.
“You need to innovate to remain relevant and to have any chance at being competitive,” said Ben Wickum, CFO at Collins Community Credit Union.
Fifty-two percent of CFOs agreed with that premise, saying digitalization is critical to survive.
And budgets for DT efforts are continuing to increase: 59 percent said their 2023 allocation of capital to digital transformation had increased from prior year, and 65 percent said it was going to increase even more going into 2024, indicating that CFOs and their organizations are taking the matter seriously.
About the CFO Confidence Index
The CFO Confidence Index is a recurring flash poll of CFOs and finance chiefs on their perspective of the economy and how policies and current events are affecting their companies and strategies. Throughout the year, StrategicCFO360 surveys hundreds of CFOs across America, at organizations of all types and sizes, to compile our CFO Confidence Index data. The Index, which we produce in partnership with BlackLine, tracks confidence in current and future business environments, as well as their forecast for their company’s revenue, profit, capex and cash/debt ratio for the year ahead. Learn more at StrategicCFO360.com/CFO-Confidence-Index