- 53% of finance leaders surveyed say more than half of current tasks could be automated over the next three years
- 54% think it is likely that blockchain-based systems will underpin finance
- 63% have concerns about the risks of using artificial intelligence in finance and reporting
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.
Tim Gordon, EY Global Financial Accounting Advisory Services Leader, says:
“The COVID-19 pandemic has accelerated the transformation of finance functions and made the use of smart technologies increasingly the norm. The challenge for finance leaders now is to map out how finance and reporting are to be delivered in this new reality. Building trust into smart technologies can unleash a tech-powered future for finance functions, where digitally savvy people work seamlessly with smart machines to provide the forward-looking insights that stakeholders require.”
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.
Lee Pei Yin, Partner, Financial Accounting and Advisory Services, Ernst & Young PLT, says:
“In Malaysia, organizations are at varying stages of adapting their business models to the new normal. The finance functions in some sectors are still responding to the unprecedented challenges of the pandemic itself, while others are already looking to plan for what’s next.
The financial reporting over the past year has provided some insights into the business and financial challenges that organizations face and the arising accounting issues.
Clearly, organizations and their finance functions will need to prioritize strategically and reimagine what the new normal will look like for their business, people and sector. It is important to explore opportunities to operate differently in the future, leveraging data and technology to build agility and flexibility to ensure future-fitness and the ability to create long-term value in a post-pandemic world.”
Gordon concludes: “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.
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About the survey
How can corporate reporting connect your business to its true value? surveyed more than 1,000 CFOs and financial controllers of large organizations to understand the challenges they face in corporate reporting. The research was conducted by Longitude on behalf of EY Global Financial Accounting Advisory Services (FAAS). Half the respondents (50%) were from the CFO community, with more than one-third (35%) of respondents representing financial controllers. The remaining 15% of respondents were finance directors or leaders in the treasury function. A majority (62%) of respondents’ organizations have revenues in excess of US$5b a year, and 10% in excess of US$20b a year. Respondents were split across the Americas; Asia-Pacific; and Europe, the Middle East, India and Africa (EMEIA). Thirteen main sectors were represented, with 56% of respondents’ companies being publicly held or listed and 44% privately owned. The survey was supplemented by in-depth interviews with CFOs and heads of reporting organizations, as well as EY subject-matter professionals.