Does Industry 4.0 mean Finance 4.0??

 Whether we have heard it or not, but sure we would have already felt it: We are in the fourth Industrial revolution.  As we know Industry 4.0 is the name given to the current trend of automation and data exchange in manufacturing technologies. Characterized by increasing globalization, demographic shifts and rapid development of digital technologies, it presents new opportunities to transform finance. To be prepared for the world of 4.0, leaders should understand how technology is anticipated to evolve and impact the finance function. It is important to plan to respond for the finance leaders to respond to disruption and way it is affecting them.

The finance function should address:

►How could digital technologies change the finance operating model?

►How might this impact the size and shape of finance?

►How might reporting change in a 4.0 world?

►How does finance communicate the value of what the company generates to its all stakeholders?

►What type of people may be needed in future finance?

Stake holders increasingly seek real-time information, including future trends in strategy and how risks are being managed, which the annual report does not provide. The finance function of 4.0 is expected to deliver more relevant information, more quickly and with a forward looking view, to meet the needs of shareholders and stakeholders alike.

Impact:

a)     Managing accounting and regulatory change : Expected to enhance transparency, produce more relevant and insightful financial and non-financial reporting and further standardize / automate reporting.

b)     Finance Controller : “fit for purpose reports, meet increasing regulatory and compliance requirements, having right people and with right skills in place and understand technology requirements to support reporting

c)      Treasurer : Regulatory change and increasing risks and its impact on treasury, manage to support competitive advantage, providing data and projections in the time frame expected by stake holders

Most important provide a future view!!!!!

The challenge for CFOs is to move past the hype to set practical goals and make wise decisions on the usage of emerging and available technologies like AI, analytics and RPA. Contrary to popular imagination, Finance 4.0 of the future will not be manned by a robot army. It will mean using right mix of technologies. The technologies are:

a)     Data and analytics – tool to provide insight by extracting value from large amounts of data

b)     Cloud technology: provide opportunity to replace outdated, fragmented and inflexible legacy systems

c)      RPA: Tends to be a fast, reliable and always-present method that can replace routine manual process

d)     AI makes sense of large structured and unstructured data sets. It can recognize patterns and learn and adapt to new accounting or tax regulations

e)     Blockchain records transactions using a distributed ledger, which gives every network participant a secure audit trail of all transactions ever made in real time. It allows trade directly between parties without need of intermediaries

The successful adoption of new technologies is a complex process and a business transformation journey. It is only when the finance team has a digital mindset and when there is strong partnering with other parts of business such as IT, that Finance 4.0 transformation becomes a journey rather than just an one-off project.

The mindset should be of returning to first principles. (Remember Elon Musk got down costs by 90% through return to first principles)

In essence, the world of 4.0 would mean deploying technologies to:

-         Finance speaking business and NOT only finance

-         Enable business through finance and NOT inhibit

-         Deploy digital technology and NOT legacy fragmented

-         Use trusted data and NOT disparate

-         Predict of the future and NOT report the past

So a finance 4.0 world is no more an option but an important catalyst for the Business 4.0 world!