Generative AI in the Finance Function

Generative AI technology is beginning to show its disruptive potential. The technology will not affect all businesses equally, but in other industries and geographies, generative AI could present opportunities for significant value creation.

So, what is it, well briefly it is a predictive language model that produces new unstructured content such as text, images and audio. Traditional, or analytical, AI, by contrast, is used to solve analytical tasks such as classifying, predicting, clustering, analysing and presenting structured data².

The purpose of this article is how finance can effectively approach Generative AI company-wide, prioritise its specific use within the finance function and climb the Generative AI learning curve.

Value creation- through technological progress

Firstly, we need to identify the largest opportunities for value creation, ensuring both budget and resources are there, whilst making sure this Generative AI provides a return of investment- sad but true. Pareto principle always applies; usually a small number of opportunities will deliver most of the company’s cash. To overlook highest-value initiatives because a competing project has Generative AI attached to it, could be a source of future problems?

“to err is human; to really foul things up requires a computer”

To expand on this rhetoric, when you combine human errors with computers on which your business relies, you can see the potential for trouble, or am I just being facetious or being a Luddite!

An overreliance on generative AI and lack of understanding of the  underlying analysis or data can also reduce the preparedness of finance teams to gut feel “reasonableness” of outputs. It is critical to bear in mind that Generative AI is designed to enhance the productivity of people, not to replace them. While it can boost efficiency, real people must always be involved.

Generative AI in the finance function

For many finance functions, this will be at the back of their mind—one among several of the essential tools that every effective, forward-looking finance function will use. The technology has the potential to save meaningful amounts of time and resources. That is one of the reasons why most, if not all, finance functions in forward thinking enterprises are likely to be using Generative AI in significant ways within the next three to five years.

A way to envisage the use of Generative AI could be to look at it from an end game viewpoint. Firstly, most companies are using data for the basics visualisation in dashboards. Second, some finance functions already use advanced analytics for analysis, FP&A, budgeting and predictive modelling. The last arrow will make extensive use of robotics and AI, where very few companies are at this stage. 

How to get going with Generative AI

I tried ChatGPT, where I asked it to provide me with VBA coding to use in Excel, for scenario analysis, sending zillions of emails messages to different people, with different attachments and some other idea and functions. Although, I can write the coding myself, depending on what you ask and how you ask, the output is quite reasonable, but I did have 90% of the suggestive coding, with the other 10% boiling down to own experience and VBA know-how to fill the gap. This gave me a good idea on how Generative AI works in practiceᵌ.

One factor that quickly became apparent was that Generative AI is not plug and play; it does not create like a human does or have a light bulb moment. It will not do the financial modelling for you either. I did ask it, but it said no! Instead, it is a mere translator that seeks to generate content that a person would find helpful. Note also that all data sets themselves first need to be processed and curated for advanced analytics and analytical AI.

Areas for Generative AI in Finance

These are my thoughts where AI could potentially be used¹:

Now, this list is all fine and dandy, however put into context every Board member will want to know the time/ cost and effort involved versus the value of impact-ROI. Rightly or wrongly, I have tried to depict the trade off between these two competing variables and plotted them below. The grey area is gradient shaded for obvious reasons – clearly trade off needs to be considered. The quick wins, is worth charging at like a bull, the greater the impact on value. The middle area “no pain, no gain” requires effort where the value will commensurate. The remaining area needs to be carefully prioritised truly in term of cost and returns.

Again, a reanalysis of the main themes, which I believe would be a good start point if Finance is totally serious on using generative AI is shown below.

Generative AI can be an important tool for value creation. Finance should strive to be Generative AI enablers, not gatekeepers and make sure that strategically critical initiatives rapidly and continually receive necessary resources. They should also ensure that they and their own function quickly climb the AI learning curve too.

The future is already starting, try not to get left behind Finance folks⁴.

Dee Singh Kothari is a senior partner in Kothari Partners

¹ Contact Kothari Partners for a free confidential discussion on how we can help.

² Generative AI technology is powered by artificial intelligence models called foundation models, which are trained on a broad set of data, including the outputs from analytical AI. It can be adapted to generate content that seems human, such as written documents, audio conversations, software programming, charts and visual images. The technology, will not displace traditional AI, instead it will complement and enable the other, with new innovations in robotics and automation, to make it better, creative and self-fulfilling.

ᵌ Ideas expressed in this article are solely of the authors. The author nor Kothari Partner’s accept any liability for the incorrect application of these ideas either used by companies, employees or other individuals alike.

⁴ At Kothari Partners, our approach is to help our clients understand their current situation, identify the value and decide on the scope, vision and set of strategies for what they could achieve for their business. We help plan their implementation and support them and deliver the solution/ change needed, so it is properly and permanently embedded in their organisation.

We aim to help past and future clients by delivering high-quality work to their organisation, generate real efficiencies and free up time to support better business decisions.

For a confidential discussion please free to contact us, via our corporate website: https://www.KothariPartners.com