How Will AI Chatbots Impact Corporate Finance? - Finance Silos

How Will AI Chatbots Impact Corporate Finance?

The use of AI-powered chatbots has become a major trend ever since the emergence of ChatGPT last November. With these tools getting people out of parking tickets, writing essays for students, and even eerily hiring human beings to bypass captcha tests, this technology is unprecedented and disruptive.

Tech giants including Google and Microsoft have recognized the potential advantages of incorporating AI chatbots in their operations and products, and have made significant investments in creating their own cutting-edge chatbot systems, aiming to emerge as leaders in this industry.

However, this technology is also controversial, with industry leaders calling for formal bans on further advancements in this area, while some countries have already banned its use altogether.

Glenn Hopper, director at Eventus Advisory Group and author of “Deep Finance: Corporate Finance in the Information Age,” highlights several advantages and risks that AI chatbots could bring to corporate finance.

Improved Financial Analysis

It is anticipated that the utilization of AI chatbots in the financial sector will quicken the pace of financial analysis and decision-making processes. Hopper drew a comparison between interacting with an AI chatbot and how one would communicate with a junior analyst. Although ERP dashboards can offer an overview of a company’s finances, obtaining detailed information usually requires the involvement of financial analysts, which can be a time-consuming process. Nevertheless, a fully integrated chatbot that can access a company’s data can respond to financial queries and provide analysis without the need for a formal request. Hopper remarked that “you can ask questions, just like you would have an analyst, and get this information in pretty near real-time.”

Leaked Corporate Secrets

It is possible that confidential information of a company may not remain confidential as it is being used by OpenAI to train the model. This poses a risk of potential leaks of proprietary information, as evidenced by Amazon’s experience with ChatGPT responses resembling their company data. “I would strongly advise against anyone putting actual company information that they don’t want shared in there,” Hopper said.

Revolutionize SMEs

The implementation of AI technology in finance can create a fairer playing field by granting small and medium-sized enterprises access to data and resources that were previously only available to larger companies. Large companies have an advantage due to their vast amount of data and dedicated teams that work with it, which allows them to gain valuable insights and improve forecasting accuracy, budget variance explanations, and overall decision-making.

During his guest appearance on the FP&A Today podcast, Hopper predicted that we are on the verge of a revolution and compared it to when Quickbooks first came out and revolutionized accounting for small businesses. “I think if someone is going to come along and have a product that is basically the QuickBooks of machine learning that brings this capability to small businesses that otherwise couldn’t have it…I really think this is going to be the next wave,” he said.

Streamline Compliance & Reporting

According to a white paper by Klarity, incorporating AI technology into accounting and finance could greatly enhance compliance and reporting procedures. Klarity claims that AI can accelerate tasks such as disclosure review, data matching, and creating accounting memos by up to 10 times faster than manual methods.

It’s not hard to see how that could be useful for finance departments, said Hopper. “If you have faith in new lease rules, if you have that loaded into a chatbot and you can ask it, ‘How do I need to record these [leases]?” he said. “There’s a template and…it just vastly streamlines the amount of effort it takes to do that.”

A Loss of Knowledge & Creativity

The expense of relying on automation is the loss of knowledge and creativity within an organization. Similar to how our dependence on smartphones has resulted in a lack of memory for phone numbers, automating processes can lead to a lack of practical information within a company.

There is also the risk that AI could cost accountants and finance professionals their jobs, draining organizations of institutional memory.

“The more you automate, the easier it is to say, ‘Oh, well, that’s another area that we don’t need humans to do,” said Hopper. “If you take the most replicable kind of mindless tasks and automate those, there’s a thought that now we can reduce headcount and finance and accounting.”

Recent Posts

What is the Role of an FP&A Analyst?

Leave a Reply

Your email address will not be published. Required fields are marked *