Robotics in Finance: A New Frontier

Automating high-volume, repetitive tasks has become more achievable than ever, freeing finance departments to boost productivity.

In the 1970s and 1980s, the car industry became the first to harness the power of robots. By investing widely in automation, car manufacturers worldwide improved productivity and freed their employees to take on less repetitive tasks while robots worked on vast conveyor-belt type assembly lines. “Lean,” “Six Sigma,” and process re-engineering methodologies were introduced, eventually spreading from car companies to other types of manufacturers such as aerospace.
 

But robotic automation did not until recently go beyond manufacturing, into the realms of office work, removing the need for people to perform some of this environment’s most repetitive tasks.
 

Now that is changing as robots and automation enter into this realm of solely human activity. Taken together, advances in both computing power and artificial intelligence (AI) have made this possible. But the real game changer has been the integration of robotics into software platforms over the last few years.
 

Research conducted before the Covid-19 pandemic suggested that robotics and automation were the largest opportunity in a fast-evolving economy. PwC forecasts that global GDP could be up to fourteen per cent higher in 2030 as a result of automation, the equivalent of USD 15.7 trillion. Many of the world's leading advisory firms predict that ninety-five per cent of blue-chip companies will rush to take advantage of the opportunity by the end of 2020 by either beginning new automation initiatives or scaling up their existing programs.

To put the importance of automation in context, AI and automation are coined by the World Economic Forum as the Fourth Industrial Revolution. Automation is spreading across every sector and has particularly strong potential within both the finance industry as well as companies’ finance departments.
 

Reinventing finance departments

Automation has the potential to revolutionise the productivity of finance departments. The accounts reconciliation process for example, which is a highly manual exercise, involves several people working on various spreadsheets and versions, in what can be a laborious procedure with a significant risk of error. Yet Amazon, the world’s largest online retailer, now closes eighty per cent of its reconciliations in fixed assets automatically with no manual intervention. Along with other forms of automation, this has helped the tech giant to shorten its financial close process from five days to one.

Even football clubs’ finance departments are introducing automation, providing a clear indication of how widespread automation is today. Barcelona-based Spanish football club, RCD Espanyol, recently automated its financial processes with substantial benefits. Increasing productivity by more than twenty per cent, reducing reporting time by fifty per cent, and reducing errors by twenty-five per cent, the team has been able to refocus their efforts.
 

Regardless of the sector, finance departments are finding that automation has twin benefits – speed and accuracy. And producing more accurate data frees a business to take important decisions with better information and greater confidence.
 

Again, a number of studies show the big potential gains. A recent McKinsey study illustrates just how many finance tasks can be automated (see illustration below). The net benefits are now increasingly accepted, with CFOs expecting a forty-three per cent improvement in process speed and efficiency, forty-two per cent fewer errors, and a thirty-five per cent reduction in costs, according to a report from Grant Thornton.
 

More broadly, three quarters of CFOs agreed that automation is improving efficiency in a study by forecasting firm Oxford Economics.

“It is essential that humans embrace the augmentation that automation brings to our everyday life, especially in the workplace,” says Danilo McGarry, Head of Automation at Alter Domus. “Humans can stop doing the work of machines and be free to focus on what they do best– helping companies think laterally and more strategically, utilising their human ability to connect with one and another in order to solve difficult problems more creatively.”
 

“Now with automation dealing with the repetitive, high volume, mundane tasks that we were never, as humans, equipped to deal with, we can now get on with what we are good at by harnessing the power of humans and machines working side by side. Not only is this shift inevitable, but it’s the only way for companies to remain competitive, as automation fosters speed and accuracy across all areas but especially in the finance department.”
 

“Alter Domus is making serious investments in automation, which will allow us to do more work more accurately and faster, and ultimately provide a better customer experience through improved quality of service and output.” says McGarry.

Communication is key in the age of “robophobia”

Of course, there is rising anxiety that robots and automation will displace humans, leading to high levels of unemployment. “Robophobia”, a fear of robots, is a very real, yet misplaced, phenomenon.
 

What’s certainly true is that automation will eliminate a lot of manual tasks – up to forty per cent of transactional accounting work in finance departments, according to Accenture’s Finance 2020 report. Similarly, research has shown that automating manual processes that require little subjective judgment, such as data input and output, reconciliation, data quality management, reporting, and dashboard and business rules, can potentially reduce man hours by as much as eighty per cent
 

Yet the most progressive adopters of robotics show the potential for freeing up people for more creative and rewarding work. Amazon recently said it would spend close to USD 700 million to retrain a third of its US workforce (100,000 employees) to perform new tasks as AI and robots assume some of the most repetitive roles. More and more examples are surfacing in the corporate world of how automation is changing the way companies are structured and thus creating new job opportunities.
 

“While automation may look like a job destroyer, companies are taking the opportunity to invest in training employees in other skills,” says McGarry. “They will also have time to adapt as automation will not happen overnight.
 

“Like every wave of innovation, in the end robotics will prepare companies for their next stage of growth, just as happened in the car industry. However, the key to dealing with robophobia is to communicate with all areas of the business, explaining plans for automation and how staff can get involved.”

An experienced partner in automation

Open communications should be part of any strategy for transforming the productivity of a business through automation. Implementing such a strategy takes seasoned professionals with strong leadership skills. “To run an automation programme you need people who know what they are doing, otherwise you could easily fall into a situation where automation is not helping but just complicating matters further” says McGarry.
 

It often takes a crisis to accelerate waves of innovation such as that made possible by robotics. Covid-19 appears likely to do so, as CFOs seek new efficiencies in a harsh trading environment. Automation seems to be the ultimate weapon of choice in salvaging EBITDA as it can yield quick wins as well as longer term strategic gains.