Generative AI is revolutionizing the world of finance including accounting, banking, investing, and managerial finance. Of course, implementing emerging technologies often requires sizeable upfront investments (time and money) and strategic leadership. Research indicates that AI advancements could significantly boost global GDP and productivity.

Generative AI's capabilities extend beyond traditional automation, transforming AI from a support tool to a co-pilot that can generate novel content and insights. In finance, chief financial officers (CFOs) play a crucial role in integrating AI within enterprises, emphasizing sound strategy, robust data governance, and a clear understanding of the expected return on investment. CFOs will also lead the charge with cross-departmental collaboration.

Generative AI

Generative AI can produce content including text, images, audio, and more. AI chatbots (such as ChatGPT and Google Gemini), image generators (such as DALL-E), and other generative AI tools are changing business operations. This technology can be used to write copy, process customer data, answer common questions, automate routine tasks, translate documents, and more.

Potential Applications in Finance

Generative AI can streamline financial planning and analysis, transactional finance, and controllership by automating data analysis, producing financial summaries, and easily creating graphs and charts from data. Generative AI paired with automation can save finance professionals time by handling routine tasks, allowing them to focus more on strategic decision-making and complex financial analysis.

With internal audit and compliance, AI enhances risk management by continuously monitoring large data sets for regulatory compliance and generating real-time insights, leading to more comprehensive audit coverage and optimized resource utilization.

For tax functions, AI improves agility and efficiency by automating detection of statistical outliers, data enrichment, and historical pattern analysis, thereby reducing manual efforts in complex tax adjustments and enhancing tax planning and compliance.

AI is expected to help reduce hacking attacks on credit cards and bank accounts. Chats with banks, credit card companies, and financial institutions will become more sophisticated in their answers to customer questions. The ability to analyze massive amounts of data will help everyone manage their financial situation more efficiently.

Risk Management and Governance

Generative AI's adoption in finance calls for a watchful eye to avoid risks such as data bias, privacy breaches, and inaccurate outputs. Data security is of critical importance, especially when sensitive financial information is involved. Effective governance frameworks and continuous monitoring are essential to maintaining quality and managing risks.

While generative AI can automate the creation of materials such as earnings reports and regulatory filings, there are several limitations to consider. First, the technology might generate inaccurate or misleading information. Additionally, generative AI models are prone to bias if the training data is skewed, which can affect the objectivity and fairness of the generated content. Privacy and data security are also significant concerns, as these models may not always guarantee the confidentiality of sensitive financial information.

Moreover, compliance with complex company policies and regulations can be challenging for AI to achieve without significant human oversight. Finally, ensuring the quality and validity of AI-generated outputs requires continuous monitoring and validation by finance professionals, which can cancel out some of the anticipated efficiency gains.

Real-World Applications

At a European consumer goods company, an AI finance assistant streamlined the process of handling financial performance queries, resulting in a reduction in the workload of finance analysts. By automating routine tasks such as data interpretation, the AI assistant not only expedited the delivery of critical financial insights but also empowered managers with clearer and more actionable information. This enhancement in operational efficiency allowed the finance team to reallocate their efforts towards strategic endeavors and complex analyses, ultimately fostering a more responsive environment.

At Amazon, the integration of generative AI has been transformative across many parts of its finance operations. Embracing AI for tasks ranging from fraud detection and contract review to financial forecasting and tax compliance, Amazon has significantly boosted efficiency, accuracy, and productivity within its finance teams. By automating repetitive processes and leveraging AI's analytical capabilities, Amazon's finance professionals can now spend more time on high-value activities that require human expertise, such as strategic planning and decision-making.

Generative AI has the potential to enhance financial operations by automating routine tasks, improving risk management, and enabling better decision-making through data insights. However, its successful integration requires strategic planning, robust governance, and a balanced approach to mitigate risks. As AI technology continues to evolve, finance leaders must prepare their organizations to leverage its capabilities effectively while maintaining control and ensuring ethical use.

In the Classroom

This article can be used to discuss accounting (Chapter 14: Accounting and Financial Statements), banking (Chapter 15: Money and the Financial System), and financial management (Chapter 16: Financial Management and Securities Markets).

Discussion Questions

  1. How might generative AI transform traditional roles within finance, such as financial analysts and auditors?
  2. What are the challenges and risks associated with integrating generative AI into finance functions?
  3. How can organizations mitigate the risks associated with AI while maximizing the benefits?

 

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.