5 min read
Cautionary tales of robot takeovers and the dangers of artificial intelligence (AI) fill the world of science fiction. While all new technologies should be regarded and adopted with caution and prudence, artificial intelligence stands to revolutionize the financial management industry (along with several other industries and aspects of our lives). AI-powered technology can swiftly automate repetitive tasks, enhance accuracy, and improve decision-making in financial processes.
As AI becomes increasingly embedded in our everyday technologies (such as the bookkeeping and accounting software and applications that businesses are already using), its applications will become endless. Some of the most revolutionary ways you can expect AI to impact the financial management industry in the near future include the following applications.
How AI-Powered Applications Will Transform Financial Management
Predictive analytics uses historical data and modeling to predict or forecast future outcomes and performance . For example, we currently use manual predictive analysis processes to forecast things like cash flow, revenue, and expenses in addition to staffing needs and behavioral targeting in marketing .
Unfortunately, manual forecasting processes are cumbersome and can be quite inaccurate, as the results can easily be influenced by our natural, human biases. AI, however, will enable businesses to remove these human biases while analyzing vast quantities of historical data to model and reveal the most likely future outcomes.
Businesses can then leverage this unbiased and more accurate analysis to improve their financial forecasting and planning .
Availability and Automated Workflow
Automation is another primary benefit of AI technology that will transform nearly every aspect of financial management. With automated workflows and processes, AI increases accuracy and reliability while increasing efficiency by completing these processes in seconds. This will save humans time and empower their data-backed decision-making processes.
Additionally, AI-powered tech is always available and always busy doing its job. This means you never have to wait for manual transaction processing before you're able to close out a financial period.
Enterprise Resource Planning
Beyond the basic financial management of your business, AI is also powering improved enterprise resource planning across departments with applications like conversational chatbots to help with customer response management in addition to improved budgeting capabilities and intelligently streamlined workflows.
Risk Mitigation and Compliance Management
AI's ability to analyze vast datasets, compile long lists of rules, and understand them almost instantaneously has major implications for compliance. AI stands to revolutionize the way in which businesses manage their risk mitigation and compliance management processes, not only by streamlining audits but also by building compliance and risk mitigation tools into the system.
AI continuously learns and improves as its data sets increase. As a result, it will eventually become the go-to technology for detection and preventing fraud. These systems analyze incredible pools of data in real time with machine learning algorithms. As a result, AI fraud-detection systems can almost instantaneously identify patterns and flag anomalies that could indicate fraudulent activities .
Are There Any Disadvantages to Adopting AI in Financial Management?
The advantages of using AI in financial management are obvious. It's a high-powered, highly intelligent strategy for revolutionizing the way we setup, manage, and use our back offices. Despite these benefits, no one is trying to march headlong into creating a robotic uprising.
All science fiction jokes aside, are there any disadvantages to using artificial intelligence in financial management? What exactly are the downsides of this technology?
An extensive paper published by the International Monetary Fund titled Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance discusses a variety of potential disadvantages and risks created by the rapid adoption of AI technologies in the finance industry .
The disadvantages mentioned include the following:
- Embedded Bias - The paper argues that while a potential benefit of AI is the removal of human biases that our biases can become built into these systems through the fact that they exist in our datasets and the technology we create. So, regarding AI as 100% unbiased can be an easy and dangerous way of overlooking biases.
- The Black Box Effect - AI is unimaginably complex and its models are difficult to explain. As a result, the user might not truly understand a model presented by AI, resulting in misunderstanding, misuse, and applications with potentially negative impacts or implications.
- Cybersecurity - The increased use of AI technology creates more opportunities and heightened risks for cybersecurity threats. For example, systems could be targeted with invalid data dumps or instruction input attacks.
- Data Privacy - AI relies heavily on banks of data. As a result, the value of data increases, and this presents increased risks for data privacy.
- Regulating Robustness - The paper explains that the AI industry currently lacks regulation. There is a lack of guidance and understanding in the general public. Since AI-powered technology is new, standards have not yet been set that will help the public identify which AI-technologies are robust and reliable and which are not.
- Unknown Impact - As the use of AI tech becomes widespread in the financial sector, there's no way to understand what its complete impact will be on the industry, economy, and overall financial stability.
The Transformative Power of Emerging AI Technology in Financial Management
Whether we choose to resist it or embrace it, the rise of artificial intelligence is only just beginning. From designing logos and writing song lyrics to aiding in medical diagnoses and managing your finances, AI stands to transform nearly every aspect of the technology we use in our modern lives. So, it might not be a matter of whether we choose to adopt it but when we finally become ready. Afterall, AI has the potential to transform your business by truly optimizing performance to maximize your profits.
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