3 Ways AI May Impact Risk in 2020

At the beginning of 2020, we could not have imagined our world gripped by a pandemic with far-reaching effects into our lives and economies. Many of the old rules will no longer apply as we enter uncharted territory and work to keep businesses operating and financially sound. What’s the role of AI and risk management?  Let’s take a look back – and, hopefully, forward.

Last year was, in many respects, a year of AI trial and error.

Trumpeted as an arriving force, AI was promised to solve the world’s problems automatically. Pre-pandemic, we saw AI delivering on some of its analytics and analysis promises, yet many organizations also realize that the AI approaches promoted by some vendors are not the easy enterprise cure-alls they expected. Many early adopters were left on their own to teach the “black box,” filter out the noise and find manageable but useful direct applications of automation and workforce support.

Now organizations are asking what those direct, applied AI techniques can mean for them. Armed with this new understanding, many see 2020 as the year to leverage technology like AI in conjunction with improved processes and better engaged employees to achieve a more impactful outcome. Here are three significant ways we predict AI will affect risk trends in the year ahead for enterprise organizations:

Organizations Will Double Down on Augmented Analytics

We have seen a bit of buzz surrounding the term augmented analytics and how it will disrupt the data and analytics market. Gartner has stated that companies will leverage machine learning and AI techniques to transform the development, consumption and sharing of analytics content.

As the market continues to mature and businesses seek out new ways to see and act on intelligence through data analysis, they will invest in automated approaches that were once manual. Augmented analytics will be a key focus in 2020, especially in the finance department, as they are being asked to address high-value business challenges like compliance.

Most compliance efforts are still made either manually or with a modest amount of technology, and that technology is either platform- or process-specific – the kind of tools that automate a job but do not assemble or analyze data from across the finance ecosystem.

The trend going forward will be to use control systems that sit on top of the entire financial ecosystem as a single source of truth for analyzing data across all platform elements – tools that enrich data, pulling data points from across all systems, and tools that provide analysis from the entire ecosystem for a more coherent, more complete view of spend and risk.

Organizations will unify data in a single analyzable format on a single platform purpose-built for identifying patterns and anomalies. The general direction with augmented analytics is toward the ability to consolidate data views from across the finance ecosystem, to analyze data differently and to find previously undiscovered or unreachable outcomes.

Organizations Will Adopt an Integrated Risk Strategy

The same tools that power more savvy augmented analytics can be used to break down traditional silos of knowledge, effort and communication across departments in the creation of an integrated risk strategy and true finance transformation.

Traditionally, the way organizations managed risk was via a single process or by viewing a single type of spend at a time. They would try to get a handle on the risk occurring, for example, in the T&E system. At the same time, elsewhere in the organization, a different team would manage risk in other areas (such as payables) with a different process, a different audit team and a different system.

Today’s leading organizations are looking instead to bring cohesion to these efforts by adopting an integrated risk strategy as part of their finance transformation. In an integrated risk strategy, each of the three lines of defense – finance operations, compliance and internal audit teams – works more cohesively, building relationships and lines of communication between teams, working in unison and across silos.

Often it is the adoption of a spend management platform that brings the teams together. When technology monitors 100 percent of spend across the organization and helps support the auditing requirements of these three stakeholder groups, a natural best practice arises to bring each of the involved teams together for better and more effective management of financial and compliance risk across the organization.

Data monitoring across an organization isn’t new, but connecting the three lines of defense in spend risk on a single platform is. This approach closes gaps that used to expose organizations to fraud and other financial risks.

As organizations take a broader view of risk across T&E, payables, P-card programs, fleet spending and the totality of organizational spend, the organization upends its current state approach and drives a shift left in controls. They can take the same level of forensic analysis conducted by compliance and internal audit and connect them for the first time to the operations team, automating handwork and freeing resources for headwork.

Because all spend risk in an enterprise can be viewed, addressed, audited and managed in one place, organizations can align managers more effectively to empower all three lines of defense and drive more thorough finance transformations.

Throughout 2020, we expect organizations to take a more data-driven and holistic view of risk to adopt more integrated risk strategies.

Finance Transformation Will Mean More Data Analysis and Less Data Acquisition

For many years, finance leaders have focused on labor efficiency to improve operations.

Even so, 70 percent of transformations fail, according to the Gartner study, Hallmarks of Winning Finance Transformations. Those transformations, the report contends, focus on the wrong things.

The research compares early movers who either did or didn’t achieve success, which suggests that the break occurs during the execution. Organizations seek change and expect efficiency improvement to follow, but that isn’t often the case.

Finance organizations on either side of the financial transformation continuum are still spending 80 percent of their manpower gathering information and only 20 percent on analysis. For all the efforts to transform, data suggests most organizations realize limited, if any, efficiency gains.

This year, the goal will be to flip that 80-20 metric. The new mandate, per the recent Gartner study on success in financial transformations: Do better with less. In an era when seven in 10 financial transformation projects fail, doing better with less means, in short, to “have better guidance.”

While automation of manual tasks and process improvements are needed to upend that 80-20 metric, their presence in a finance transformation is only half the battle. Better tools can lead to efficiency, inevitably. But to transformational success? Not a guarantee.

The leading reason why the transformation effort fails is that the focus is placed on making an existing process better instead of rethinking the process and stopping doing what’s not working. A taxi cab can reduce its labor costs by hiring younger, newer drivers. It can reduce its automotive costs by investing in a cheap, reliable fleet. But as long as a taxi cab company is still just answering phones and dispatching drivers, it can never upend the very fiber of travel like a ride-share company.

For taxi cabs and finance departments alike, the key to success is not incremental efficiency gain, but radical process transformation. To that end, enacting organizations will need better technology, better data, better people and better processes – and above all else, insight and vision.

Read: Data Analytics and AI: The Fraud Mitigation Dream Team