Tech in finance: Credit the opportunities and debit the risks

By Manoj Bhat, Group CFO, Mahindra Group We have all witnessed the seemingly magical evolution of technology and its applications across multiple fields over time. Various inventions such as the integrated circuit, computers, software applications, cloud and even the latest advances in domains like AI keep pushing the frontiers of what technology can accomplish. Technology has created new industries and business models, and we can’t imagine a world without it.

Businesses that have adopted technology have thrived, and the ones that fell behind have been disrupted – with many not having a chance to revive or survive. We are now in the digital era; the combination of computing power, communication bandwidth, sensors, and storage has enabled the creation of powerful solutions which touch all aspects of an organisation; be it sales, operations, or support. One area that has tremendously benefited is the finance function.

Digital transformation has seen broad-based use across reporting, analytics, controls, and decision-making. The journey has just begun, and the opportunities are endless. A raft of opportunities Numerous critical functions in the finance department are made simpler by data analytics and forecasting tools, budgeting systems, and broad-spectrum robotic process automation (RPA) packages.

A few taps on the computer keyboard can help with everything – from simple accounting tasks to time-sensitive compliance matters and complex financial planning and analysis. One of the major benefits of digital transformation in finance is the ability to streamline processes and increase efficiencies. By embracing automation, organisations can reduce recurring manual processes and expedite data processing.

This can lead to significant cost savings, greater accuracy, reduced turnaround time and improved employee/customer satisfaction. As an example, in the Mahindra Group, we have been using continuous control monitoring tools which is essentially a set of algorithms that allow the finance function to spot exceptions and take corrective actions with agility. Large organisations – such as the Mahindra Group – have access to vast streams of data both internal and external.

The emergence of analytical software tools to correlate different datasets enables managers to derive valuable, actionable business intelligence and information. Our Auto and Farm businesses use a combination of external demand and pricing data, along with internal production data to drive decisions on procurement quantity and timing. This has been extremely valuable as we have successfully navigated supply-side disruptions in recent years.

Today, multiple platforms enable businesses to scale rapidly. India’s pioneering success with Digital Public Infrastructure like Aadhaar, UPI (Unified Payment Interface), and ONDC (Open Network for Digital Commerce), is helping foster innovation at an unprecedented scale. Platforms focused on payments, commerce, HR, and customer relationships are redefining business models.

The emergence of this digital ecosystem has increased speed to market, and improved customer experience. We live in a world of constantly changing domestic regulations and a more volatile geopolitical environment. Finance functions are increasingly looking at technology solutions to ensure compliance and manage risk more effectively.

At the Mahindra Group, we manage a very large pool of more than 190 companies, and we are automating a lot of areas like related party reporting and compliance reporting to ensure regulatory compliance. Managing change, turning challenges into opportunities All the examples above necessitate significant changes in process, structure and skills, and roles. One important aspect of this journey is the ability of the leadership team to navigate this transformation.

Digital transformation is all about change management – a methodical approach to transitioning or transforming an organisation’s processes or technologies. To begin, a clear vision and articulation of the technology transformation journey is required to enable businesses to plan for these changes. This transition is typically a multi-year journey requiring significant investments, and a holistic view of the future state is a vital starting point.

At the Mahindra Group, one of the important tenets of our purpose, Rise, is to make the organisation ‘future-ready’, by ethically leveraging the power of technology. We are also committed to ensuring that our employees are prepared to adapt to changing circumstances and embrace technological advancements. Another aspect to consider is the impact of this transition on the finance function in terms of roles, responsibilities, and skills.

As automation and technology usage has increased, the emphasis is moving towards decision support and analytical skills. Most finance organisations are grappling with the challenges of anticipating these shifts and planning for them. A clear approach to career development, skilling, and re-training are important elements of creating a future-ready finance function.

An interesting element of this transition is drawing up an approach to data and data privacy and factoring in the risks emerging from this. As companies operate in the digital ecosystem ensuring data protection, data ownership, and safeguarding confidentiality are critical risk areas to focus on. From a compliance perspective, finance managers must ensure process discipline to comply with data privacy laws in each jurisdiction.

In addition, ensuring data security, and responding to threats like hacking and cybercrime, is increasingly important. The finance and risk functions should be fully aligned with these new-age threats to prevent any unforeseen surprises. A frequently discussed topic is how should finance functions think about the return on investments in technology.

A clear charter of expected benefits and timeframes which are well understood by the larger organisation is the starting point of this analysis. These benefits could be financial which would then translate into cost optimisation, yield improvement or increased volumes. They could also lead to a reduction in the risk of non-compliance and add to the overall governance quotient of the company.

A balanced view of both these parameters is required to enable a successful investment program. In summary Digital and technology transformation is part of the new reality. The path to a technology-intensive and agile finance function is an exciting one.

Finance managers will have to walk the tightrope of maximising opportunities while minimising challenges and risks. However, the benefits it brings in terms of agility, innovation, and perspective far outweigh the risks and hence this is an essential tool in any CFOs arsenal. if (!window.

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