Industrial revolutions, traditionally, have altered our way of life and catapulted the human race to new, unexplored turfs. First, we used water and steam to power our machines and transportation. Then, during the Second industrial revolution, we discovered electricity and were hence able to engage in mass production. The Third industrial revolution introduced us to electronics, information technology and automation. Now, as we are moving towards a new era, that of the digital revolution, industries are being disrupted all over the globe.
The Fourth industrial revolution seems like an extension of the Third, at first look. Yet, it is much more powerful in the impact that it has already created. The rate of innovation during this revolution is exponential as it is overhauling businesses and processes instead of simply introducing us to an “extra” feature to facilitate the traditional way of doing things. For example, with the advent of smart phones, the banking and financial services industry has had to revamp its products and modes of communication with customers. Fintech and edtech, as industries, have emerged recently thanks to the ease of access to internet via mobile phones and laptops. Marketers, newspapers and politicians all over the world have had to adapt to the new sources of information available to the general public, in the form of social media. The traditional cinema and television industries are now facing fierce competition from live streaming services. Agriculture, national security, transportation are some other examples of fields where the digital revolution has already had a profound effect.
It is only natural that Finance professionals adapt to the changing environment since this revolution introduces new risks and loopholes along with a range of opportunities. New technologies such as block chain – distributed ledger accounting, artificial intelligence (AI) – big data analysis, and robotic process automation (RPA) – prepopulated spreadsheets and forms, have all forced CFOs and CEOs to re-think traditional ways of financial reporting and management.
The finance department, in any organisation, has a pervasive role. If the sales department or the production department move to new technologies separately, only the Finance function is in a position to coordinate such transitions smoothly and in a cost-effective manner. Therefore, if the head of Finance does not have a basic understanding of the technologies involved, there will be no cohesion or consistent flow of information between departments. Additionally, the function of Finance & Accounting also needs to upgrade their own technologies, information and reporting systems in order to re-engineer internal processes, and respond to or lead changes elsewhere in the organisation. Therefore, finance managers have to be “agile” enough to quickly cater to evolving demands placed on them, based on digital advancement in the internal and external environments of their company.
Finance managers and auditors of tomorrow must be able to adapt quickly to change and to learn new technologies to enhance their skill set. While law-makers scramble to regulate the collection and use of big data and the larger public worries about privacy, there has not yet been much concern about reliability of financial reports and data produced by companies that have implemented new technologies. Eventually, when shareholders and other stakeholders have fully adjusted to the new trends and technologies, there will be increased demand for transparency, accountability and good governance. The role of the Finance function will be questioned in the digital context. Those who would not learn how to make good use of the various new kinds of reporting tools, data analysis models and software robotics, will fall behind.
As with the other industrial revolutions, the dynamics of labour markets will shift, the level of automation will increase and the skills required of finance professionals will change as the needs of the profession evolve. We are still transitioning through the Fourth industrial revolution, so nobody knows what our societies and businesses will finally look like but it is certain that the face of auditing, accounting, banking and other finance related professions will probably not remain recognisable in the matter of only a few years.
Ed-watch is conducting a webinar about The Impact of Digitalisation on Financial Practices, in collaboration with ICAP Representatives in KSA, on 26 December 2020 at 01:00 PM (GMT+5). If you wish to attend, please register here.
The author, Aamina Khan, who is also the editor of Ed-watch, is an international polyglot citizen who likes to explore the world differently. A Chartered Accountant by profession, she likes to read and write in various languages as an amateur.