Time for a reboot

Time for a reboot


By Nick Huber, Financial Management

Smart robots and malevolent computers have long been a staple of dystopian sci-fi films and novels that play on our fear that machines might somehow rise up and enslave us. But there’s a concern that’s more real and immediate, albeit a little less dramatic. Will advances in technology such as artificial intelligence (AI) render white-collar workers’ jobs redundant?

Technologies such as power looms in textile factories and robots on car assembly lines have largely replaced low-skilled jobs over the centuries since the industrial revolution of the late 1700s. But experts are predicting, based on recent advances, that machines will be able to perform tasks previously considered immune from automation, including analysis and decision support. In The Future of the Professions (Oxford University Press, 2015) futurists Richard and Daniel Susskind argue that much of the work currently done by professionals, including doctors, teachers, architects, lawyers, and accountants, will be automated in the medium term.

Carl Frey, co-director of the Oxford Martin Programme on Technology and Employment, believes that just over a third of jobs in the UK are at risk from automation. Accountants and auditors are among the most vulnerable, he says, calculating the probability that their jobs will be computerised at 93.5%. But financial professionals needn’t start panicking yet, as there is another school of thought that argues that automation may actually be good for the function.

There is broad agreement that many fundamental accounting tasks, including cash flow accounting, along with several more complex processes, such as transfer pricing, will be automated over the next decade. The same goes for a lot of audit work, such as transaction sampling. And, as AI improves, experts believe that machines will also be able to take over much of the analysis work – for instance, determining the best way for a supermarket to run a warehouse – that’s currently done by accountants. Some of the Big Four auditors are already developing their own automated technology. KPMG, for instance, is working with banks to help them use AI to review their loans more thoroughly.

Flip the script

Although jobs will inevitably be lost to the march of technology, new employment opportunities will also be created. Commercially minded management accountants who are experts in data analysis and are good at explaining complex financial issues to decision-makers can harness the power of automation. It may also make accountants’ work more varied and stimulating, enabling them to spend more time advising the board on strategic matters, say, and less on transactional paperwork.

Those who know the basics of coding – perhaps one of the popular programming languages, such as Java or Python – are likely to be in high demand and will earn more than colleagues with less IT knowledge, says Yuval Millo, professor of accounting at Warwick Business School. “Learn to code, so that you can understand the basics of automation,” he advises.

The advance of automation and technologies such as cloud computing is part of a bigger trend: the “digitisation” of finance, which is explained in the 2016 Oracle research report Thriving in the Digital Age: A Guide for Modern Finance Leaders. If this trend continues, financial managers will also serve partly as data scientists and management consultants.

“There’s that great quote, attributed to the American biologist Edward Wilson, about drowning in data and starving for wisdom,” says Shamus Rae, partner and head of innovation and investments at KPMG in the UK. Rae, who has served on an all-party parliamentary group to consider the implications of AI, argues that businesses will always need their accountants to perform tasks such as explaining exceptional items in financial statements.

According to a forecast by the Gartner research group, nearly 21 billion items worldwide, from heavy manufacturing equipment all the way down to domestic appliances, will be connected to the internet by 2020. This expected massive growth in the so-called internet of things – and in the raw data this is likely to generate – should serve to make organisations more reliant on financial managers with the ability to detect risks and/or opportunities in a large amount of data.

Even if it takes longer than predicted for automation to take a hold in finance, some aspects of the function are likely to go the way of the typing pool, according to Peter Simons, FCMA, CGMA, head of future of finance research at CIMA. On the bright side, he says, automation ought to liberate accountants from the drudgery of the monthly reporting cycle. They should have more time to explore more stimulating aspects of financial management, such as collaborating on projects with IT, marketing, and risk teams, and working with emerging technologies.

The boundaries between business functions and job titles are likely to blur as well, notes Simons, who adds that automation should be an exciting prospect for management accountants who are willing and able to broaden their horizons.

“There will be few comfort zones in the digital world,” he stresses. “We will all have to be prepared to learn new skills throughout our careers.”

People carrier

Toyota’s $1 billion robotics project is not only a bet on autonomous cars. It’s also an investment in supporting Japan’s ageing population.

In 2015, Toyota, the world’s biggest car manufacturer, announced that it was investing $1 billion (£820 million) in a number of AI and robotics units in the US. The firm’s establishment of the Toyota Research Institute (TRI) at the end of that year highlighted its determination to become a leading producer of self-driving cars.

The market for such products had been established five years earlier, when Google announced its intention to design autonomous vehicles. All of the industry’s big players – including Renault-Nissan – have since picked up the gauntlet and are developing self-driving vehicles in some form, while disruptors such as Apple and Tesla have also joined the fray.

The TRI opened three facilities last year: the first in the heart of Silicon Valley near Stanford University; the second near Massachusetts Institute of Technology; and the third near the University of Michigan. Unlike many of its rivals, which are working towards full automatisation, Toyota believes in retaining a human element in driving. Malcolm Frank, Ben Pring, and Paul Roehrig, senior executives at technology consultancy Cognizant, have worked closely with Toyota in recent years. They quote Ned Curic, executive vice president of technology and development of Toyota Connected, the firm’s collaboration with Microsoft, in their book, What to Do When Machines Do Everything (John Wiley & Sons, 2017): “If you believe Silicon Valley, nobody will be driving in ten years. But the reality, at least, is showing something that is the opposite. Millennials do want to have a car and do want to drive. So, as a company, we have to hedge.”

Organisations facing an uncertain future need to act like venture capitalists, placing lots of small bets rather than one big one, they argue, adding: “Nobody really knows with any certainty how big the market for self-driving cars will be in the next five, ten, or 15 years, but Toyota’s leaders know that they risk losing its leadership position if they don’t invest here.”

The TRI has branched out into a number of sectors as a consequence of Toyota’s hedging policy. When the institute was created at the end of 2015, its CEO, Gill Pratt, said that its initial goals were to decrease the likelihood of car accidents; to make driving accessible to everyone “regardless of ability”; and to bring extra mobility to the home, “particularly for the support of seniors”. The last of these doesn’t apply directly to making driverless cars, but it is making use of related technology to solve the problems associated with the fast-ageing population in Japan, where the proportion of people aged over 65 is expected to grow from 25% to 40% in the next 30 years.

In fact, Toyota has been developing robots to assist the movement of elderly and infirm people for years. The link between this work and the development of autonomous vehicles was made clear by Pratt, a former programme manager at the US Defense Advanced Research Projects Agency, in an interview with the journal of the Institute of Electrical and Electronics Engineers, IEEE Spectrum.

“If you think about the use of robotics within the home, it is the same as the use of vehicles when we travel on the road – except that, instead of moving goods and people outdoors, you move them indoors. A lot of the same technology can be brought to bear,” he said. “Toyota is also convinced that there should be a strong relationship between people and the machines that are helping them to move.”

Hard drive

Last year Renault-Nissan revealed plans to introduce “significant autonomous driving functionalities” to more than ten models by 2020. To this end, it acquired French software firm Sylpheo and established a 300-person division focusing on big data analytics and cloud systems.

“We have set a target to be a leader in affordable autonomous vehicles,” says the alliance’s global director, Jérémie Papin, who is responsible for its financial strategy. “Progress on this is reviewed regularly at the highest level of the business. We can’t afford any complacency until vehicles with embedded AI are on the road in large numbers.”

The finance team secures the budget for all the streams of work required by the project, ensures that they have enough resources to meet their targets, and checks that their action plans are solid, he says. “It is also finding external sources of funding and executing the M&A activities that our plans require.”

The alliance is working closely with its main suppliers on the initiative. It has also been entering partnerships with universities and high-tech start-ups to access all the programming talent it needs.

“Our efforts in AI are managed by alliance teams who handle advanced research and electronic architecture,” Papin says. “We have hired talent that we had never seen in our companies before. These people are excited by the challenge of transforming the automobiles.”

A version of this article appeared in the April edition of Financial Management magazine.