Artificial Intelligence & Financials
Owen von Zagorski, CEO/CFO
Artificial Intelligence (AI) is revolutionizing business practices around the globe. As the world enters a new age of technology, AI leads the way for companies. Financial Technology (Fintech) is fueling small businesses and giving an edge to startup companies. Information processing is the heart of financial markets and now AI takes advantage of its data processing tools to help exploit strengths and weaknesses.
How Is This Possible?
AI has been around since the mid-20th century; however, this recent “AI Boom” wasn’t until recent development in unsupervised learning. Unsupervised learning uses machine learning algorithms that do not require human interaction. The algorithms analyze and cluster unlabeled data sets. Multiple approaches facilitate unsupervised learning such as clustering, association rules, and dimensionality reduction. Of course, the growth the world has seen is backed by what is now a trillion-dollar industry. Investments alone have seen a dramatic increase over the last ten years.
Benefits
One of the most heavily impacted careers is auditors. Coming as a surprise, AI is not taking these jobs. It is providing a level of insight auditors have never been able to reach thus far. KPMG, one of the leading accounting firms, states that they are looking to deploy AI in three main purposes. “1: Improve the efficiency and accuracy of audits. 2: Develop more proactive, continuous and predictive procedures. 3: Gather data and the value-added audit insights.” KPMG has predicted that 99% of companies will use AI in financial reporting within three years.
Threats
There are two major concerns when discussing AI within financial reporting:
First, the danger presented when breaking down existing channels of reporting and replacing them with new ones. A change in processes can have unintended consequences. Take for example the recent issue with Crowdstrike, what should have been a routine security update, caused unintended financial harm to an array of companies globally. The integration of AI is as much an advancement of technology as it is a race. There is a certain value attributed in being first, but speed can often outpace the quality assurances in place. AI is intended to launch companies forward, increasing efficiency, lowering resources and costs, but the transition in systems and processes threaten the very core of these companies’ brand and product if not successfully transitioned. Start-Up companies and established companies must balance the integration of AI with necessary quality assurances for the finished product, less they risk tarnishing the product and brand they have worked hard to nurture.
Second, AI risks being exploited for illegal or nefarious purposes. The use of AI opens a door for powerful tools, such as investor exploitation and fraud.
Ending Thoughts
How AI is going to continue to transform over the next two decades is ultimately unknown. The positive upswing the world has seen from AI will continue to grow. It is important for those developing AI to be weary of the risks involved. This may be able to be countered through improved trust with employees. Management is the backbone of the world’s economy and will also demonstrate itself as a strong component in the continued growth of AI.