Transforming the Government Finance Function

• The digital revolution is here!

• Some of the challenges of digital transformation

• Systems

• Information

• People

• What should the profession do?

The digital revolution is here!

Tesla: 1.3 bn

training miles by Dec 2017

Big 4 Firm

50%Reduction in

graduate recruitment

Bank of England

15mUK jobs have the potential to be

automated

FOXCONN60,000

Workers replaced… A total of 500,000

FTEs to be replaced

100%Of a major bank’s loan

book now reviewed and reassessed by AI

JD.com

200,000Packages processed per

hour in Shanghai warehouse

1 person employed, …previously 500

The future accountant?

Changing role of accountants

• Different focus in accounting and compliance tasks – e.g. spotting errors, low cost processing centres

• More focus on added value activities

• Business and financial planning

• Process improvement

• Better business partnering

• Getting insight from data

• Good data management and control

• Non-financial measures

• More predictive and forward-looking

© ICAEW 2017

What does it mean for the finance functionKey questions

Accounting & Compliance Robotic Process Automation Artificial Intelligence

What’s new? • Cloud and mobile- based models• Automated functionality• Integrated workflow• Online filing

• Based on user tasks and interface• Rules-based• Configured by users• Repetitive and high volume

processes

• Computers teach themselves the rules

• Predictive and statistical models• Need lots of data and repeatable

problems• More accurate outputs than

humans

What are some examples?

• Bank reconciliations• Expenses• Audit data transfers• Automated feeds to other

government systems

• Insurance claims processes• Compliance processes• Travel and expense management• Review and payment of invoices

• Account coding• Identifying unusual transactions• Forecasting revenues• Text analysis

What is driving adoption?

• Efficiency and cost• Better service• Improved data analysis

• Business case• Speed and scale

• Powerful decision aids• Automation of complex decisions• Integrated into standard business

and accounting software

Some of the challengesof digital transformation

Most government finance functions fall somewhere between level 2 and 3

Legacy Financial Management applications often designed for specific purposes

Rarely enterprise wide

Data analysis relatively basic

Data often used to confirm rather than drive policy decisions

Gartner CPM Framework

Systems

• Almost all governments under-invest in financial management systems…

• …and then wonder why they can’t get the same sort of analysis and responsiveness as industry!

• Challenge of securing investment against other public spending priorities

• There is a real danger of ‘building on the rubble’ –

• Maybe simpler to begin again from scratch?

Systems – transformative potential

• The prospect of ‘real time’ financial information has the power to transform how we think about reporting

• Distributed ledgers (aka blockchain) have the potential to transform the control environment – but will require significant investment

• In many countries (including my own) we have the prospect of an increasing disconnect between public and private sector financial management practices.

• Danger in government of trying to design systems to do ‘everything’

Information

• Data vs Information

• Access to and quality of data is very important

• Big data – those who can use it effectively will be quicker, more agile and cost-effective

• Used effectively the predictive power could transform a range of activities from budgeting to public service delivery

• Evidence based policy making…

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Data – how to use it?

• Government has a lot of data… not necessarily information

• Usually spread over a multitude of systems and spreadsheets

• Vast effort is needed to transform it into a usable resource…

• …an effort beyond most companies, let alone most Governments

• The important thing is to pick the question you really want to answer and design the data needs around it!

People

• Meet ‘Amelia’ the new employee

• Could just as easily be ‘Alexa’ or ‘Watson’

• Some of these products are already in ‘live’ use in finance roles

• They work 24/7 and don’t make mistakes within their operating parameters

• In theory they can access all of the digital information their organisation knows

• They don’t forget what they have learned

People• Most government finance functions are some

way behind industry in adopting automation

• How much of this activity can in theory be automated? Some sources suggest between 40%-75%

• Should free up valuable accountancy skills for higher value activities

• Raises an interesting question:

• When all activity that can be automated, is automated – where will the experienced managers come from?

Transforming the finance function

Skills needed in the past:

• Transaction processing

• Reconciliation

• Reporting historic postion

• Enforcing controls & ‘rules’

• Answering questions

Skills needed in the future:

• Data analytics

• Influencing & collaborating

• Forecasting & predicting

• Exercising judgement

• Asking questions

People & Culture • Culture – “the way we do things here” harder to change than an

accounting system or standards!

• Ability and willingness of people to change is going to matter

• Avoid the comfort zone effect… spreadsheets and historic data

• We need to educate a whole new generation of professionals with different skills and expectations of what their role will be

• Whatever we do, we probably won’t get it exactly right….

What should the profession do?

The most important things we can do to future proof the finance profession in government:

1. Train people to question and apply principles not to follow processes

2. Teach adaptability and create a ‘learning’ culture that values it

3. Give our people broad experience beyond the finance function so they can exercise judgement in wider context (the thing the machines can’t do yet!)

Embrace change – its not going away!

How is the ICAEW thinking about it?

How do I learn more?

Email: ross.campbell@icaew.com

Blog: https://ion.icaew.com/itcounts/ @icaew_ITFaculty