Generative AI will redefine the model CFO, says Gartner
CFOs are sceptical when it comes to generative AI and yet leadership is expecting them to play a leading role in AI strategy, said Alexander Bant, chief of research in Gartner’s finance practice.
According to Gartner, the scepticism is not specific to generative AI as 67 per cent agree that returns made on digital technology investments tend to fall short of expectations. It is unsurprising, then, that finance has seen the lowest level of AI integration of any business function. Customer-facing business functions have experienced the highest rate of AI integration to date.
Mr Bant said the reasons for this scepticism are varied, however, it often comes down to concerns about the security of financial information and the accuracy of financial data. Despite the concerns, CFOs are expected to play a leading role in developing gen AI strategies by 34 per cent of functional leaders. Only chief technology officers (55 per cent), chief information officers (48 per cent), and chief executives (45 per cent) ranked higher.
CFOs are not alone in identifying the risks posed by generative AI as boards of directors and chief risk officers consistently rank it as among the most significant operational risks, said Mr Bant. However, they do appear to be less optimistic about its benefits.
Spending on generative AI is expected to increase by five to eight times at a majority of companies over the next year, said Mr Bant, and many CFOs will have to play “co-pilot to ensure these investments drive measurable benefits and profitable growth without unduly increasing risk.”
Digital technology is seen as the top strategic business priority for 2024–2025 among board members, according to Gartner.
While generative AI did not rank as a top 10 business priority among CFOs for 2024, it can aid most of their priorities, Mr Bant said.
Business transformation and improving finance function strategies, both of which ranked as top priorities, have much to gain from generative AI, Mr Bant said, adding that it "filters through" a lot of existing priorities.
Generative AI strategies "must be cross-functional," said Gartner, and CFOs are therefore leaning in, with business leaders from different functions while many are even taking leadership roles.
"But many are going further than just partnership, and instead playing a leadership role in crafting a gen AI strategy that aligns with and enhances the business and financial strategy for the board, investors, and regulators," said Mr Bant.
Given the cross-functional nature of gen AI, the role of many CFOs, particularly those responsible for administering cross-functional strategies, will expand. Businesses are putting "a lot of pressure" on finance professionals to champion AI strategies, said Mr Bant. While there is an appetite for greater investment in generative AI among employees, the pressure tends to be top-down, he added.
Of the recommendations made for CFOs when it comes to the technology, Mr Bant listed “defining your role as CFO in the enterprise AI strategy and communicating the business case requirements clearly to functional leaders,” as number one.
Executives will spend on generative AI, it is partly up to direct and justify the allocations. The massive spending increases are “part of why it’s scary" to be a CFO in the age of generative AI, particularly given concerns about the technology.
Justifications for increased spending on generative AI can be broken down into three main strategic deployments, said Mr Bant: growth initiatives, cost optimisation, and customer experience and retention.
The interest in generative AI technologies is overwhelming. At the board level, conversations about generative AI are occurring 3.4 times more frequently than conversations about cloud technology and 2.5 more frequently than conversations about digital transformation at large.
Generative AI will stretch the portfolios of chief financial officers, to play a bigger role in areas ranging from governance and ethics to labour market strategies and data security. Given the expected funding boosts for generative AI, the lack of functional readiness for AI rollout and governance is “kind of scary,” said Mr Bant.
Only 45 per cent of companies have ethical AI guidelines in place, while as little as four per cent of chief information officers and tech leaders report having “tech-ready data."
Seventy-nine per cent of functional leaders will either begin introducing or will continue introducing generative AI into their business functions over the coming year while businesses are dedicating 6.5 an average of 6.5 per cent of their functional budgets towards generative AI.
Functional leaders are expecting cost savings of 15.7 per cent due to the technology over the coming year. For the same reason, they are also expecting functional productivity to increase by 24.7 per cent.
