EY, one of the big four consulting companies, is continuing their series of blockchain publications. In the new edition, they are exploring how blockchain technologies will benefit Chief Financial Officers and what functions will they be able to change.
In their previous series of studies, DNA of the CFO, EY has established that the role of the CFO can be split into 3 key roles: execution, enablement, and development. According to EY, all of these functions can be transformed with blockchain: “Blockchain has the potential to impact each of these segments, redefine the traditional CFO role and revolutionize the finance function.”
Trusting the numbers
One of the key responsibilities of the CFO is to establish a trustworthy financial base for the company with accurate data. Blockchain, with hashing and cryptographic functions, ensures that the data collected is not altered, the full copy of the database is available to everyone, and any change in the data is approved by the participants. The decentralized shared ledger makes it possible to have a transparent and accessible unified source of truth, and this can greatly cut down on basic data entry and auditing activities.
Financial analysis helps to make better business decision. The base of the analysis is the data available. Blockchain, with the ability to record data in nearly real-time can provide a sound, updated base for business decisions, such as movements on a supply chain as well as each and every transaction recorded internally.
Funding organizational strategy
Finance is one of the leaders in strategic initiatives and reaching transformative business goals. Blockchain is a great tool to help organization transformations, as it increases visibility and integration within an organization. Blockchain helps to form a network system within organizations, and it increases efficiency in interdepartmental transaction speed and transparency. This new clarity can help reform internal transactions and processes.
Development of business strategy
Increased transparency and efficiency opens a new horizon to business transactions, so far that unseen connections can be uncovered and entire business models can be altered. In a blockchain environment, transactions can occur automatically and an asset’s life cycle can be completely monitored. This is a new base on which to rethink the business completely.
Communication to external marketplace
With the combination of private and public ledgers, some informations on the blockchain can be shared with external parties. This can enhance the efficiency of supply chains and cooperation even between competitors; it can also form a more collaborative business environment. Blockchain could enable “momentum accounting” where real-time changes to a firm’s asset(s) could be examined and increase stakeholders’ expectations in transparency.
As we can see, blockchain can bring a new possibility to rethink how companies process their financials, and it can open up a new future of business decisions. As Paul Brody, Principal, Global Innovation Leader, Blockchain put it: “Finance is expensive. In particular, though it often doesn’t show up in a line item, we invest heavily in trust. What happens to the role of the CFO if trust is much cheaper? What kinds of deals aren’t done today because the cost of due diligence is just too high?”
If you would like to read the full report, you can do so here.
Which function do you think will be the first to transform? Who will lead the change – innovative small companies or industry giants?
Let us know your thoughts in the comments section!