ExecOpinion: CFO’s guide to AI’s impact on risk management

Artificial intelligence promises to enhance operational efficiency, improve decision-making, and help CFOs and the finance team drive strategic value. However, for most organisations, it is still early days and much needs to be learned and discovered about AI for users and leaders to fully grasp the impact of the technology.

The dual nature of AI in risk management

AI is heralded as one of the most significant innovations of our time, offering both immense potential benefits and considerable risks. For CFOs, understanding this dual nature is crucial. Dipak Golechha, CFO, Palo Alto Networks highlights that while AI can be a potent tool against cyber threats, it is also a catalyst for new risks.

He explains that for hackers, AI is a force multiplier, doubling the efficacy of phishing and social engineering. This means that while AI can significantly enhance security measures, it also amplifies the threats that CFOs must manage.

In this context, CFOs must adopt a proactive stance, perceiving AI not only as a source of risk but also as a vital component in the risk management toolkit.

"The only way that you can fight AI is with AI. Therefore, CFOs must ensure that their organisations are equipped with AI-driven cybersecurity solutions to mitigate risks effectively." Dipak Golechha

Impact on existing risk management frameworks

AI's integration into risk management frameworks is not merely an enhancement; it represents a paradigm shift. Golechha emphasises that every facet of enterprise risk management can be influenced by AI, with cybersecurity being the most pressing concern. He posits thats the biggest role that AI has on the CFOs is in cybersecurity, signalling the need for CFOs to reassess their data management practices and risk assessment protocols.

The implications extend beyond cybersecurity. Geopolitical risks and compliance issues are becoming increasingly intertwined with AI adoption.

"CFOs should be vigilant in evaluating how AI technologies could affect their organisations' exposure to these risks, urging them to leverage AI analytics for deeper insights into potential vulnerabilities." Dipak Golechha

Safeguarding financial stability

A core responsibility of the CFO is to safeguard the organisation's financial stability. Golechha stresses the importance of creating a secure environment for utilising AI tools: "The most important thing is having a safe environment to use AI tools." This begins with robust cybersecurity measures to protect sensitive data—an organisation's most valuable asset.

At Palo Alto Networks, Golechha's team implemented a natural language processing interface powered by AI to handle over 400,000 queries related to travel, expenses, and IT access.

"Since then, we've been able to halve the number of people who are serving those tickets, showing clear AI-driven productivity improvements," reveals Goleccha. The clear takeaway for CFOs is that while AI can drive productivity, security must always be the priority.

AI-driven insights in risk management strategy

The integration of AI into risk management strategies offers CFOs the opportunity to harness powerful insights. Golechha outlines that while many technologies are rebranded as AI, the genuine potential lies in generative AI and machine learning.

He explains that these technologies can identify anomalies in data sets, stating, "AI can be used to identify anomalies within good data sets, improving efficiency." For instance, by analysing employee travel expenses, AI can flag unusual spending patterns, allowing CFOs to take corrective actions swiftly.

In an era where data is abundant, the ability to distil actionable insights from it is invaluable. Finance leaders in Asia must invest in AI tools that facilitate this analysis to enhance operational efficiency and drive informed decision-making.

Personal and Professional Impacts of AI Adoption

As the CFO of a leading technology firm, Golechha's experience illustrates the personal and professional dimensions of AI adoption. He admits that personal engagement with AI tools, such as ChatGPT, has informed his professional perspective:

"Personally, I use ChatGPT's voice function. It’s almost a natural language interface that gives me clear answers," admits Golechha. This highlights the significance of personal experience in understanding AI's potential and limitations.

CFOs must not only embrace AI in their professional roles but also advocate for its adoption across their organisations. The journey towards AI integration necessitates a cultural shift, wherein finance teams are encouraged to experiment with AI tools while remaining vigilant about data privacy and security.

Cautionary Considerations for AI Implementation

Despite the promise of AI, Golechha offers a word of caution: the sharing of sensitive data with external AI tools can pose significant risks. He warns, "When using AI, it’s crucial to consider that your data is sent to external data centres."

For example, using an AI tool to review a Board presentation may inadvertently expose confidential information. CFOs should be acutely aware of the potential for data leaks and take proactive measures to safeguard sensitive information.

Understanding the mechanics of AI—how it functions, its associated risks, and mitigation strategies—should be a priority for CFOs. A well-informed leadership team can better navigate the complexities of AI adoption, ensuring that the benefits outweigh the risks.

The Role of Leadership in AI Adoption

Golechha encourages CFOs to take an active role in AI initiatives within their organisations. He asserts, "First, there is more investment going on in AI in the next 3 to 5 years than there has been in history in the cloud." As investments in AI continue to surge, it is imperative for finance leaders to be intimately involved in AI projects, rather than relying solely on IT departments.

This involvement allows CFOs to offer unique insights into risk and return on investment (ROI), fostering a more comprehensive understanding of AI's impact on the organisation.

Further, collaboration with peers in the industry is vital. As Golechha points out, "Everybody is learning and things are changing so quickly," emphasising the need for CFOs to share knowledge with other companies to stay abreast of best practices and emerging trends.

Preparing for the Future of AI in Finance

Asked for his expectations around AI's use in the finance function, Golechha postulates that the evolution of AI will likely reach a critical inflection point. He believes that the advancements made in AI will redefine how finance functions operate.

"I believe that the inflection point will come in 2025, because a lot of the investments that have gone into AI are designed to overcome the issues that they've had before." Dipak Golechha

He urges CFOs to prepare for this shift by investing in ongoing education and training for themselves and their teams.

Understanding when to rely on AI's output—recognising the difference between acceptable accuracy levels for various tasks—will be essential. Golechha concludes, "It’s crucial to understand when AI delivers 100% accuracy and when it may be only 90% correct," particularly in finance, where precision is paramount.

What to expect in 2025

The advent of AI presents both challenges and opportunities for CFOs and finance leaders in Asia. By understanding AI's dual nature, integrating it into risk management frameworks, and fostering a culture of informed adoption, CFOs can position their organisations for success in an increasingly digital landscape.

"As we approach 2025, embracing AI will not only enhance operational efficiency but also fortify risk management strategies, ultimately driving sustainable growth and innovation." Dipak Golehha