With rising demand for managing the impacts of climate change, finance-related businesses are experiencing new challenges. Deloitte is partnering with Persefoni to launch a new integrated service that measures climate exposure, meets new regulations and delivers more informed data-focused decisions.

Persefoni, a climate management and accounting platform (CMAP) provide businesses, financial companies and government agencies with the software required for managing climate-related data and business performance with the same level of confidence as their financial reporting system. The software solutions will allow users to calculate their carbon footprint, perform climate modelling aligned to temperature rise scenarios and benchmark their impact by location, sector and other groups.

As Deloitte continues to focus on supporting clients on their path to net zero, it has formed a strong partnership with Persefoni. The collaboration will see the companies develop analytical solutions for the finance industry, supporting businesses to find a new path for measuring, disclosing and managing their carbon footprints, from an operational and financial perspective as part of their climate journey.

Ricardo Martinex, the sustainability, climate and equity leader at Deloitte Risk and Finance, explains that by leveraging rich data in the Persefoni platform combined with Deloitte’s analytics and services, they can support businesses through their end-to-end ESG transformation. As finance-related companies focus on carbon accounting requirements, recognising and evolving the financed emissions in their portfolios will enable clients to chart financed emissions, explore critical business risks and find opportunities to improve the structure of their financed portfolio, as well as meet all reporting obligations.

As leaders of sustainability and finance combine to tackle CMAP requirements, Persefoni and Deloitte’s clients can apply Persefoni’s tools and Deloitte’s experience with ESG practices and financial analytics to address sustainability and climate goals. The partnership has seen Deloitte create and integrate accelerators, analytics and other tools to support clients in the finance industry, and understand risks and opportunities based on financed emissions portfolio data.

The financial services industry faces rising pressure from governments, regulators and capital markets and is moving towards disclosing operational and financed emissions footprint. As finance companies work toward their net zero targets and improve their impact on the climate, creating a structured CMAP use will be vital, especially as ESG disclosures become regulated.

Kentaro Kawamori, CEO and Co-Founder of Persefoni, explains that Persefoni is excited to partner with Deloitte, a leader in sustainability, climate and equity strategy and advisor to many leading businesses and financial institutions. Supported by Perseoni’s technology platform and Deloitte’s sustainability, risk and reporting services, their clients in finance will have access to the best support on their climate journeys, from meeting compliance requirements to measuring climate exposure within their portfolios and enhancing their business strategies.

Pressure from regulators to eliminate money laundering and sanctions on Russia is accelerating plans for AI.

Falling economic growth and rising interest rates are impacting business models and forcing some to rethink their hiring plans. Despite a surge in development, fintech isn’t immune from these impacts, but those specialising in AI monitoring for compliance on transactions remain an essential service from many financial groups. Since the 2008 financial crisis, the demand for compliance checks accelerated as financial institutions faced significant fines for making errors. In previous years, finance-related businesses attempted to maintain pace with continuous changes and stringent regulators by employing thousands of research to manually compile information.

Fast forward to today, businesses are utilising machine learning tools to gather thousands of data sources and combine them. Global fines for anti-money laundering breaches have been increasing quickly, reaching $2.2 billion between 2019 and 2020, a rise that put financial services companies worldwide on high alert for potential cases of non-compliance.

The battle against terrorism and fraudulent activities has triggered a broader clampdown on money laundering, headed by the Intergovernmental Financial Action Task Force and Moneyval, the Council of Europe’s money laundering body. The recent sanctions on Russia after its invasion of Ukraine have escalated regulatory compliance to the top of corporate priorities. Digital finance businesses see a challenging future, emphasising increased fraudulent activity and a demand for financial services businesses wanting to maintain a grasp on digital crime. All those in the industry agree that technology has a critical role in managing compliance and fraudulence. Technology is vital in determining complex money laundering schemes, mining big data sets for terrorism financing activity, and is essential for criminal activities associated with cryptocurrencies.

Financial business, can and sometimes do develop their solutions, especially the larger groups, which collectively invest billions every year in technology. Furthermore, new competitors in the AI and machine learning industry are emerging. RegTech company, ComplyAdvantage believes their advanced technology will enable them to maintain a strong position within the market shortly. Marcus Swanepoel, co-founder and CEO of cryptocurrency platform Luno, explains that his business initially developed its system for compliance checks. It then switched to traditional providers, which rely more on manual processes. It finally switched its attention to ComplyAdvantage because of its higher accuracy and reduction of false positives, enabling the team to focus on customers with the highest risk. Similar to other tech businesses, ComplyAdvantage has launched a new product using AI to identify hidden risks in transactions. The tool enables companies to detect less obvious risks across multiple industries. With the growing potential of fraud, increasing regulation and the rise of new technology, the demand for compliance and anti-money laundering services for all industry professionals shows no sign of slowing down.

The global impact on food security is one of the major priorities at the COP27 climate summit. Recently the Commonwealth Secretary-General called on other leaders to collaborate and learn from each other to transform their future strategies.

Patricia Scotland, the Commonwealth Secretary-General, emphasised that for countries to deliver a more productive and sustainable agricultural industry and ultimately be more resilient to climate change, we must utilise big data and other digital technology. New digital tools can transform business plans within the agricultural chain and tackle productivity, harvesting, finance and supply chain management issues.

At COP27, Commonwealth Secretary announced a new policy guide focusing specifically on global food security. This guide is one of the first to explore how digital technology impacts the agricultural industry. Scotland believes that this policy guide is a critical step, not only for the Commonwealth but also for small, developing and middle-income nations. The guide supports policy leaders in recognising key areas that can improve and develop this market.

Agriculture is responsible for food security and employment in most Commonwealth member states, with over half of the collective 2.5 billion people residing in rural regions and connected with smallholder farming.
Created by the Commonwealth Connectivity Agenda, the framework discussed in The State of Digital Agriculture in the Commonwealth guide explores various regions based on their current digital technology, infrastructure, and enabling further digital progression and suggesting strategies for progress.

According to the policy guide, while regions like Africa lack some critical data infrastructure, considerable progress has been made through digital innovation, new technologies and services. In Asia, technologies for agriculture have progressed across the region, but overall affordability continues to challenge the most vulnerable communities.

The business development market, financing and investments remain underdeveloped within the Caribbean and Pacific Small Island nations. In Europe, Canada, New Zealand and Australia, smart digital technologies are widely used, and the policy guide encourages other regions to collaborate and learn from these innovations to assist them in making continued progress. While speaking about climate resilience and food security at COP27, Secretary-General Scotland emphasised that further efforts must be made by the public and private sectors to recognise the potential of digital and big data solutions for the agricultural industry.

A recent study by Harvard Business Review suggests companies expect finance teams to be more strategic, collaborative and automated. Increasingly, businesses are requested to provide financial details quickly and support leaders in achieving their goals. Finance professionals are, however, facing the pressures of daily administrative duties, which means fulfilling this strategic role is more challenging than expected. Many industry professionals believe it’s time for finance teams to automate tasks and start focusing on core strategies. 

Finance teams have a tradition of utilising new technologies that make the technical aspects of their jobs faster and simpler. Tech-focused businesses and associated C-suites are adopting automation to accelerate their efficiency and performance. The affordable and improved technology will likely transform the function of a finance team.

Many industries are adopting automation within their accounting teams. Businesses have automated processes delivered by their finance teams, such as financial close, accounts payable, financial planning and analysis. While automation impacts accounting services, there is still much to be done in this industry. According to a Deloitte report from 2020, over 75% of respondents said their business accounting processes are predominantly manual or require significant manual input. Under 4% of respondents suggested that their business has implemented robotic process automation (RPA), while around 2% had integrated machine learning and artificial intelligence (AI). 

Considering the existing economic and financial conditions, geopolitical uncertainties and increased inflation, finance teams are under further pressure to raise their performance levels and focus on their corporate strategy. The Harvard Business study suggested that 89% of finance teams can provide unique and valued input on business challenges. A further 83% believed there is a potential risk to their business if the finance team doesn’t contribute to the overall strategy. However, many believe that finance departments are held back by basic tasks, which prevents them from adopting this more strategic role.

Automation doesn’t necessarily remove humans completely from a process, but it enables machines to focus on repetitive work. While professionals can increase their productivity and drive key business objectives. If finance teams spend a large portion of their time on manual activities, they lose the opportunity to explore data and deliver high-value insights. By automating tasks, finance teams are in a stronger position to add more value. 

In finance, automation enables businesses to identify missing payments and remove potential errors. Automation can improve the analysis of customers and reduce or eliminate findings that can lead to poor decision-making and planning.

Applying automation to financial close

In a Trintech survey, over 50% of financial professionals said that meeting deadlines and timescales were the biggest challenges in the financial close process. Manual processes and reduced use of financial automated solutions can impact the ability to generate insights, particularly when working in a remote or hybrid environment. According to EY, over 60% of CFOs said their closing process is manual. When asked what stopped businesses from implementing the most efficient financial close, lack of automation and manual errors were considered notable factors. There is a growing recognition that manual activities and a lack of automation directly impact the challenges experienced during financial close but many are yet to have a solution to this issue.

Automation presents several benefits, but there are challenges related to the implementation process. Businesses must understand these issues and be prepared to create the necessary solutions. Before launching automation, companies must determine whether to automate their existing workflows or restructure them. Prioritising areas for automation must focus on repetitive tasks that are more likely to incur errors and recurring costs. Financial operations represent the core of many businesses, especially if these changes can be risky. Some solutions require organisations to invest considerably to implement the necessary changes to their systems. 

One of the biggest challenges to overcome is the underlying fear of employees and getting them to invest in the automation process. Some finance members may be concerned about being replaced by automation and other technology. Others may be worried that their team is piloting automation for the rest of the company. It’s critical engaging with employees to eliminate any negative perceptions of the process and highlight the benefits. 

With further technological advancements, businesses may fall behind their competition if they fail to recognise the benefits of automation. Shifting from manual to automated processes can be very beneficial, increasing performance, saving time and reducing the chance of fraud. Finance teams are now a central part of business operations. The CFO today is directly associated with key strategies. As technology becomes more sophisticated, businesses can automate more activities. 

Finance teams are dependent on the continued availability of accurate data. Leveraging data solutions and other technologies are signifcantly beneficial for forward-thinking businesses, creating more insights and widening capabilities. 

The responsibilities of the CFO in supporting business development have changed considerably in recent years. A report by McKinsey this year indicated that the role of a CFO is expanding rapidly.

The responsibilities of a CFO have transformed to include critical business processes. In recent years, the position has shifted toward embracing broader responsibilities such as risk management and business strategy. The role expands beyond the traditional areas to new fields such as innovation, digital transformation and culture.

Today’s CFO work with the CEO, establishing the business strategy and managing change. The range of functions connected to the CFO provides them with a vital oversight of the business and a deeper insight into the strategy. Innovation has become a critical asset of a CFO. A CFO understands how to balance creativity and financial expectations with new decisions. Concepts need to be tested and validated before implementing change and expecting progress.

The pandemic has reinforced the value of a good CFO by showing that the experience and skills of finance stretch beyond data processing. As we navigated the impacts of the lockdowns and other restrictions, forecasting cash flow became critical in ensuring a business survived, and the skills of the CFO and their supporting finance team proved vital in carrying companies through this period.

Most companies have managed to move through this challenging period and are now exploring ways to innovate and expand. This involves researching new concepts, whether introducing new tech or acquiring another organisation. The role of the CFO has once again proved pivotal in this new phase of innovation.

The role of a CFO provides more than just a reporting function. The CFO has a critical understanding of the business, as they see valuable data across the entire company and can transform data into clear and structured information. CFOs are skilled in applying advanced systems and analytics to create valuable insights into how business functions and the possible impact certain decisions could have on overall performance. An experienced CFO can determine what success looks like, critical KPIs, the required resources and the potential outcomes.

This type of information supports senior leaders in making informed decisions. It may support a final strategic decision or encourage them to invest in new technology. Whether you have an in-house CFO or hire externally, it’s evident that the modern CFO has more responsibility and influence on the overall success of a business and consists of a broader skillset to ensure companies can continue growing.