Industry leaders are exploring how analytics is impacting the finance industry, creating opportunities and new challenges. In a recent discussion referred to as the analytics of finance, representatives stated the risk of potential new frauds and that if regulators fail to embrace analytics in the future, fraud cases will get bigger, persist for longer and be more challenging. According to financial leaders, some of the biggest fraud cases happen due to complexity, and financial markets are getting increasingly complex.

The discussion explored the importance of analytics, AI and Machine Learning as providing valuable pathways for solutions to every challenge faced. Investing in technologies like analytics is one of the most effective ways to tackle financial crimes. JP Morgan invests $12 billion every year in technology, and the entire financial sector may have a total annual outlay in the region of $100 billion. The critical area to focus on is efficiency, which means embracing data and analytics to determine potential barriers or challenges. 

As financial crimes become more sophisticated and challenging to detect, regulators appreciate the power of analytics and are embracing new technologies. Recognition of these tools is moving into education, with more institutions training for data and quantitative analysis. The use of analytics in finance has also delivered other benefits, such as growth and new efficiencies to markets and increased access to financial products, levelling the playing field for others. Analytics has a valuable and growing role beyond its traditional focus. On the high street, we see more efficient capital budgeting due to data utilisation. In households, we’re experiencing better budgeting, retirement savings and credit usage due to the democratisation of data, innovation and fintech. Within capital markets, analytics is exploring new uses, such as machine learning to develop predictive business models. Data and predictive models are being utilised for due diligence in mergers and acquisitions and capital-raising activities. Practitioners have seen positive results in terms of better accuracy and improved benefits to shareholders. Analytics could provide critical to meeting ESG values. Analytics with satellite monitoring could tackle greenwashing, and technologies like infrared imaging could monitor and verify emissions at various units. These methodologies would support investors assign capital to businesses embracing their values. 

Finance leaders explain that we need to consider data and analytics as an investment. Looking toward the future, the top challenge for analytics is related to data ownership, where people can control their personal information. On the other side, analytics will create innovative, custom financial planning for people at better costs, helping individuals make more informed decisions. Businesses, small and large, will also find more uses for analytics in other areas like capital budgeting and resource allocation. 

In a progressive field like analytics, it’s vital to determine between technology-related and human failures. To begin with, informed individuals that understand the technology, data and analytics make a huge difference. 

Predictive analytics is becoming a critical tool for businesses looking to determine the results of key decisions before committing to them. The benefits are evident but implementing the tech can be a challenge. With rising inflation impacting costs and fears of recession affecting demand for services, companies across the country are decreasing their spending and exploring new growth opportunities.

Identifying where, when and how much to invest is critical, but it’s vital during a challenging downturn when choices can have a profound impact on the growth prospects of your business once the economy recovers. In an attempt to adapt their investment plans, companies are increasingly applying predictive analytics to support them in assessing opportunities and risks. 

James Petter, VP of data storage business Pure Storage, believes risk management is a major discussion point among CFOs and regulatory teams, especially in the current economic climate. Senior leaders consider risk management a top priority, assessing their economics, financial structures and technologies. Businesses contain lots of data, and most are trying to determine how to use this information. Often, companies are focused on the current market conditions and responding to these but moving forward, there is likely to be more of a push on looking ahead, and predictive analytics will play a significant part in this. The rise of predictive analytics is no surprise to Shankar Balakrishnan, VP for Europe at Anaplan. Balakrishnan refers to businesses using historical data to navigate challenging times as someone driving by only using their rear-view mirror. Balakrishnan believes companies must utilise more data on potential outcomes and react smarter to possible disruption. Anaplan recently partnered with the South Central Ambulance Service Foundation NHS Trust to support its predictive potential. By applying machine learning and predictive insights to their data, Anaplan determined the number of emergency call the ambulance teams would receive at any given time. This process allowed the trust to deliver resources more efficiently. 

The challenge of implementing predictive analytics 

For finance leaders, the challenge is understanding what to focus on. One initial area to work on is automating functions in the back office. Applying technology, such as robotic process automation and AI-focused data analytics, improves the processes, tackles skills gaps and improves efficiency. It can also provide intelligence that can support forecasting and planning. Automation like this allows employees to focus more on value-added tasks.

Bearing in mind the potential risk and uncertainties, few leaders will want to make critical investments and resourcing plans on instinct. Risk management may be a priority in a crisis, but can business leaders avoid this crisis in the first place? Whether it’s a pandemic or cyber attack, making effective plans under pressure requires accurate and data-focused insights. Successful risk management needs data to deliver various scenarios and options. For example, in the travel and tourism industry, predictive analytics may prove critical to enable them to recover from significant disruption experienced after Covid. Aircraft manufacturers are using technology to find the best times to perform maintenance tasks, and airlines are using similar technologies to predict demand for flights and plan their staffing and fuelling requirements. Quality data and predictive analytics are critical to risk mitigation within the finance industry. They are vital for fraud detection, auditing and other types of advanced work.

The overall success of this technology depends on the quality of data fed into the system. Insights created on incomplete inputs could be misleading and potentially cause harm to a business. Implementing predictive analytics isn’t a one-time process. It takes time and effort to examine the findings, understand them and alter the system accordingly. It’s important to have clear goals when implementing analytics, adapt them when necessary and continuously revisit them to ensure the business is getting what it needs. Accuracy and compatibility are critical when measuring performance across various teams.

If leaders work with inaccurate data, they risk making inaccurate decisions. Similarly, if teams spend hours validating data, it makes the entire process impossible for decision-makers to react quickly. Despite the challenges, the benefits of predictive analytics are clear. With the insights it delivers, predictive analytics offers significant value for business leaders, converting data into critical information for a business.

When discussing the value of cloud outsourcing with financing, IT leaders should highlight the benefits such as speed, reliability and security.

The division between IT and finance can be challenging in budget planning. While opinions differ within IT budget planning, they can escalate further when discussing the potential of outsourcing cloud hosting. In practice, many finance executives believe it’s cheaper to manage IT environments and resources in-house rather than outsourcing to public or private cloud providers, but this doesn’t factor in other elements like speed, reliability, and security. The benefits can be hard to determine, in terms of financial gain, but the competitive advantage cloud providers offer with secure and scalable infrastructure is valuable.

The risk of cybersecurity

When talking about the benefits of cloud outsourcing, safeguarding IT systems from the threat of cybercrime are a priority. The truth is that all companies face a potential risk of cyberattacks, and the costs can be significant. As of this year, the global average cost of each data breach exceeded $4 million, and according to the World Economic Forum, cyberattacks have increased by 125% since 2021.

The importance of reputation

Aside from the issues of damaging data and disruption to productivity and business activities, reputational harm is a concern. When sensitive customer data is exposed, businesses can experience significant harm to their reputation, which ultimately impacts their financial gains. Studies have shown that customers care deeply about data breaches and how organisations manage their information and security. The Ponemon Institute reported that 65% of data breach victims lost confidence in a business due to a data breach.

High security provided by cloud providers

As shown by studies, cyberattacks can result in substantial costs. Most businesses want the highest level of security, something that cloud providers can offer. Cloud providers invest significantly in high-level security systems and staffing to ensure their customers remain safe. Another benefit of on-premise services is the segmentation from user platforms. Outsourcing cloud hosting enables businesses to create safeguards as their users aren’t operating on the same network.

Significant investment is required for in-house hosting and will require maintenance and possible replacement in the future. The initial expense can be challenging for many companies to absorb, which leads to the benefit of cloud outsourcing. Rather than invest thousands in purchasing and maintaining in-house equipment, cloud outsourcing offers predictable costs for budgeting.

Cloud outsourcing supports businesses to compete effectively through added reliability, scalability and speed. Many cloud providers have invested time to ensure high uptime for their service, creating a higher level of reliability that makes a business more attractive to customers.

The ability of cloud providers to readily increase cloud capacity ensures businesses can remain agile and makes the process of growing more accessible and faster. Instead of investing time and money to acquire more systems, changes to cloud capacity can happen instantly.

The volume of data and storage capacity managed by cloud providers exceeds a typical company resource. Cloud providers also have quicker connection rates since they have the resources to afford better bandwidth and speeds. A faster connection means quicker speed-to-market for customers.

The benefits of cloud outsourcing may be challenging to quantify, but discussing the long-term benefits with finance leaders, including security, scalability, reliability and competitive advantage, are difficult to ignore.