4: Digital Technologies and the Finance Function

Question 1

advantages to finance functions of investing in process automation

Answer 1

frees up time to focus on value-adding activities
headcount reduced as work is automated to reduce costs
removal of human error improves accuracy of information
catalyst to help the organisation adapt better to its environment
positive return on investment

Question 2

disadvantages to finance functions of investing in process automation

Answer 2

significant training costs
change management
change creates uncertainty
systems are only as effective as those using and creating them
finance function’s relationship with IT has to be functional

Question 3

key benefits of data visualisation for the finance function

Answer 3

makes information more easily understood
real-time processing
optimisation of performance
richer insights and understanding of drivers of performance

Question 4

impacts of distributed ledger technology and blockchain

Answer 4

improvements in security and traceability of transactions
smart contracts
bitcoin/crypto are not covered by accounting standards
allows money transfer more easily as it removes the intermediary and there is only one currency

Question 5

mobile technology’s contributions to efficiencies

Answer 5

scalability
communication and flexibility
reductions in paperwork
instant visibility

Question 6

impacts of 3D printing

Answer 6

increase in direct/set up costs
cost savings due to waste reduction
smarter production so no overproduction
reduced inventory and fewer raw materials held
minimal tooling

Question 7

key digital skills: basic digital literacy (Farrar)

Answer 7

create digital content
ensure data safety
communicate through digital channels
solve problems created by the digital technology environment

Question 8

key digital skills: technology know-how (Farrar)

Answer 8

understanding how digital issues impact the finance function
understanding how digital technologies disrupt an organisation’s business model
appreciating the need to apply data privacy and increased security procedures

Question 9

digital mindset

Answer 9

fusion of abilities to confront complexity, work in an agile and creative manner, and to harness curiosity in order to continuously learn

Question 10

5 qualities, practices and approaches of a digital mindset (Forbes)

Answer 10

1. providing a clear vision of how the business should evolve and supporting actions to get there
2. not controlling the change but architect the choices of getting there
3. sustain and enhance existing business processes to allow/nurture new processes to disrupt the status quo
4. reliance on the data but trusting personal instincts and going beyond the numbers when making decisions
5. be skeptical and open-minded

Question 11

components of the finance function

Answer 11

financial reporting
management accounting
treasury
internal audit

Question 12

3 key financial ratios used by investors

Answer 12

earnings per share (EPS) - profit after tax divided by weighted average number of shares in issue

price earnings - share price divided by EPS

dividend yield - dividend paid peer share divided by the current share price as a percentage

Question 13

uses of budgets

Answer 13

coordination
responsibility
utilisation
motivation
planning
evaluation
telling

Question 14

key roles of treasury

Answer 14

working capital and liquidity management
financing
taxation
foreign exchange management

Question 15

3 prerequisites of fraud

Answer 15

dishonesty
opportunity
motivation

Question 16

limitations of internal audit

Answer 16

independence
organisational constraints
poorly qualified and experienced staff
self-interest threat

Question 17

3 key impacts of automation on finance (Farrar)

Answer 17

1. ensuring they understand what machines can do and what their limitations are
2. ensuring they possess human skills which machines lack
3. ensuring they are highly skilled in areas where machines and humans can work together

Question 18

automation paradox

Answer 18

technology takes tasks out of human control and results in a loss of skills in this area

Question 19

skills required of finance professionals

Answer 19

business acumen
analytical skills
people skills
leadership
judgement

Question 20

5 ethical considerations of IT

Answer 20

information rights and obligations
property rights
accountability and control
system quality
quality of life

Question 21

3 ethical considerations for data

Answer 21

data dependence
data mining and data storage
data distribution

Question 22

5 areas to developing a CDR strategy

Answer 22

1. digital stewardship
2. customer expectations
3. giving back
4. data value
5. data inclusion