Dive Brief:

• As CFOs keep a tight grip on cash, technology and digital transformation remain one area where finance chiefs are still willing to splurge: 58% of finance leaders plan to increase their spending on IT and digital transformation, according to a quarterly survey released Monday by Grant Thornton.
• This represents the highest percentage of CFOs who plan to increase spending on digital transformation since the first quarter of 2021, the audit, tax and advisory firm found in its Q3 2023 survey.
• “I think any business leader has to make technology part of their strategy,” Paul Melville, national managing principal of CFO Advisory at Grant Thornton told CFO Dive. “Whether you’re pessimistic or optimistic, you still have to have a sound technology strategy, you need to know how to optimize it, because otherwise you're going to get left behind.”

Dive Insight:

CFOs are boosting their digital transformation budgets as they continue to juggle economic challenges. Twenty-eight percent of finance chiefs cited pessimism about the future of the economy — a 7 percentage point increase from the previous quarter — even though 75% of CFOs are also predicting they will see a growth of net profit, according to the Q3 survey.

Forty-seven percent of CFOs, meanwhile, expect to see their operating costs grow — a 17 percentage point jump from last quarter, which comes as inflation continues to persist well above the Federal Reserve’s 2% target. That’s driving finance chiefs to keep cost optimization as a high priority, and as technology is one of a company’s higher costs, choosing to invest in those that can provide a more positive return on investment is a must. 

“As a CFO, you've got to be on top of all that to make sure your business is optimal,” Melville said. “And if you think about the finance function, to have an efficient finance function, you've really got to have the best IT and the best platforms, and they're changing so fast.”

Companies have already taken steps to bring technologies that can help add more efficiency to their finance functions: Nearly one-third of CFOs are already using artificial intelligence in their finance processes, Grant Thornton said, while 40% plan to tap the technology in those processes in the next year.

However, CFOs also need to ensure they are keeping up with the rapid pace of technology and staying competitive — AI, which has seen rapid advancements over just the past few years, is a key example, Melville said.

“Effectively from a finance officer’s position, he’s almost got to have an R&D spend budget to be able to get the efficiencies out of his team,” Melville said of how CFOs need to think of emerging technologies.

The percentage of CFOs who said they were currently utilizing generative AI has continued to grow rapidly, ballooning to 43% compared to the 30% who said the same the prior quarter, Grant Thornton found. As the technology becomes more widely adopted, however, concerns surrounding data privacy and security have begun to swirl among both executives and regulators.

Over-reliance on tools like generative AI could also do more than just lighten a company’s wallet; AI could cause a financial crash as soon as the late 2020s or 2030s, SEC Chair Gary Gensler recently told the Financial Times, calling for regulation surrounding the use of AI models and how they are put to use on Wall Street, according to a report by Business Insider.

CFOs who need to walk a tight balancing act when it comes to investing in generative AI must ensure they are taking into account some of its more unique risk factors. 

AI is typically trained on historical data, for example, but “is history going to tell you how much of a risk tolerance you want to take?” Melville said. To balance that risk, “that's where you need the experience and business savvy of professionals within your team,” he said.