Five in Five
Five key facts at a glance!
- A cloud can be public, private, hybrid or multi, but migration to any version offers numerous benefits – not least of which are versatility, accessibility and security – as well as a few challenges to a company.
- The automation of financial processes and the use of SaaS models offers companies the opportunity to save time and money while making data access smoother, more continuous and place agnostic.
- The use of artificial intelligence tools such as machine learning and deep learning, can further increase the efficiency and productivity gains and maximize the value to be had from data mining in the cloud.
- Wider use of the cloud across the organization can increase some cyber security risks, but a shared-responsibility mentality that sees companies meticulously training and monitoring their employees to avoid social engineering attempts, combined with new approaches and solutions from cloud providers can solve this problem.
- Taking advantage of the cloud in your financial operations helps CFOs to achieve greater agility, better visibility, increased responsiveness, improved security, and facilitates regulatory compliance – all essential to optimize the finance function in order to meet the changing demands of modern business.
Cloud computing refers to the on-demand, secure delivery of services (such as information storage and backup, database hosting, software rental or networking services) from a provider to an end customer via the internet. Cloud solutions provide companies with scalability (growing easily from a small base to a very large one or reducing quickly and easily, too) and can help minimize the impact of a digital transition on your systems and your organization. Other benefits that typically result from exploiting the cloud are:
- Cost savings
- Protection with industry-leading security
- Flexibility and versatility
- Accessibility from anywhere, 24-hours a day
- Greater, more easy collaboration
- Improved data integrity and security
- Fewer technology responsibilities
- Automatic updates
Let's take a closer look at what "the cloud" is, and explore the benefits of the cloud for the finance department.
The ABCs of the Cloud
Firstly, a distinction must be made between the different types of Cloud service: A Public Cloud means that the infrastructure is owned by a service provider who offers cloud services to a wide range of organizations and/or to the public. A Private Cloud is infrastructure segregated for the exclusive use of a single customer. It may be owned by the customer and hosted on their own premises in their corporate data centre, or offered to them by a service provider over the internet or in the customer's own data centre. A Hybrid Cloud is infrastructure that comprises both a private and a public cloud that are managed independently, but connected together to provide information access and services to its users. A Multi-Cloud is infrastructure comprising two or more cloud services (public or private) from different providers. The benefits of each service differ. For instance, a private cloud is more expensive than a public cloud and may have more technical responsibilities associated with it, compared to a public cloud that has very few technical responsibilities associated with it for the customer. There are three main types of cloud service:
- Infrastructure as a service (IaaS) - where the cloud provider manages the hardware (servers and networking) and data storage for the customer
- Platform as a service (PaaS) - where the cloud provider manages both the hardware and the operating systems for the customer, including capacity planning, maintenance, upgrades, patching, and so on.
- Software as a service (SaaS) - the service provider offers a complete (and usually specialized) application for use by the customer, and which the customer's users access via a mobile or web application.
Benefits of the Cloud
Recent research by McKinsey shows that effective use of the cloud can:
- increase the efficiency of the development and maintenance of migrated applications by 38%;
- increase infrastructure cost efficiency by 29%; and
- reduce downtime of migrated applications by around 57%.
At the same time, the cloud can improve platform integrity through automated and integrated security processes and controls. Today, most enterprises have only a small percentage of their workloads migrated to the public cloud for general functions (i.e. not specific to their role or industry). As time goes on, it will be easier for companies to use more specific platforms to take advantage of their targeted functionalities. The development of specific cloud services is nothing new, but the ease of adoption of cloud solutions is making it simpler for companies to embrace cloud computing. The different platforms available can offer specific services such as:
- security and compliance automation
- banking, payments and insurance services
- financial data analysis
- financial data and services management
- customer and reporting management.
All cloud providers partner with firms to provide relevant software and services, so that a customer can access all the tools it needs to run its business.
Risks of the Cloud
Any system that a company relies on can also represent a risk: downtime as a result of a cyberattack or failure of part of the infrastructure can have a significant business – and even economic – impact. As use of the cloud widens and deepens, governments around the world have begun to address this dependence through regulation:
- In the EU, the Digital Operational Resilience Act (DORA) was published in the Official Journal of the EU on 27 December 2022 and will come into effect on 17 January 2025. DORA applies both to Financial Services Institutions (FSIs) and to a group of non-financial service providers, including cloud computing service providers.
- In the UK, a 2020 Bank of England survey found that two-thirds of UK banks use cloud services from AWS and Microsoft Azure, making the entire British financial system very vulnerable to a cyberattack against one of these providers. The BoE published a set of recommendations in its Future Of Finance report, identifying cloud and operational resilience as a key priority for the country's financial services firms.
- In the US, cloud computing services are usually governed by state laws, with some federal overlay based on the subject matter of the specific contract.
While these regulatory developments around the world are targeted at FSIs, they also involve cloud service providers (CSPs) and this will result in knock-on benefits for cloud users as the CSPs begin testing and developing new cloud products and services that are fully compliant with the emerging regulatory framework.
High Performance Computing (HPC) and the explosion of AI
The mushrooming growth of data is driving the adoption of digital platforms to industrialize its potential and improve its management and use. Large quantities of data require more data storage space and greater computing power to mine through the data to find patterns and actionable information. Artificial Intelligence (AI) and Machine Learning (ML) are key technologies for automating the extraction of value from data, while high performance computing clouds offer the computing power necessary to run the ML and deep learning algorithms and churn through all the data -- particularly for very large or highly complex data sets. For this reason AI-cloud integration is on the rise. LLM (large language model) AI applications will facilitate the generation of content from company data, which will help expand the corporate knowledge base across the company. As a result, organizations will no longer have to depend on employees with a deep knowledge of their business and customers, but all staff will be able to find suitable solutions more easily. Broader application of AI in the accounting and auditing professions is expected to increase efficiency, productivity and accuracy, accelerate and improve decision making, reduce accounting costs, and free accounting staff from low-level activities to focus on higher-value tasks, in spite of the challenges of a technologically unskilled workforce. There is therefore a vital need to review the training required in accounting departments, and more particularly to assist team members to learn how to make full and efficient use of AI tools.
Cyber security and control
Over the past few years remote and hybrid work modes have become increasingly common around the world, driving new models of operations and infrastructure such as IaaS, PaaS and SaaS, which are increasingly seen as important tools for business efficiency and success. Modern cloud-based platforms such as Google Workspace, Zoom, Slack and Salesforce have become essential to enable knowledge workers around the world to collaborate efficiently from wherever they are. This digital transformation has also amplified companies' vulnerability to cyber attacks and expanded the risks and threats to corporate data. Cyber Security has therefore become an indispensable requirement. However, the emergence of the cloud also created new opportunities for start-ups who are completely revolutionizing the industry leading to the development of new security solutions (two-factor authentication, password management tools, etc.) for protecting access to and control of company networks and data. Furthermore, cloud-native systems provide inbuilt controls to help companies to limit access to sensitive data to suitably authorized people. Furthermore, managers should note that when they adopt a public cloud provider, the security of the system is a shared responsibility between the cloud provider and the customer and its employees. For example, if a company stores data in the AWS data center, that company is responsible for configuring, implementing and managing its own IT security policies and ensuring that its staff adhere to them. Security breaches are always the responsibility of all parties.
Cloud computing for the finance function
Today, in addition to rethinking their supply chains, production, and distribution structures for greater competitiveness, companies also need to reorganize their financial operations to ensure greater agility, responsiveness and security to meet the changing demands of modern business. Organizations of all sizes, but SMEs in particular, are struggling to keep pace with the demands of financial management and compliance today. The greatest obstacles to achieving optimal financial management are:
- obsolete and outdated manual processes,
- dispersed data housed in individual silos that cannot be accessed or consulted by different business figures, and
- inaccurate or outdated forecasting and reporting
The solution to these issues lies in consolidating management of the finance function and its data on a cloud-native platform. By automating processes, companies can not only eliminate repetitive tasks, accelerate regular tasks, and improve accuracy, but they also gain real-time visibility into their operations and can make informed decisions to improve productivity and profits.
SaaS models benefit accounting
SaaS models offer direct use of state-of-the-art software and databases managed, supported and maintained by a specialized service provider that leverages economies of scale to lower the costs, which are distributed according to the use you make of the software. Furthermore, companies gain access to flexible storage and processing services at a lower cost. In fact, one of the greatest advantages of cloud-based SaaS applications is that they can grow with your company. Adding or removing access to the service or application is much easier because the cost adjusts to active use. The move to the cloud helps business teams to improve controls while achieving better visibility across the organization and increasing the efficiency of collaboration among geographically-dispersed teams through secure access to shared data that is more accurate thanks to up-to-the-minute synchronization across the cloud. In finance, teams responsible for budgeting, planning and reporting no longer have to send spreadsheets, emails and voicemails to try to coordinate teams and document versions. This helps reduce the time spent on operational management activities and reduces risk, and enables business decision-makers to forecast more accurately, and more tightly control expenditures, leading to more profitable businesses.
To cloud or not to cloud? There is no question
The decision to move to a cloud-based accounting solution is significant and there are a number of issues that should be considered. Most of these relate to the human issues, specifically:
- a lack of clarity as to what the new system will be used for
- finding the time to set the cloud implementation in motion in the department, since the recurring weekly and monthly tasks still being done manually cannot be ignored
- resistance to change from the finance team who may feel comfortable with the existing processes
While initially the change may be daunting, the long-term benefits are incomparable.
