Episode 8 - Kristin Stubbins with Stephanie Nehme

Kristin covers the role of the CFO in agentic AI implementations, and overcoming inertia - getting started and how to manage the risk.

Together with Stephanie Nehme, she also introduces Appraise Reporting, a new financial reporting managed service which turns your standard general ledger financials into a financial report with full disclosures, audit workpapers and Board reporting.

Transcript

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Kristin Stubbins 0:01

Welcome to Cutting Through with KSIB episode number eight, which will be our final episode of this financial year. I'm Kristin Stubbin, CEO and founder of KSIB. And today we're going to cover three topics. Our favorite agentic AI implementations, but today we're going to talk about what's the role of the CFO. Number two, we're going to talk about inertia and how we have to overcome that feeling of inertia, get started, and manage the risk associated with AI. And then finally, we're going to talk about appraise AI, which is our new managed service for financial reporting, basically turning your standard general ledger financials into a financial report with full disclosures, audit work papers, and board reporting. So let me start with the role of the CFO in this world where agentic AI is starting to really take off in Australia. So as we all know, the CFO is a strategic partner to the CEO. They're at the heart of everything in the organization. And I have used the analogy of the finance function being the kitchen of the organization. The strategy of all modern businesses will be driven and optimized in some way by AI. So the CFO does need to be positioned as the sort of sensible strategic advisor and driver. In our view and in our experience so far, AI implementations will be successful if the people issues are well managed, if the risk issues are understood and well managed, the data and technology are optimized, and the CFO plays a unique and central role in all of these areas. So let's talk a little bit about understanding the technology and your readiness from a data and a broader organizational perspective. This is key, it's always been key, but it's more important now than ever before. So the CFO sits in the center of the organization and needs to understand the opportunities and the limitations of the technology. How the technology will work in an organizational system is complex. The people and risk implications are very significant, but the opportunities are also significant. And many of the lessons we've all learned with respect to major change projects over the last 20 years are highly relevant. So the CFO needs to play an active role in these implementations. The danger is that often implementations are seen to be an IT-led exercise. And that really doesn't work for AI. Another theme that I'd like to talk about, and I feel really strongly about this, is that risk management in AI is much more than governance, but it does include governance. So this is a really important point because I think there's a lot of discussion around governance, but actually managing the real risk from a system perspective means you have to go much deeper than the governance processes. So managing the risk from a system perspective can mean the difference between success and failure in an AI implementation. And again, the CFO is the guardian of risk in most large organizations. So think about some of the new risks that might present themselves with the gentic systems. And these include you will have heard about all of the generative AI model risks, the hallucinations, the prompt engineering, all of those things, prompt injections, there's system design risks, there's heightened cyber risks, and there's people risks. Many of the legacy controls that used to mitigate risk might actually now be redundant. So that actually does present an opportunity as the legacy systems and processes are streamlined. So a final word on people opportunities and challenges, and we're going to pick this up separately in a series focused on CPOs and people issues more broadly. But the CFO has a significant role to play in managing the strategic workforce planning in addition to the risk management. These transition issues are complex, and one of the important things you have to think about is how do you keep your people motivated when there's uncertainty in the system? So, as I said, we'll talk about this some more in some future episodes. Now, I don't want people to be really afraid with all this talk of risks because there are so many opportunities, and arguably the bigger risk for all Australian organizations at the moment is doing nothing at all. So one of the things to start to think about is how do you get started? How best do you understand the opportunities and the risks of these enterprise AI implementations? So we've been recently working with some large organizations to perform what we call an AI impact assessment, which basically means how do you identify the key focus areas and a high-level roadmap for implementation. This looks at things like the foundational elements, the governance, the controls by the design, controls by design, I should say, and data cleaning. But it also looks at some of the more complex areas around organizational readiness and your control environment. We've also developed an assessment program that can apply to all agentic or significant implementations. So that's really providing an independent view, primarily with a risk management focus, over the system or the product before it goes live. So now on to our third and very exciting topic. AI is a really useful tool in the development of managed services. So this is where KSIB can help clients by managing a particular process or functional area. So we launched HARP Marketing back in March, and this is an end-to-end marketing offering with brand foundations, amplified campaign management and ROI measurement. And we've now introduced Appraise, which is our financial reporting managed service. So basically, what we're doing here is we're taking the financial reporting system, an extract from your financial reporting system, producing the financial report, the audit work papers, and the board reporting using AI-enabled technology with expert review. So Steph Nehme, who I'm going to introduce to you now, is one of is a Director at KSIB. She has had 14 years experience at both Big Four Professional Services Firm but also a large investment bank. And she is really an expert in financial reporting. So, Steph, tell us a little bit about Appraise and what its purpose is.

Stephanie Nehme 6:58

So thanks for having me on the podcast today, Kristin. Really excited to be introducing Appraise after a few months of a lot of hard work with Steve Brown, who's a technologist to help build Appraise. It's a managed financial reporting service where our primary output is a set of statutory financial statements prepared end-to-end on behalf of all of our clients. It's not just a piece of software. The team that has pulled it together brings decades of collective big four audit experience. So we know exactly what auditors need, we know exactly what boards expect. And to be quite frank, we know what good looks like. So we're really excited about launching this product. It's not just about financial statements. Alongside those financial statements, we produce an audit work paper file that's structured in such a way that the auditor can go straight to work and a board reporting pack that's designed so that directors understand what they're signing. Part of the offering is that it's priced as a fixed annual fee because we have built efficiency into the model through AI. We can price below what a traditional firm would charge for the exact same scope. And that scope already includes board packs and audit work papers, which are outputs that most providers charge extra for or don't even offer at all. Here's the reality that nobody really talks about. Statutory reporting happens once a year. And it's hard to be an expert in something that only happens once or twice a year.

Kristin Stubbins 8:46

So who do you think in terms of um organizations would sort of most benefit from appraise, Steph?

Stephanie Nehme 8:56

I think there's a broad spectrum of organizations that will benefit. Um definitely mid-market private companies with CFOs or finance managers, um, but no real dedicated financial reporting function. Uh, you know, they might be big enough such that they have complex obligations, but not enough to have a team of experts. I'm also thinking about companies with group structures. So, I'm thinking of subsidiaries, holding companies, um, lots of intercompany transactions, or uh, you know, somewhere where consolidation would add some additional complexity. So special purpose vehicles, even uh particular types of reporting. So stakeholder reporting and debt covenant reporting that needs to be considered.

Kristin Stubbins 9:45

So Steph, what have you learned through this architecture and platform build process?

Stephanie Nehme 9:53

One thing I've really learned over the course of the last six months or so is just how many organizations are really struggling with this process. CFOs everywhere seem to be dealing with the same type of pain. Um, and most of them have actually just accepted that as part of the job. But once you start having these conversations with these CFOs, you actually start to realize that it's remarkably widespread. I also realize that I've had some preconceived ideas that I need to let go of, which is that bigger organizations have this solved because they can seem to spend more. But one thing I've realized is that budget doesn't equal equality or compliance in financial reporting. Financial reporting is genuinely complex, um, but I've realized through this process that it doesn't have to feel that way for the client if it's managed by the right people. And what I mean by the right people is uh having that audit fluency, you know, knowing what an auditor will need, knowing what a board needs to see, and trying to build that in from the start. And that's really the um the decades of experience that we have that's really paying off in a really practical way.

Kristin Stubbins 11:06

Well, thanks. Thanks for your time today, Steph. And thanks for joining us on the podcast. So if you have heard something today that you want to follow up with, please um contact us through our website or email me directly at Kristin@ksib.com.au. And thanks again for listening. Over and out.