Brad Birkin
Small accounting and financial services firms face growing operational threats and vulnerabilities. Cybercrime is on the rise, with PwC reporting a 30% increase in the risk of cybersecurity attacks against financial firms. Additionally, accounting, tax preparation, and bookkeeping firms are dealing with a growing staffing shortage. Technology can address both of these issues, from improved cybersecurity platforms to artificial intelligence-based tools that take over routine processes typically handled by staff. Despite AI’s transformative potential, adoption is limited, with only 3% of financial services firms actively using AI.
While the alarming lack of protection and high vulnerability are major threats to financial professionals, the challenges don’t end there. Demanding workloads and lack of work-life balance often lead to widespread burnout, and coupled with the recent revelation that the U.S. is short 340,000 accountants, these issues could further exacerbate an already overworked workforce. So the question arises: how can the financial services industry use technology to protect itself and its clients, within budget, without taking on too much risk?
To better understand the challenges and needs of financial professionals, Embroker commissioned a survey of over 200 in-house and independent accountants. The results confirmed a long-held suspicion: financial professionals are prime targets for cyber attacks, which is why they need to step up their security. Firms hold vast amounts of sensitive client information, including names, addresses, identification documents and bank account information. And the risk doesn’t stop with clients: 67% of accountants surveyed reported they have entered personal financial information on their work computers, putting themselves at risk as well.
Businesses have a responsibility to proactively protect the personal data of their employees and customers. But responsibility doesn’t always translate into action. More than half of accountants report they received any kind of cybersecurity training at work. This is a significant pitfall for employees and IT teams alike. Of those who received cybersecurity training, one in two reported that the training had little or no effect.
While technology is essential, we mustn’t forget that human involvement remains essential in financial services operations. The capabilities of these new technologies raise expectations of humans, for zero errors and faster output. Nearly half (46%) of accountants have encountered situations where operational errors caused financial loss to both the firm and the client. 72% of accountants who experienced these errors reported that an individual or company was held responsible, highlighting the critical importance of increased safeguards within the industry.
One solution to this problem is to hire more accountants and distribute the workload better. However, the American Institute of Certified Public Accountants (AICPA) estimates that around 75% of CPAs will soon retire. This, plus a steady decline in new students choosing to study accounting, means companies are facing a severe talent shortage. Technology can help accountants, streamlining their workload despite headcount reductions and helping them supplement their routine tasks to give them more time to focus on value-added services such as consulting and advisory. Accounting and financial services companies can implement AI solutions for tasks such as data summarization, organization, and analysis, expense and payroll processing, reporting, forecasting, fraud detection, and workflow automation.
These tools can significantly improve efficiency and accuracy. AI algorithms excel at fraud detection and risk management, and can identify potential irregularities in financial transactions. Technology also allows management to prioritize staff development through training. AI, in particular, has the added benefit of distributing the workload evenly, making it easier for accountants to manage.
But as great as these tools are, they come with risks. While using AI can greatly improve operations, it also comes with drawbacks. Lacking contextual awareness, AI is more likely to make mistakes compared to human intuition. Despite being extremely capable of processing vast amounts of data, AI systems often struggle to understand nuances that humans can easily comprehend.
AI systems are also increasingly being used in decision-making processes, despite evidence that the data is biased. Because AI systems base their decisions on biased data, they perpetuate and amplify existing inequalities and discrimination. For example, AI systems used for hiring can lead to discriminatory hiring practices if they rely on biased training data that favors certain demographics or educational backgrounds.
The intense scrutiny facing accountants and financial services professionals today highlights the need for practical solutions. While errors are always a risk, it’s important to recognize that errors often stem from underlying systemic issues. Addressing these challenges requires proactive measures and innovative solutions. Implementing AI solutions can ease pressure on accountants, reduce errors, make work more efficient, and create a less stressful work environment for everyone.
Ah, it’s not a bad idea to have some good insurance.
About the author:
Brad Barker is vice president of legal and accounting operations at Embroker, a leading digital insurance brokerage.
