The biggest challenge in corporate finance and enterprise risk management is how to manage the vast amounts of data to uncover opportunities that will guide a company's growth and investment strategies while taking an appropriate level of risk.
Financial information is growing at an astounding rate of 70% a year, according to IBM research—and other corporate internal data, external macroeconomic, industry and country data are growing just as quickly. The industry’s intricate data sets have to be collected and cross-referenced against analyst reports, economic market data, financial reports, news stories, board notes and company balance sheets. Financial executives and risk managers are more and more challenged to cull through, absorb and digest all this information, as they try to make informed decisions.
New technology advancements have the power to help CFOs make strategic inferences around the financial performance of companies in split-second response times.
The IBM computer named Watson that played on TV’s "Jeopardy!" earlier this year shows the potential of this technology. Watson evaluated roughly 200 million pages of content (about 1 million books worth) written in natural language to find correct responses to Jeopardy! clues in less than three seconds.
Watson could be applied to assist with managing and helping gain inferences from the vast amounts of corporate and external data that are used to make crucial business decisions, for instance in financial forecasting or aligning investments with corporate strategy. Specific applications could include evaluating the optimal customer, product or geographic segments to invest in the best commercial opportunities. Or evaluating the probabilities and outcomes of internal and external risk events could be aided by a Watson-like capability.
Watson uses advanced analytics to understand what is being asked, analyze millions of pieces of information, and provide the best answer based on the evidence it finds. Watson-like technologies aid in human decision-making. It still takes human interaction to assess the data and make judgment calls on it.
Executing corporate strategy is both art, and science: IBM’s Watson demonstrates a breakthrough bridging both.
See Watson in action: The "Jeopardy!" shows featuring Watson’s matches with two "Jeopardy!" champions will be rebroadcast beginning Monday. Or you can see a video here.
Carl Nordman, an associate partner with IBM’s Global Business Services’ Institute for Business Value, was lead research and author of IBM’s 2010 CFO Survey and the report, Journey to the Value Integrator.