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Unleashing blockchain on finance

Mar 22, 2019

Starting as the backbone for bitcoin, blockchain's current potential as a ground-breaking technology for business is gaining momentum.

For blockchain, the future is now.

Distributed ledger technology first gained prominence years ago as the backbone of bitcoin, the pioneering peer-to-peer network and cryptocurrency. While the digital currency's value has fluctuated, blockchain’s potential as a ground-breaking technology for business, capable of slicing through layers of inefficiency, is growing – fast.

In Deloitte’s 2018 global blockchain survey, which drew responses from 1,053 executives across seven countries, 74% reported that their organisations see a “compelling business case” for using blockchain technology. Fuelling this feeling is a growing awareness of the value blockchain delivers as a platform that integrates operational processes such as supply chain, customer/channel operations, and financial services. In doing so, the technology may replace today's siloed approach to transaction processing, with its multiple handoffs and time-consuming data entry and reconciliations.

In addition to driving significant efficiencies and cycle-time reductions, blockchain provides full end-to-end transparency across operations and finance, enabling predictive operational insights and opportunities to optimise working capital.

What blockchain does

Blockchain can be used to remake, or re-engineer, a wide range of finance processes: intercompany transactions (when there are multiple enterprise resource plans), procure-to-pay, order-to-cash, rebates, warranties, financing (such as trade finance, letters of credit and invoice factoring). Wherever paper piles up, and where workflow is distributed between multiple parties, presents an opportunity for blockchain to move in and knock it down.

What does it mean for a CFO?

Here are a few steps for a CFO to consider:

1. Assign a blockchain champion

Blockchain should be a business-led initiative, requiring strong sponsorship and leadership provided from the ranks of finance executives. They can start to envision how the various functions might benefit from implementing blockchain, identify value drivers, and build business case frameworks.

2. Invest in talent

Pull together a focused cross-section team from the supply chain, customer/channel operations, service, and finance to identify and prioritise pain points that could be targeted and develop a hypothesis around how the use of blockchain will solve the business problem.

3. Forget the technology

Focus on how blockchain will potentially disrupt or shift your operating model. The process involves understanding the transformative nature of blockchain, and talking with customers, suppliers, and C-suite peers to identify potential use cases. Given that blockchain's value proposition relies on multi-party transactions, select external partners who share the business challenge you are focused on and are, therefore, likely to be receptive to participating in the future.

4. Think big, start small, and iterate often

Blockchain's capabilities are more efficient in the external world, but as an introduction to the technology, it may be best to focus on an internal issue, such as intercompany transactions.

5. Launch a pilot

Having identified finance pain points, select a process where blockchain will likely produce a real return on investment. Track the results, especially transaction times and costs, to judge the technology's suitability for large -scale iterative processes.

What does it mean for the finance team?

Blockchain is one of a number of technologies, including robotics process automation and artificial intelligence, which will create a new digital processing infrastructure between value chain participants. This new infrastructure will result in the reduction of paper, reconciliations and manual rekeying, resulting in faster processing time (and even straight-through processing) as well as overall operational excellence. This will provide teams with the ability to focus on their value-add role as opposed to administration that is currently consuming their time and effort. Add to this the standardisation and normalisation of data within the infrastructure, and we will create the data fuel for more advanced "engines", e.g. enhanced risk and performance management.

Organisations cannot sit still; learning, development and continued growth are more important now than ever.   

Cillian Leonowicz is a Director in Consulting and Co-Lead of the EMEA Blockchain Lab in Deloitte. Amy Pugh is a Manager in Consulting in Deloitte.