Good morning. Many CFOs are exploring use cases for generative AI. However, some companies are deciding to create a new senior executive position to oversee AI activities across the enterprise: a Chief AI Officer (CAIO). Is this necessary?
“Do We Really Need a Chief AI Officer?” is the title of an interesting new report from MIT Sloan Management Review that delves into this topic. The authors have experience analyzing the potential value of a CAIO, four of whom have served as chief digital officers across a range of industries. One benefit of having a CAIO is that they can determine AI focus and prioritization across the company, which can centralize management of AI risks and reduce internal gaps.
But there are downsides. For example, adding a CAIO role could create tension between the existing C-suite and the CIO, CTO, chief operating officer, chief digital officer and chief data officer, the report said. Another obstacle is that “CAIOs may be tempted to pursue AI for AI's sake, rather than for business goals,” the authors wrote. And the extra costs of adding a CAIO role could outweigh the benefits.
I asked report co-author Michael Wade how companies can effectively evaluate the need to create this C-suite role, and he said there are a few factors, including current AI capabilities, but one factor in particular is key:
“Organizations where AI could have a significant impact on their competitive position may find it advantageous to appoint a CAIO,” Wade said. For example, companies in the technology and financial services sectors, where data management and insights are key sources of differentiation, could greatly benefit from centrally coordinating their AI initiatives, he said.
So how does Wade think CAIOs can work with CFOs to implement AI strategies across their organizations? Wade noted the importance of “not getting caught up in the hype and jumping into AI for AI's sake.” When it comes to ROI expectations, Wade said CAIOs should be held to the same standards as the rest of the organization. “CFOs can work with CAIOs to set financial goals for AI projects and hold them accountable when necessary,” Wade said.
On the use of artificial intelligence in finance, Wade said traditional AI is already being used to improve outcomes and streamline operations, and should be used more to support automation, reduce risk and cut costs.
“Generative AI is a bit of an oddball,” he says. “For the purposes of formal automation tasks, generative AI can be used to improve finance productivity. It can also be used for scenario planning and some creative tasks. But you need to be careful when using it for core finance operations.”
AI's place in the C-suite was the subject of a study published by Foundry in August 2023, based on a survey of 965 global IT decision makers from organizations of all sizes. Overall, it found that just 21% of respondents are actively recruiting for a CIAO role, while 15% of large companies surveyed have a chief AI officer and 24% are searching for a candidate.
But Wade doesn't believe the CAIO role will ultimately become mainstream in the C-suite. If it's prudent to appoint a CAIO, the role shouldn't be full-time, the authors wrote in the report. They recommend that the CAIO be a term-limited appointment that builds a set of enterprise AI capabilities that will eventually be handed off to the business or technology organizations.
To find out where CAIO expertise can help in your enterprise’s AI adoption journey, read the full report here.
Cheryl Estrada
[email protected]
The following section of CFO Daily was curated by Greg McKenna.
Leaderboard
Matteo Anversa has been appointed CFO of Swiss computer hardware maker Logitec (Nasdaq: LOGI), effective Sept. 1. He succeeds interim CFO Meeta Sunderwala, who is the company's chief accounting officer. Anversa was previously CFO of Michigan-based thermal management company Gentherm and has held the same role at various companies, including Ferrari.
Doran Hall has been appointed CFO of renewable energy company Stem (NYSE: STEM), and will also oversee the company's software and services group, effective September 2. Hall succeeds current CFO Bill Bush, who will continue to lead the company's utility and large front-of-meter projects, as well as the supply chain team. Hall's renewable energy experience includes most recently serving as EVP and CFO of Ameresco, and previously serving as CEO of ReneSola.
Big Deal
According to a report from S&P Global Market Intelligence, U.S. corporate bankruptcy filings dipped slightly in July but are on track to be the worst year since the start of the COVID-19 pandemic. More than 392 public and eligible private companies have filed for bankruptcy in the first seven months of the year, the highest number since 2020, when there were 407 filings through July.
The report said high inflation and borrowing costs continue to impact demand, with the consumer discretionary sector being the hardest hit, with 60 companies filing for bankruptcy, followed by industrials (45) and healthcare (42).
Provided by S&P Global Market Intelligence
Going deeper
According to financial literacy company Nudge's annual Global Financial Well-Being Report, the majority of men (82%) and women (73%) aged 25-34 in the United States have set their sights on starting their own business. The report suggests that part of what's fueling this entrepreneurial spirit is that employees feel undervalued in the workplace: Nearly 70% of respondents in this age group said their employers see them as easily replaceable and interchangeable.
Stories I've heard
“Investors seem to have tended to ignore Trump's policies that have had more extreme economic consequences as evidence that the former president was not serious. If there was evidence that Trump was serious about these policies, the market would likely react.”
–Paul Donovan, chief economist at UBS Global Wealth Management, wrote a research memo to clients suggesting that former President and Republican presidential nominee Donald Trump is trying to undermine the Fed's independence, Fortune magazine reported.
This is the web version of CFO Daily, a newsletter about the trends and people shaping corporate finance. Sign up for free.
Source link
