By Brad Barkin
Small accounting and financial services firms are facing escalating operation threats and vulnerabilities. Cybercrime is on the rise, with PwC reporting a 30% higher risk of cybersecurity attacks for financial firms. Additionally, accounting, tax preparation, and bookkeeping firms are navigating a growing staffing shortage. Technology can address both of these problems, from improved cybersecurity platforms to artificial intelligence-based tools to take over the routine processes normally handled by staff. Despite the transformative potential of AI, adoption remains limited, with only 3% actively leveraging AI in the financial services space.
The alarming lack of protection and high vulnerability margins pose significant threats to financial professionals, but the challenges don’t end there. Demanding workloads and lack of work-life balance often lead to pervasive burnout, and coupled with the recent discovery of a shortage of 340,000 accountants in the U.S., these issues can further exacerbate already overworked accountants. Thus the question stands: How can the financial services industry use technology to protect themselves and their clients without taking too big of a risk and within budget?
To better understand the challenges and needs of financial professionals, Embroker commissioned a survey of more than 200 in-firm and independent accountants. The results confirm a sneaking suspicion: financial professionals are prime targets for cyberattacks, and because of this, they need better security. Firms hold massive volumes of sensitive client information, including names, addresses, identification documents, and bank account information. And the risk doesn’t stop at clients: 67% of surveyed accountants report having entered their personal financial information into their work computers, jeopardizing even themselves.
Firms are responsible for actively safeguarding both their employees’ and clients’ personal data. However, responsibility does not always translate into action. Just over half of accountants report having done some form of cybersecurity training at work—a serious pitfall for both employees and IT teams. Of those who have done cybersecurity training, one in two reported that it was only slightly effective, or worse, that it wasn’t effective at all.
It’s crucial to remember that while technology is essential, human involvement in financial services work remains indispensable. The capabilities of these new technologies have led to heightened expectations for humans: zero mistakes and faster outputs. Nearly half (46%) of accountants have encountered situations where errors in their work resulted in financial losses for both their company and clients. A staggering 72% of accountants who experienced these errors report either personal or corporate accountability, underscoring the critical need for enhanced safeguards within the industry.
One solution to this problem is hiring more accountants to better distribute the volume of work. However, the American Institute of Certified Public Accountants (AICPA) estimated that about 75% of CPAs will soon reach retirement eligibility. This, paired with a steady decrease in new students electing to study accounting, has resulted in firms facing a significant talent shortage. Technology can help aid accountants and make their workload more efficient despite staffing reductions and augment their day-to-day work to give them more time to focus on value-added services, such as consulting and advisory. Accounting and financial services firms can implement AI solutions for tasks like data summarization, organization and analysis, as well as expense and payroll processing, reporting, forecasting, fraud detection, and workflow automation.
These tools can significantly enhance efficiency and accuracy. AI algorithms are adept at fraud detection and risk management, capable of identifying potential fraud in financial transactions. Leveraging technology also allows leadership to prioritize staff development through training. AI in particular has the added benefit of evenly distributing workloads, making them more manageable for accountants.
But as great as these can be, every tool comes with risk. While using AI can advance operations significantly, it also has its downsides. Because it lacks contextual awareness, AI can make more mistakes compared to human intuition. Even though AI systems are incredibly powerful in processing vast amounts of data, they often struggle to understand the nuances that humans effortlessly grasp.
AI systems are also increasingly used in decision-making processes, despite evidence of data bias. While AI systems rely on biased data to make decisions, they perpetuate and amplify existing inequalities and discrimination. If AI systems used for hiring rely on biased training data that favors certain demographics or educational backgrounds, it can lead to discriminatory hiring practices, for example.
The heightened scrutiny facing today’s accountants and financial services professionals underscores the need for actionable solutions. Errors will always be a risk, but it’s essential to recognize that they often stem from underlying, systematic issues. Addressing these challenges requires proactive measures and innovative solutions. Implementing AI solutions can alleviate the pressure on accountants, paving the way for fewer errors, more efficient work, and a less stressful working environment for everyone.
Oh, and some solid insurance policies wouldn’t hurt, either.
ABOUT THE AUTHOR:
Brad Barker is vice president of law and accounting practice at Embroker, a leading digital insurance brokerage.
