Since the inception of Bitcoin in 2009, crypto-currencies have dominated headlines, with investors and politicians alike trying to make sense of them. To learn more about how consulting providers are helping clients understand what impact blockchain technology can have on their functions and business models, ALM Intelligence's Senior Analyst Tomek Jankowski spoke with KPMG's Eamonn Maguire, Global Financial Services Lead for KPMG Blockchain Services, and Tony Alejo, Managing Director for the Management Consulting Advisory practice.
ALM Intelligence: In what ways is blockchain impacting CFOs?
Maguire: In general, we think that blockchain is going to arrive later for the finance function than it will for the middle and back offices. Other lines of business ultimately will adopt blockchain first with finance to follow. However, today there is a meaningful amount of work that is being done in supply chain and in the late stages of supply chain that affects the procurement function, and the procurement to-pay process. We are involved in a number of initiatives that address procurement to pay, this helps clients in driving better accountability against procurement standards and service level agreements.
Alejo: I agree with Eamonn. One of the other areas where blockchain is impacting CFOs and their functions is account and sub-ledger reconciliation procedures. This is an area where the finance function is going to be impacted posing the question, 'if the effort isn't going into reconciliation activities, where is it going?' We are working with CFOs to help to free up capacity for analysis, understanding the financial impact of business events, and helping to drive strategic business decision support rather than investigating reconciling differences.
ALM Intelligence: Most opportunity seems aspirational. Where's blockchain having an immediate impact?
Maguire: Well, I think that's an extension of the maturity phase in particular, because it's agreed upon by the participants in the blockchain and should say as to what the terms and conditions are of a contract, that a producer is expected to observe. There's going to be a higher level of confidence in terms of how contracts are applied, based upon the commercial contracts that they have, and therefore what the penalties and/or the incentives are. There are examples today of how blockchain is being applied, not only in being able to better track the transmission of parts, but also the application of the commercial contract. Leakage is being reduced right now by blockchain in better tracking today; and recovery, which is about the application of a commercial contract is being impacted by blockchain right now.
Alejo: Yes, there are areas where blockchain is having an impact. For example, I'm working with a surety insurance company where we are addressing disputes with agents on commissions. Smart contracts are enabling our client to codify the commission percentages as agreed upfront with agents so that once a policy is written payments can be executed, removing the efforts to address disputes.
ALM Intelligence: Where does KPMG see the big growth opportunities down the road for CFOs in blockchain?
Maguire: I don't think that CFOs are dealing with this right now. CFOs are going to need to deal with it in the future. As the extension of blockchain increases more firms adopt blockchain, institutions are going to find that its transactions are going to be multiple blockchains that they need to address. Not all the blockchains will have the same data standards, and so there will be a requirement to address interoperability as well as a requirement to ensure that the data harvested from the various blockchains has been standardized so that it can be incorporated into the internal systems. That, I think, is probably about three years away.
Alejo: I would just add that the CFO has one of the best opportunities to challenge existing operating models – how their companies collaborate with their customers, vendors/suppliers, and other business partners to initiate or get involved with blockchain enables consortia to drive business efficiencies.
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