CFOs in recent decades have faced several actual or possible nightmare scenarios — the collapse of mortgage finance, a once-in-a-century global pandemic, a sudden worldwide shortage of life-sustaining grains and the risk of the first nuclear weapons attack since 1945.
Most CFOs did not, or would not, predict such crises and the harm to their companies’ revenue and operations, according to Gartner. But by using artificial intelligence (AI) in scenario planning soon after a crisis erupts, a CFO can quickly estimate the business impact and act to limit losses.
“We’re not making a magical prediction about dark horizons,” Mark McDonald, a Gartner senior director analyst, said Monday in an interview. Instead, a CFO using AI can “navigate that horizon.”
By using AI in scenario planning, CFOs can evaluate a much broader range of possible risks and business outcomes and gain greater insights on the probability of occurrence and when and how to respond, McDonald said at the Gartner CFO and Finance Executive Conference.
“AI introduces a very compelling alternative to our traditional scenario planning process,” McDonald said during a presentation at the conference at National Harbor, Maryland. “It’s not going to eliminate your worst case scenario, but it’s maybe going to mitigate a worst-case scenario.”
CFOs tend to shy from gathering a broad range of data when attempting to limit risk through traditional scenario planning, McDonald said. “We’re averse to it in finance because it drives up the complexity and we’ve got to analyze all this new stuff.”