Financial Analysis Essay: Is AI Taking Over The Work Of Financial Analysts?

Question

Task: Drawing on a wide range of sources, and within 1200 words (approx five pages), answer the following question: Are Artificial Intelligence and Machine Learning taking over the work that financial analysts used to do?
The evidence that you use to answer this question should be mainly derived from research that is published in academic journals, but as this is a fast moving area, you may use some good quality non-academic sources, such as the FT, Wall Street Journal or the Economist.

Answer

The current financial analysis essay talks about the role of financial analysts which includes various activities financial planning, financial analysis and basis financial analysis undertaking of important financial decisions. As a part of financial planning financial analysts have to prepare various kinds of budgets and forecasts so that an estimation of project or business financial state could be identified well before at the start of the year and thereby comparing actual performance with forecasted figures to analyse the overall financial performance.

With the advancement of technologies a modernised business world is growing at a fast pace in today’s era. According to the research on financial analysis essay, the use of Artificial Intelligence in various business processes has become a key to achieve organisational success. With the growing importance of accuracy and quick data, AI and its supporting technology machine learning have taken centre stage in the business organisations all across the world (Jordan & Mitchell, 2015). In financial sector, artificial intelligence has offered attractive ways to manage the activities with more accuracy and in real time (O'Leary, 2013). It is true that artificial intelligence have taken over the work of financial analysts to a significant extend as AI replicates human intelligence by enabling machines do whatever is done through manual processes. The core responsibility of a financial analyst outlined herein financial analysis essay is to analyse the suitability of any project or business on the basis of its financial performance. The analysis requires a great amount of professional expertise (Adhikari & Agrawal, 2014). Not only the financial sector is adopting the AI practices but also other sectors are aligning their business processes with the AI especially when it comes to analysing the financial performance of the business as a whole or a project in particular.

Artificial intelligence makes it possible to quickly run all the calculation, analysis and other related workings (through automated processes) that were once taken up by human experts in the traditional scenarios (Krollner, Vanstone & Finnie, 2010). The reports generated in traditional analysis process had higher chances of errors due to manual intervention but now the use of tools featuring artificial intelligence have reduced the chances of error almost to the negligible level. Hence, the reports prepared using AI tools are more found more accurate. As per the investigation on financial analysis essay, in last few years, remarkable growth of robots, digital assistants and the smart machines has been seen in almost every sector be it manufacturing sector or marketing sector (Dirican, 2015). As AI has made it quite convenient to stimulate the thinking process of human minds and their actions using various learning algorithms, the role of financial analysts have been affected out of it (Kou, Peng & Wang, 2014).

The availability of cost effective hardware and advanced level software along with multiple revolutionary AI technologies such as Internet of Things, Big Data, Cloud etc. has a sheer potential to create a new world for financial analysts where there routine work will be taken over by the machines and they will have to architect the analytics strategies in innovative ways (Sohangir, Wang, Pomeranets & Khoshgoftaar, 2018).Though it is correct to say that Artificial intelligence has taken over what financial analysts use to do in the earlier times but it does not imply that AI has caused elimination of role of financial analyst in an organisation. Rather, AI has supported the functions of financial analyst by providing them accurate input in the real time so that they can undertake the in-depth analysis part (Baldwin, Brown & Trinkle, 2006).

One of the key relevance of machine learning algorithms in the process of financial analysis discussed in the financial analysis essay is its ability to analyze large quantum of transactional data and real time flagging of suspicious transactions i.e. the transactions that involves high risk scores (Arnold, 2018). These activities were although taken by financial analysts manually using the tools like advanced excel and other analytics tools, in the times when the concept of artificial intelligence was not in place but due to manual intervention the data results could not be obtained as accurate as are required to take informed decision making and also such practices had required involvement of higher time (Daniels & Caron, 2009). The inability of human experts to process the data and prepare the report in real time did not often enable their reports to render their core purpose. The delay in generation of input for the analysis and inaccuracy of input more often leads to vague analysis causing incorrect decision making in the businesses (Cath, Wachter, Mittelstadt, Taddeo & Floridi, 2018).

Undoubted technology is a key to automate the routine tasks of the financial analysts and to identify data patterns in the large datasets, financial analysts do not lose their relevance in the companies (Soufian, Forbes & Hudson, 2014). Rather the true fact stated herein financial analysis essay is that role of financial analyst is being expanded wherein they will be entrusted with higher accountabilities which machines cannot perform with use of logics and algorithms. The unnecessary time which was earlier used to gather the input from different sources for the purpose of financial analysis will now be used in performance of high end activities such as in-depth analysis of data, exercising rational judgement based on the inputs generated though tools of AI and evaluation of quantitative algorithms (Bertone?che & Knight, 2001). The human decision making power still supersedes the AI capabilities. Further, it is accepted in this scenario of financial analysis essay that quantitative models are generally more superior to human experts but it is undeniable that they are more equipped to identify the subjective data such as future trends based on the microeconomic and macroeconomic conditions which are not taken into account while using artificial intelligence tools for financial analysis purposes. Further, AI, machine learning and big data proves to be less effective in the circumstances when there is uncertainty of outcomes and such outcomes are highly subjective to greater degree of randomness (Richins, Stapleton, Stratopoulos & Wong, 2017).

The impact of techniques like artificial intelligence on the role of financial analyst in future will majorly depend on continuous learning of different patterns, data interpretation or/ and providing unique financial services. The insights of accuracy, timeliness, predictions and other factors will shape the future of artificial intelligence and machine learning in the business organisations. From the above discussion on financial analysis essay it can be concluded that though artificial intelligence has resulted in transition in the roles of financial analysts by simply automating the routine tasks but it has not resulted in the elimination of scope of work for them. Instead, the role of financial analyst has been expanded in a way. The automation of basic task through AI has created room for more advanced level activities for financial analysts such as analysing the data and making judgements regarding the critical activities (Benninga, 2014). Human intelligence will always be required to implement and run the technologies in the business processes. It would be rather more correct to conclude the above readings prepared in the financial analysis essay that the key to digital transformation in the areas of financial analysis is coupling of financial analysts professionals with machines allowing both of them to contribute their areas of excellence in the financial analytical activities (Benninga, 2014).

References:
Adhikari, R., & Agrawal, R. (2014). A combination of artificial neural network and random walk models for financial time series forecasting. Neural Computing and Applications, 24(6), 1441-1449. doi:10.1007/s00521-013-1386-y

Arnold, V. (2018). The changing technological environment and the future of behavioural research in accounting. financial analysis essay Accounting & Finance, 58(2), 315-339.

Baldwin, A., Brown, C., & Trinkle, B. (2006). Opportunities for artificial intelligence development in the accounting domain: The case for auditing. Intelligent Systems in Accounting, Finance & Management, 14(3), 77-86. doi:10.1002/isaf.277

Benninga, S. (2014). Financial modeling (Fourth ed.). Cambridge, Massachusetts: MIT Press.

Bertone?che, M., & Knight, R. (2001). Financial performance. Oxford: Butterworth-Heinemann. (2001). Retrieved April 22, 2020, from INSERT-MISSING-DATABASE-NAME.

Cath, C., Wachter, S., Mittelstadt, B., Taddeo, M., & Floridi, L. (2018). Artificial intelligence and the ‘good society’: The us, eu, and uk approach. Science and Engineering Ethics, 24(2), 505-528. doi:10.1007/s11948-017-9901-7

Daniels, H., & Caron, E. (2009). Automated explanation of financial data. Intelligent Systems in Accounting, Finance & Management, 16(1-2), 5-19. doi:10.1002/isaf.290

Dirican, C. (2015). The impacts of robotics, artificial intelligence on business and economics. Procedia-Social and Behavioral Sciences, 195, 564-573.

Jordan, M. I., & Mitchell, T. M. (2015). Machine learning: Trends, perspectives, and prospects. Financial analysis essay Science, 349(6245), 255-260.

Kou, G., Peng, Y., & Wang, G. (2014). Evaluation of clustering algorithms for financial risk analysis using MCDM methods. Information Sciences, 275, 1-12.

Krollner, B., Vanstone, B. J., & Finnie, G. R. (2010, April). Financial time series forecasting with machine learning techniques: a survey. In ESANN.

O'Leary, D. E. (2013). Artificial intelligence and big data. IEEE intelligent systems, 28(2), 96-99.

Richins, G., Stapleton, A., Stratopoulos, T. C., & Wong, C. (2017). Big Data analytics: Opportunity or threat for the accounting profession?. Journal of Information Systems, 31(3), 63-79.

Sohangir, S., Wang, D., Pomeranets, A., & Khoshgoftaar, T. M. (2018). Big Data: Deep Learning for financial sentiment analysis. Journal of Big Data, 5(1), 3.

Soufian, M., Forbes, W., & Hudson, R. (2014). Adapting financial rationality: Is a new paradigm emerging?. Financial analysis essay Critical Perspectives on Accounting, 25(8), 724-742.