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AI-Powered Policy Compliance: The Future of Risk Management for CFOs

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By Ramesh Iyer, President & CRO, Happay

Given the fact that higher policy compliance reduces the levels of risk in the organisation,
every CFO invests in ensuring that their organisation complies with all relevant policies to
reduce wasteful expenditure and fraud.

Ramesh Iyer

In a CFO Barometer survey conducted by EY in 2021, 64% of CFOs said that it is the job of finance to be the organisation’s conscience. Preventing fraud and ensuring 100% policy compliance is one of the core responsibilities of modern CFOs, adding a complex task to an already heavy burden lifted by them.

Manual policy compliance is expensive (in terms of time & effort) and prone to errors. The majority of companies might find that they don’t have adequate staffing levels to monitor fraud activity and that the tools they use are too broad and, thus, relatively ineffective.

However, there’s hope for tech-savvy CFOs! There are ways to tap into the latest
technologies that have evolved to meet the highly specialised needs of businesses, thereby
reducing the burden somewhat and ensuring that the organisation is operating in line with
its T&E policies.

As automation technology blankets the various aspects of doing business, policy compliance is a match made in heaven for this cutting-edge technology. While AI can accurately spot irregularities in the final reports, the real magic lies in its ability to spot errors and control them before they occur. With a truly integrated Travel & Employee Expense Management platform, AI spots the policy violations at the time of the transaction and, if required, can be made to prevent such transactions from happening.

Modernising Travel & Expense Management To Reduce Non-compliance
One of the core requirements of AI-driven policy compliance is a clear, logical policy that is
easy to follow. Your policy should be very detailed in every aspect to dispense the need for
human intervention. For example, suppose you permit regional sales managers to book a
hotel room worth ₹5K when they are traveling. In that case, you might need to up the
maximum permissible tariff, too, say, ₹10K for expensive cities like Mumbai.

Implementing AI to achieve policy compliance is vital for the first two stages of digital
transformation – modernisation and enterprise-wide transformation. These focus on
reshaping the existing business to reap the benefits of digitisation truly. Without this, digital transformation will remain a distant dream for companies.

Let us consider how AI can become a CFO’s primary cost-saving tool when it comes to travel & expense management.

Automating data capture for accuracy
The contribution of digitisation towards reducing fraud cannot be overstated. According to a PYMNTS and Corcentric collaboration based on a survey of 400 CFOs, 50% of chief financial officers (CFOs) say digitisation reduced fraudulent transactions.

Fortunately, digital invoices have increasingly become commonplace in corporate India. For companies willing to tap into the right technology, this is an opportunity to completely
automate employee expense data right at the source, like debit/credit/corporate card
statements, SMS, emails, and ridesharing apps, thus paving the way for accurate, fraud-
free expense systems.

Automating invoice capture eliminates the opportunity of modifying invoices, thus reducing
fraudulent activities. Moreover, it reduces the possibility of manual errors made while
submitting invoices. For many reasons, it is one of the most potent tools a CFO can
integrate with the process to reduce wasteful expenditure.

Preventing policy violations at the source
Perhaps no other saying explains the problems urgency like a stitch in time saves nine
Reactive solutions are expensive for companies, often as expensive as the problem in the
first place. An AI-powered integrated travel & expense platform can capture the policy violations during flight and hotel booking, thereby preventing employees from making these violations in the first place. It also automatically detects policy violations during expense filing, thus keeping employees from raising expense requests that are not permitted under the company’s T&E policy.

In this scenario, AI serves as a diligent all-powerful employee that cannot be bribed, cannot
make mistakes, and cannot be biased towards any specific employee. Talk about a dream
team member!

Automating expense approvals
While expense approval processes are already lengthy, time-consuming and complicated for
the stakeholders, the possibility of the delays being expensive increases the pressure on the
process. Processing expense reports are expensive, and correcting the errors in them, both intentional and otherwise is even more costly. AI can tackle all of these simultaneously, thus saving time and money.

AI can recognise policy violations and automatically send the non-compliant expenses to the respective stakeholders. It can also add deviated approval workflows to speed up the
process. It’s a very fix-and-forget solution. If the company decides to revise the approval process or change the organisational structure at any time, it can modify the policies on the AI platform and forget about it again.

Automate expense auditing
Finance teams spend a lot of time auditing the expenses before approving and processing them. Throughout a workday and a typical month, one clerk might be able to process tens or hundreds of invoices—assuming that every single one conforms to expected standards and there are no errors to reconcile. As most of us know, this is rarely the scenario in the real world.

Thus, expense auditing is one of the most time-consuming jobs for any finance company.
Fortunately, AI can solve this task by understanding the T&E policy, automatically
recognising out-of-policy claims, and spotting duplicate items, banned items on invoices, or
duplicate invoices.

Quite often, internal frauds in financial institutions are unearthed either during internal
audits or through whistleblowing at least 12 to 15 months after such fraud is committed. AI
can fix this problem through real-time audit and analysis, thus saving the company a lot of
money.

Artificial intelligence is fast moving from the experimental to the operational. Smart, tech-
savvy CFOs are integrating AI into almost every part of the finance function, thus leveraging its powers of predictive analytics to make their role more strategic and proactive. The fact that this accounts for a better experience for employees and reduces the workload for the finance team is a bonus.

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