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  • Writer's pictureNick Roquefort-Villeneuve

CFOs and Blockchain: What Relationship Status?

Leadership requires the ability to bring key-people together to build communication and collaboration channels that will play a crucial role in executing the overall corporate strategy and creating a perennial and sustainable financial health. Along with other C-Level Executives, this is the CFO's role. Moreover, we are in a digital economy that continues to evolve exponentially. Professionals who cannot embrace those changes are often left on the side of the road. Therefore, CFOs must deploy technological tools that facilitate internal and external collaboration, while constantly keeping in mind one major target, which is to manage finance efficiently while maintaining all required levels of compliance.

CFOs are slowly but surely becoming acquainted with a revolutionary technology: Blockchain. This cutting-edge technology, which I believe is going to have business ramifications far greater than those the Internet created, is slowly starting to spread across many key-industries: Financial Services, Supply Chain and Logistics, Oil and Gas, etc. The fact is that today's CFOs cannot ignore the conversation around Blockchain and its advantages anymore. They cannot afford to pass on tools that will benefit their businesses while minimizing the risks.

Why Should CFOs Adopt Blockchain?

To vulgarize the concept of Blockchain, it is a technology that eliminates intermediaries. You can view it as a decentralized peer-to-peer platform, where consumers and suppliers are able to engage directly in a transaction, without the intervention or the need of a third party. Moreover, the transaction and all its inherent details are digitally recorded as soon as it occurs. Finally, the system audits itself every few minutes to continually validate the information that is stored. Again, the system is decentralized, which means that it is virtually impossible to compromise it. If it is altered in one location, there is no ripple effect and the other locations remain unaffected. Therefore, Blockchain distances itself from the cloud as you know it, a centralized location that can be highly vulnerable if security measures are taken lightly. Do I hear Equifax breach…?

It is important that CFOs be able to grasp the financial advantages that Blockchain offers.

Intermediary Elimination: As mentioned above, Blockchain bypasses intermediaries to offer a peer-to-peer transactional environment. Information is stored in the Blockchain, not inside some external systems. It is also a cost-efficient technology, since ruling out an intermediary infers eliminating overhead charges linked to the transaction.

Data Validation: Without the ability to validate data, CFOs expose themselves to serious compliance issues. Since there is no third-party involved, only those individuals who are part of the transaction have full control of all the information that pertains to the transaction.

Faster Transactions: Transactions are carried instantly. Attributes, which are included in the code, get triggered as soon as a specific action takes place. Simultaneously, the transaction and its inherent details are recorded in the Blockchain. Transactions can happen at any hour of the day or night. And payments are instant, which eliminates delays.

Enhanced Transparence: All transactions are viewable at all times by all stakeholders. The data cannot be altered or removed.

Should CFOs Be Scared of Blockchain?

Blockchain is a new and highly disruptive technology, and like anything that is new and disruptive, it can be scary. Do you remember the first time you typed your credit card number on the Internet to book a table for two in a grossly overpriced yet romantic restaurant for Valentine's Day? Yes, this kind of fear. Recently, there have been many articles about North Korean hackers stealing five hundred-million-dollar worth of cryptocurrencies from a South Korean platform; and cryptocurrencies are indeed exchanged on the Blockchain. But this is not what I am writing about. What CFOs are interested in pertains to B2B applications that run on the Blockchain, and this has nothing to do with theft and other speculative behaviors that happen around Bitcoins and other virtual currencies traded via the Blockchain.

So, what could be those fears?

Precarious Migration and/or Integration: It's always difficult to understand the benefits and the complexity of a new technology. And I assume your Finance department is currently using solutions that are doing the job, despite the occasional glitch here and there. The migration to a Blockchain solution requires change, and again change can be frightening. Furthermore, change often rhymes with risk, and risk for a Finance department means higher or unexpected costs. A centralized system like the cloud, on which your solutions currently run, is far less complex than a decentralized platform like the Blockchain, which necessitates an interconnected network of clouds. Thus, there might be significant initial capital costs associated to such a migration, however the benefits as mentioned in the previous section are multiple. And remember, the biggest risk for a CFO is to miss the Blockchain train and find his or her organization distanced by a competition that will have understood the advantages of migrating to or integrating Blockchain-based B2B solutions early on.

Regulatory Fog: As of today, governments haven't widely accepted Blockchain, and the reason mainly lies in the fact that this is a technology that is still misunderstood and misconceived. Therefore, there is no firm regulation, which can create uncertainties or even confusion around requirements for compliance.

CFOs and Blockchain: "It's complicated?"

Education is key. Thus, it is a necessity that CFOs learn about Blockchain and how the technology can benefit their day-to-day operations. It is also crucial that CFOs comprehend and measure the competitive edge that Blockchain will create. It's about having a vision. It's about wanting to understand this paradigm shift that Blockchain embodies. Did you experience the time, when debates in the board room were about brick and mortar versus online presence? Do you remember how difficult it was back then to visualize the transition or even try to materialize all the elements involved in the process? Well it's that, but tenfold. Still, as I said in a previous post, missing the Blockchain train might signify the beginning of the end for your organization.

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