# Could AI hold the key to business recovery?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-12-16
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Maximise business success in 2021 with AI financial
Meta Description: Discover how AI is reshaping financial analytics post-COVID, offering better insights, faster decisions and improved forecasting for unpredictable markets.
URL: https://financedigest.com/could-ai-hold-the-key-to-business-recoveryhtml

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_By **Xavier Fernandes,** Analytics Director at [Metapraxis](https://www.metapraxis.com/), the financial analytics firm_

2020 has been an unpredictable year, bringing volatility to already uncertain markets. Many businesses are feeling the strain of the effects of the pandemic and have spent the last nine months trying to keep the company going. Not only has it been necessary to adapt and react in real-time to ever-changing circumstances, but companies have also been looking to bolster their finances with an eye to surviving future challenges. With arguably the worst of the economic fallout of Covid-19 still to come, it’s key that [business leaders](https://www.financedigest.com/how-business-leaders-can-adapt-or-replace-covid-related-perks-to-the-post-pandemic-world-while-keeping-employees-on-side.html "How business leaders can adapt or replace Covid related perks to the post-pandemic world while keeping employees on-side") use all the tools and technology at their disposal to deal with the challenges ahead and secure a successful 2021 and beyond. Fortunately, [businesses can take the lessons and data from the tough past few months and use that to prosper whilst navigating further market](https://www.financedigest.com/how-to-create-a-pr-plan-and-link-it-to-your-business-marketing-strategy.html "How to create a PR plan and link it to your business marketing strategy") uncertainty before we see calmer waters. One striking lesson is that algorithms which make room for human predictions can far out-perform both AI and human expert-only forecasts.

**Changing demand post-COVID**

For years, AI has delivered benefits to businesses, including more insightful analysis to support management decisions, [creating better customer experiences](https://www.financedigest.com/customer-experience-creating-the-calm-in-the-chaos.html "Customer Experience: creating the calm in the chaos"), and reducing costs by automating time consuming processes. Yet, despite these benefits, many firms have still been hesitant even just to run trials let alone [implement production](https://www.financedigest.com/how-to-implement-ethical-employee-productivity-monitoring-for-future-business-growth.html "How to implement ethical employee productivity monitoring for future business growth") capabilities. Since the [crisis hit](https://www.financedigest.com/analysis-forget-showering-its-eat-or-heat-for-shocked-europeans-hit-by-energy-crisis.html "Analysis-Forget showering, it’s eat or heat for shocked Europeans hit by energy crisis"), many of these businesses have realised that the benefits far outweigh their reservations. They want to be better able to mitigate black swan-type events, and they want access to real-time, higher-quality management information, and therefore the ability to make better and faster decisions.

But whilst interest has increased, many firms are still not confident in the capabilities of AI tools, or [don’t understand what data is needed](https://www.financedigest.com/you-dont-need-magic-to-anticipate-your-customers-needs-just-the-right-tech.html "You don’t need magic to anticipate your customers’ needs, just the right tech") for successful implementation. There is certainly more awareness that most AI algorithms are trained on past [performance of the business](https://www.financedigest.com/how-business-owners-can-improve-their-operational-and-financial-performance-through-contactless-and-card-payments.html "How Business Owners can Improve their Operational and Financial Performance through Contactless and Card Payments") – and the more historical data there is, the better those algorithms can perform. There’s also [growing understanding that the predictions of algorithms are just guidance and should still be questioned as to how precise the forecasts](https://www.financedigest.com/automotive-racing-seats-market-is-projected-to-grow-with-a-cagr-of-8-10-for-the-forecast-period-of-2021-2031.html "Automotive Racing Seats Market is projected to grow with a CAGR of 8% – 10% for the forecast period of 2021-2031") are. But with this [growing understanding can come new doubts for AI-wary businesses:](https://www.financedigest.com/philanthropy-is-an-underrated-tool-for-growing-financial-services-businesses.html "Philanthropy Is an Underrated Tool for Growing Financial Services Businesses") if the algorithms are trained on historical business patterns, what happens when those business ‘norms’ suffer shock scenarios?

Firms are right to want to know how AI tools will help them produce effective forecasts for a whole range of scenarios and help them better [deal with unpredictable situations – like the pandemic](https://www.financedigest.com/big-pharma-may-have-to-reveal-government-deals-in-whos-draft-pandemic-rules.html "Big Pharma may have to reveal government deals in WHO’s draft pandemic rules") and its aftermath.

**What can AI offer?**

![Xavier Fernandes](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/xavier-fernandes-1736838668960-compressed.jpg)

Xavier Fernandes

Historically, AI has been particularly useful for supporting tasks with repetitive activity, for example, performing financial checks and analysing large sets of [data](https://www.financedigest.com/whose-role-is-it-anyway-why-finance-underpins-data-led-digital-transformation.html "Whose role is it anyway? Why finance underpins data-led digital transformation"). AI performs particularly well within this context, spotting outliers before a human expert would notice them and allowing impending problems to be flagged to avoid [costly mistakes](https://www.financedigest.com/life-insurance-for-seniors-can-be-a-costly-mistake.html "Life Insurance For Seniors Can Be A Costly Mistake").

By doing so, it can also be used to predict existing customers’ [future needs as well as track trends](https://www.financedigest.com/nutragenomics-market-overview-forthcoming-technologies-future-trends-latest-insights-by-share-outlook-till-2022-2029.html "Nutragenomics Market Overview, Forthcoming Technologies, Future Trends, Latest Insights By Share, Outlook Till 2022-2029") in their financial circumstances, supercharging the ability to cross and up-sell products. With potential benefits like these on offer, [management teams of innovative businesses](https://www.financedigest.com/intelligent-receivables-management-why-its-a-businesss-greatest-ally.html "Intelligent Receivables Management: Why it’s a business’s greatest ally") can rely on AI to help them with some of the heavy lifting of predictive and prescriptive analysis.

Whilst those advantages are always helpful, the most relevant advantage AI can offer in the aftermath of [Covid-19 is scenario](https://www.financedigest.com/global-emi-shielding-market-significantly-hit-by-lack-of-consumer-demand-scenario-post-covid-19-crisis-likely-to-remain-gloom.html "Global EMI Shielding Market Significantly Hit By Lack Of Consumer Demand; Scenario Post Covid-19 Crisis Likely To Remain Gloom") modelling. Using advanced data capabilities and learned behaviours, AI can analyse [market trends and historical business performance in relation to external factors to provide early warning forecasts](https://www.financedigest.com/car-bulb-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2028.html "Car Bulb Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2028") of future performance. These insights can be truly invaluable in our current climate, allowing management teams to modify direction [early and take calibrated small steps to mitigate any risks](https://www.financedigest.com/early-detection-of-mismatched-trades-is-key-to-managing-risk-and-maximizing-profits-on-the-pl-desk.html "EARLY DETECTION OF MISMATCHED TRADES IS KEY TO MANAGING RISK AND MAXIMIZING PROFITS ON THE P&L DESK") and avoid management later feeling cornered into taking drastic and potentially further-destabilising action.

**Helping with the** [COVID aftermath](https://www.financedigest.com/the-aftermath-of-covid-19-cybersecurity-crisis-have-the-attacks-benefitted-the-industry-more-than-they-hurt-it.html "The Aftermath of COVID-19 Cybersecurity Crisis: Have The Attacks Benefitted the Industry More Than They Hurt It?")

Clearly, in uncertain times, a tool that allows CFOs to see how certain factors would impact performance is invaluable. But to utilise it properly, [businesses must](https://www.financedigest.com/a-taxing-issue-ten-tax-invoicing-pitfalls-that-international-businesses-must-avoid.html "A taxing issue: Ten tax invoicing pitfalls that international businesses must avoid") understand what the technology needs in order to produce accurate, useful forecasts.

The [pandemic was such a rare event that businesses did not have any previous data on the impact](https://www.financedigest.com/wework-rival-iwg-quarterly-revenue-dips-on-prolonged-pandemic-impact.html "WeWork rival IWG quarterly revenue dips on prolonged pandemic impact") of anything remotely similar. This meant that many scenario modelling tools struggled to accurately [predict the actual business](https://www.financedigest.com/disruption-and-innovation-four-predictions-for-the-business-landscape-in-2016.html "DISRUPTION AND INNOVATION – FOUR PREDICTIONS FOR THE BUSINESS LANDSCAPE IN 2016") outcomes because they had no relevant historical data to utilise. Now, as long as [businesses have collated relevant data](https://www.financedigest.com/three-ways-data-unlocks-business-value-for-financial-organisations.html "Three Ways Data Unlocks Business Value for Financial Organisations ") from 2020, there is 9 months’ worth of ‘pandemic’ business performance data to analyse and train algorithms, meaning forecasts can be generated to model future shock events.

It should be noted that algorithms like large amounts of data – and nine months [isn’t necessarily that long in the context of business](https://www.financedigest.com/isnt-it-time-open-banking-delivered-for-businesses.html "Isn’t It Time Open Banking Delivered for Businesses?") performance. Therefore, larger data sets may [need](https://www.financedigest.com/the-four-pillars-of-data-integrity-what-finance-businesses-need-to-know.html "The four pillars of data integrity: what finance businesses need to know") to be synthesised with some data science wizardry from the ‘pandemic’ dataset and the historical business-as-usual datasets.

It [must also be remembered that the tool can only work if the previous information is representative of business](https://www.financedigest.com/to-get-employees-back-in-the-office-business-leaders-must-do-their-homework.html "To get employees back in the office, business leaders must do their homework") decisions and outcomes, so all relevant factors must be taken into consideration. For example, if the tool is basing its decisions on data from the UK and on a certain product, it should not be assumed it will give accurate [business forecasts for the US market](https://www.financedigest.com/global-sulfate-free-body-wash-market-business-opportunities-current-trends-growth-market-forecast-global-industry-analysis-by-2029.html "Global Sulfate Free Body Wash Market: Business Opportunities, Current Trends, Growth, Market Forecast & Global Industry Analysis By 2029") with a different product.

There is still one massive hurdle that typical AI-generated algorithms face – they generally fare poorly if the information they have on the market no longer represents, or encodes, the [drivers of that market](https://www.financedigest.com/new-report-of-fuel-conditioning-system-market-with-size-growth-drivers-market-opportunities-business-trends-and-forecast-to-2028.html "New Report Of Fuel Conditioning System Market With Size, Growth Drivers, Market Opportunities, Business Trends And Forecast To 2028"). This is where humans’ amazing ability to synthesise all sorts of different inputs into a decision can be applied to great advantage.

**Human-AI collaboration**

We often hear talk about how algorithms can augment human capabilities. Indeed, the ability of algorithms to free up the [business from the soul-destroying task of creating monthly forecasts and instead focus its energy on achieving better company](https://www.financedigest.com/keeping-an-eye-on-company-purse-strings-where-do-businesses-go-wrong.html "Keeping an eye on company purse strings – where do businesses go wrong?") performance has been a game-changer for many organisations. Some of the best-performing of those algorithms take proxies for human forecasts – say sales pipelines or [raw material](https://www.financedigest.com/henkel-trims-earnings-outlook-on-raw-material-price-spike.html "Henkel trims earnings outlook on raw material price spike") orders – and then correct for the human biases they have discovered by analysing historical performance.

What we saw in the immediate aftermath of the lockdowns was that where algorithms incorporated such proxies, they [adapted swiftly to the changed market](https://www.financedigest.com/how-brands-can-adapt-marketing-tactics-to-better-suit-customers-changing-shopping-habits.html "How brands can adapt marketing tactics to better suit customers’ changing shopping habits") situations despite not having any equivalent situations in the historical data they utilise.

So, whilst we often think of algorithms augmenting human capabilities, human ability to assess the [impacts of a black swan event can effectively](https://www.financedigest.com/the-power-and-impact-of-effective-conversations-in-the-workplace.html "The Power and Impact Of Effective Conversations in the Workplace") augment algorithms’ capabilities resulting in agile, trusted forecasts which would have been unachievable by algorithms or humans alone.

Such human-AI collaboration will be critical for many businesses in helping them [navigate their way out of the pandemic and through the economic uncertainty](https://www.financedigest.com/why-a-liberated-cfo-and-fintech-solution-are-a-dream-partnership-for-navigating-economic-uncertainty.html "Why a liberated CFO and fintech solution are a dream partnership for navigating economic uncertainty") that still awaits.


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