The Future of Asset Management in the Age of AI: CFO Perspectives

Atul Chaturvedi:

Welcome to the Global Economic Risks Navigator Thought Leadership series.

We at Infosys, we believe that insurance companies are the guardians of the global economic risks and that’s very important when it comes to how we as individuals and societies and countries look at the risk and look at the strategy in terms of navigating the different agendas we have in our society.

So I have privilege of having two esteemed leaders with me here today for discussion, Thomas Schindler, CFO of Allianz Global Investors and Deepak Bhalla, Chief Risk Officer at Infosys.

So on that topic, I would like to start with you, Thomas. We are entering the AI era. In fact, we have just already entered it. So how does Allianz Global Investors look at putting the whole strategy in front in terms of AI and automation in your organization?

Thomas Schindler:

So first up, I think there's a pretty big divide between those firms which can deploy literally billions on AI and those which cannot. And we clearly fall into the latter camp. Does that mean this isn't a strategic priority for us? Absolutely not. So what is it we do? We started out in a really playful manner in all areas around AI, just giving people tools to play around a little bit, prompting, testing what individual tools could do. And then gradually we moved into a more strategic mindset trying to identify use cases which were really capable of transforming our value chain. Right now it's probably fair to say we are in mid flight around those topics. So we've changed fund reporting, client reporting through the application of AI. And for example, we also developed an ESG Risk Monitor where we pick up sustainability sentiments from the market. By tackling those seemingly small topics, we were able to save hundreds of hours of busy work. And we are reapplying that to more meaningful areas. And to me, that's what AI is all about, to figure out what are the areas where human intelligence can provide more value and what are the areas where AI takes preference. And that line keeps shifting. And that's the really exciting part about AI.

Atul Chaturvedi:

Thank you, Thomas. Deepak, coming to you as a Chief Risk Officer, how do you view AI applied in an enterprise?

Deepak Bhalla:

So Atul, AI is emerging as a very, very transformative agent using data to drive decision making, which is basically using the enterprise data, making sense of it, trying to create patterns out of it, and then using that data to make better decisions as an organization. I think that is where the real transformative power of AI is going to be used. If you look at the risks that we are talking about, in this AI era and how things have changed over a period of time, I think the biggest risk in my mind is the risk of the data security and making sure that you're not PII is not getting proliferated and stuff like that, right? Ensuring that you’re not ending up losing somebody’s data because somebody forgot to put guardrails around a certain type of work that we are doing. And that’s where the responsible AI, the second part of the risk comes into picture to make sure that you have a proper framework of responsible AI built. And that's something where Infosys and companies like Infosys have to lead the way because a lot of our clients, their ability to do this is probably limited because they are more worried about solving their business problems than to look at what the responsible AI frameworks need to be built up around it. So that’s where we need to come in. And the last one would be around removing biases from the data. As you know, a whole bunch of our data available on the internet today has a lot many more biases towards a certain set of business practices or ethnicities and things like that. How to remove all of those and making sure that those guardrails are actually very, very strong. And I think by tackling some of these risks and tackling some of these, these imperatives, that we can actually make use of the AI and the transformative power of AI to generate value for an organization.

Atul Chaturvedi:

And, Deepak, you brought some very great points on this front. So talking about CFOs role in business strategy. Thomas, the question I have for you is that what is the key strategic role that CFO plays in an organization like Allianz Global Investors?

Thomas Schindler:

As a CFO, it depends a little bit what kind of organization you are rooted in. If your role as a CFO is quote unquote only to make sure that the numbers are correct, that they are properly reported and accounted for, it's possible, but it's more difficult to really step into a strategic role. If you look at my remit, I have the benefit of not only being responsible for finance, but also for legal, compliance and risk management. Now, if you look at all those topics, I think that's a tremendous opportunity where you can step into the role as a copilot to the CEO quite easily. And that's a real opportunity, a real intellectual playground. But conversely, I think then it's your obligation to ask challenging questions, to challenge the business, to help the franchise navigate ambiguity and not only recuse yourself to say no, but also map out the way forward, help identify ways to invest. Because the better you're striking the balance between protecting the franchise on the one hand side and finding ways to reinvest in more profitable areas, the better job you're going to do as a strategist.

Atul Chaturvedi:

Thank you, Thomas. On this topic, Deepak, from your role perspective, what are the most critical emerging risks, that you have seen in the industry in terms of what global asset managers must prepare for?

Deepak Bhalla:

So Atul, if you look at the entire, landscape of business around, there are three key risks that in my mind emerge from a risk management perspective, which are extremely important for any organization to worry about, particularly companies which have large footprints globally. The first one is the bigger you are, the more exposed you are to technological risks. And technological risks are from all dimensions, whether it is from a cyber security perspective, which is these days it's becoming more like a when you get penetrated rather than if you will get penetrated. So that's, sort of one risk that you're talking about. You also add to that risks of data proliferation, the risk of leakage that happened from your advertently or inadvertently. How much data you're storing as an organization? Are you storing the right amount of data? GDPR requirements, and various countries are coming up with their own technological requirements from various places in terms of where you can store data, where you can't store data and stuff like that. And the last one, which is particularly for companies having footprint in various countries like us ourselves, is the geopolitical risk. And if you are operating in one of those countries which is susceptible to this or either directly or indirectly by being connected with the supply chain, you do have that risk that that you are living with at that point of time. So how do you do risk mitigation to ensure that various factors that need to be considered are being taken into account to ensure that you are, you have your strategy right, that in case this low probability but high impact risk were to fortify for you, how are you going to pivot the organization to making sure that you continue to remain relevant and continue to service your customers?

Atul Chaturvedi:

Thanks, Deepak. Similarly, maybe, Thomas, your perspective on the same question. It's about, what are the most critical emerging risks that you see?

Thomas Schindler:

If I had to pick the top three risks high on my agenda, those would be the three. First, macroeconomic and geopolitical volatility. It's always been there, but it feels different now. It feels different for good reason, because we live in a state of almost constant disruption. From a risk management perspective, the idea cannot be to manage every possible risk. Rather, your goal must be to build a resilient organization which can absorb risks and still move forward with intent. Second, anything around profitability and cost pressure. In our industry and that is asset management, we've enjoyed several decades of continued growth. It's fair to say that era is coming to an end. Conversely, our cost base has not come down in equal parts. So we really need to thread a fine line between managing costs, but at the same time reinvesting in profitable areas. And the third one is anything around artificial intelligence and technology. And 1 or 2 decades ago, people still talked about IT as mostly an efficiency and cost item. These times are over. If you are still spending a significant amount of your budget on legacy systems and maintaining the status quo, as opposed to reinvesting in change, you are falling behind and you are falling behind real quick because AI is changing the game. So you really need to invest there. So what used to be a cost item in an IT bucket is now turning into a strategic vulnerability.

Atul Chaturvedi:

Thomas, also, your perspective on what do you think will drive success in navigating through this landscape?

Thomas Schindler:

I think if we have learned anything over the past five, ten years, is you can't manage all possible risks. You really need to prepare a resilient organization which can absorb those risks and still move forward. One way to do this is you need a resilient infrastructure and operating model. Clients put a lot of trust in us, and they do that because they are looking for consistency, even in cases of disruption. Good teams win, outstanding teams win consistently and your objective needs to be how do you put yourself in that position as often as you can. And it starts with the basics. You want to have solid platforms. You want to have a robust infrastructure and you want to be really focused on appropriate governance and oversight. Second, there's no way to shrink yourself to greatness. Even in times of high cost pressure, you need to find ways to be disciplined about execution, about reinvesting and finding meaningful ways to grow. And the third one is, as an organization, I think you need to constantly ask yourself the question, why do we matter? Why are we relevant to clients? What do they really need from us from a product perspective? And the same is, by the way, true for current or future employees. How do you stay relevant as a franchise in attracting talent? The funny thing about disruption is this doesn't come about in a big bang moment. Most areas which are being disrupted that happens in baby steps, slowly. And then after multiple years you realize that it’s too little, too late. And that's what outstanding organizations do really well. They are almost constructively paranoid around areas they should be concerned about and turn that into a strategic advantage by investing. And if you do that, that's the best form, the best possible form of resilience.

Atul Chaturvedi:

Thank you Thomas, I think we really enjoyed this discussion. I think some great topics were discussed right from the role of AI in terms of technology automation and to the role of CFO, how it is shaping the business strategy. And then also in terms of the outlook and how do we actually bring this into enterprises. And I think some I would take your last point in terms of it’s very important for organizations to keep thinking, what are the top questions?

So it is a very exciting times. And as we look ahead, every organization is trying to do something whether it is about the consistency of how it is governed and managed, and it forms part of a overall business strategy that defines how that impact is created.

So thank you so much, gentlemen, for the time today. It was a pleasure talking to you. And, I hope to again engage in a discussion maybe sometime later in the series as part of the series. So thank you.