“Disruptive technological forces are impacting finance. Finance professionals should be upskilling in order to stay competitive” says Professor Raghavendra Rau.

Technology and finance disruption. These words usually conjure up negative images of robotic process automation and machine learning replacing people’s day-to-day jobs and industries. Talks about rapid technology advancements such as the often-touted artificial intelligence (AI) have largely focused on whether it will make people redundant or shift work to more productive tasks. However, such talks often miss the larger transformative impact: how humans coordinate and make decisions in organizations.  

This is a topic that Dr Raghavendra Rau, a professor from the Cambridge Judge Business School, will explore when he teaches a three-day course on technology and finance disruption at the Amsterdam Institute of Finance.

Raghavendra (commonly called Raghu) will anchor his course on how technology is disrupting the field of finance. Raghu is au fait with the topic and has written extensively on it over the past decade, with a specific focus on fintech, behavioral finance, and corporate governance.

Like many other disciplines, finance has not been spared from the disruptive nature of technology improvements. The field of finance is evolving to include heavy data to inform decision-making processes and forward-planning activities in organizations.

Use of data is becoming a priority

Raghu says access to and use of data is becoming a priority for organizations, which can use digital technology to synthesize and interpret information, enabling smarter and faster business decisions.

Good data, he says, can give organizations a competitive edge because it can help facilitate customer targeting, guide sales, and revenue growth expectations and even help monitor the productivity of staff members.

“The main themes I will be exploring during the course are organizational design in the age of technology improvements and how organizations are using technology.  We will try to help participants of the course understand how they are dealing with and reacting to technology improvements in their own organizations.”

“We will also explore how to design an organization today versus before improvements in technology, and how these changes impact the way in which people work,” he adds.

Raghu is fascinated by human behavior and the ways in which humans make sense of the world. Although his fascination would have – arguably – better suited him to pursue a career in psychology, his career path has been unconventional.

He received an undergraduate degree in chemistry at Delhi University in 1987 and an MBA from the Indian Institute of Management Bangalore in 1989. Raghu began plying his trade in the business sector after his studies, working for Indian Oil Corporation, an Indian state-owned oil, and gas company, for two years.

“I didn’t enjoy the job because it was boring. That’s when I realized that I was not cut out for the business world,” he says.  Raghu’s exit from this world entailed him pursuing a PhD in finance, an endeavor that would help him reinvent his career towards teaching and academia. Raghu achieved this goal as he is now a renowned academic and has taught at a number of prestigious universities around the world including, among others, Institut d’Etudes Politiques de Paris in France, University of California, Los Angeles and University of California, Berkeley.

He returned to the business world when he was appointed as the Principal at Barclays Global Investors in San Francisco from 2008 to 2009 to conduct research on undervalued stocks. The seismic global financial crisis occurred after he joined Barclays that left the world reeling – even today. “When I arrived at Barclays, financial markets had collapsed and Lehman Brothers [a then prominent investment bank] went bankrupt.”

After a year of working at Barclays, he went back to the world of academia, teaching on topics including information economics, behavioral finance, and game theory (the study of mathematical models of strategic interaction between rational decision-makers).

How humans organize

A crucial feature of his Financial Disruption course will explore how humans organize in the context of technology disruptions. To answer this, Raghu says there are two ways: using markets, which facilitate exchange of goods and services (for example, buying goods online versus visiting a brick-and-mortar store), and using a firm or an organization (for example, firms such as Amazon that facilitate online shopping).  The reason people pick one or the other is because of transaction costs.

“Transaction costs are being impacted by technology. If you were deciding to buy a car 20 years ago, you would compare the cost of owning a car versus that of using a taxi. Owning a car means that it would be available whenever you wanted it. In contrast, 20 years ago, there were no smartphones. You couldn’t take a landline to the streets and call a cab. The economics today are dramatically different,” he says.

Although technology provides easy access to information, not all information can be accurate or reliable. In the context of organizations, Raghu categorizes the flow of information into three parts.

The first is what he calls imperfect information, which refers to how humans can obtain information that is right and suitable for addressing problems. The second is asymmetric information, which refers to making sure that everyone involved in decision-making has equal and unfiltered access to information. The third is behavioral biases, which means that even if humans have the right information, most won’t know what to do with it or apply in decision-making.

“Technology is changing how we deal with all of these problems. The more information there is, the more difficult it is to make a decision or choice. So, you need a helper. And AI has the potential to serve as one such helper.”

For example, think about booking flights or accommodation using an online portal.  On the first search attempt, you would probably be inundated with many options, making your selection more arduous.

Artificial intelligence

Raghu’s course will also focus on the role of AI, automation, and blockchain on finance.

He believes that AI enables better decision-making instead of relying only on human biases. Asked if the disruptive nature of AI will replace humans in the discipline of finance, Raghu says no.

“I believe that AI is complementary and not supplementary. For example, human skills are still required in the accounting profession when making judgments on matters such as depreciating assets.”

This, however, doesn’t necessarily mean that the accounting profession is immune to disruption. Raghu says accounting is the most vulnerable in an AI world compared with business development and communication functions. These require human interaction skills including the ability to motivate, negotiate, and persuade.

“My course will help participants understand challenges in their jobs in the next five to ten years. Finance professionals should start thinking about upskilling to be competitive because job security is not guaranteed. It is important for people to understand their place in the world.”

Join ambitious professionals for the challenging ‘Financial Disruption’ program, taught by Professor Raghavendra Rau (Cambridge) at Amsterdam Institute of Finance.  Read more for available dates.

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