Blockchain and CFOs. Friends or Foes?
There is a lot of hype surrounding blockchain and on how it will revolutionise businesses and industries. Everyone is currently suffering from an information overload and business leaders and CFOs might actually feel daunted about the subject which is laden with technical jargon. Whilst moderating a workshop for some business executives a couple of weeks ago, our team at ARQ quickly realised that there is a lot of confusion and ambiguity. In this article we set to give some insight to blockchain and to its role in organisations.
Blockchain is a transformational innovation which goes far beyond bitcoin. In fact, bitcoin or digital currencies are just one application of blockchain. In essence, blockchain is a distributed ledger technology that enables digital assets to be transacted and traded in near real time. The record it keeps of the transaction is permanent and irreversible. Our focus is on private blockchains which are standalone systems and where the participants or nodes of the network are known and given permissions to read and write on the blockchain. The other side of the spectrum is public blockchains which are out of the scope for this article.
These private blockchains have the potential of reinventing transactions within and between companies, especially when looking at supply-chains and logistics. Blockchains are governed by smart contracts which make sure that each part of a transaction is validated the instant it happens and triggers the next required action. This process continues automatically till the end of the transaction. Common finance applications can include trade finance, intercompany transactions and reconciliations. Beyond finance, one can look at applications such as supply chain management, regulatory management, and asset tracking.
Blockchain is not a one-size fits all technology. Any organisation needs to conduct a detailed analysis to assess whether blockchain is the right solution for its business model. In general, the main fitness factors can be outlined as per below:
- The higher the number of participants or economic agents involved;
- The more complex the business purpose
- The need for long-term recordkeeping and regulatory compliance
- The need for real-time transfer of assets or payments
Blockchain has the potential to transform key industries and functions, finance being one of them. We recommend that finance teams and business leadership should start delving further into the subject and to explore ways in which such a transformational innovation can disrupt the industry or function they operate in. ARQ Group, together with its network of international partners, is well placed to assist you in your blockchain transformation.
For further information please contact JP Fabri