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Blockchain basics
1 Blockchain is a distributed 2 Blockchain has two main 3 CFOs should learn about
ledger technology that applications. One familiar both, but understanding
enables digital assets to be use of blockchain technology business blockchains and
transacted and traded in involves trading and their potential for finance
near real time. The record it managing cryptocurrencies operations should be your
keeps is permanent and like Bitcoin. More on that focus in the year ahead.
irreversible. later. The other main use of
blockchain is for managing
transactions related to trade
and commerce, including
finance processes like
payables, receivables, and
compliance. We think of these
as business blockchains.
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What CFOs need to know
about Blockchain for Finance
03 How blockchain could affect Finance 07 How to think about blockchain today
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Business blockchains
01
Business blockchains are being used today Common finance applications for 02
to help reinvent how transactions are blockchains include order-to-cash, trade
managed. They can take time and costs finance, intercompany transactions, and
out of almost any process, enabling near reconciliation. Processes that extend 03
real-time operations. And they deliver a beyond Finance, such as supply chain
high degree of accuracy and control, with management, asset tracking, warranty 04
much less risk than many alternatives. service, and regulatory compliance can
also be streamlined using blockchain
Blockchains perform recordkeeping technology. 05
using automated, low-cost
mechanisms. They enable asset Business blockchains can operate as
transfer through secure, real-time standalone solutions, but the value 06
methods. And they provide governance realized increases significantly when
in the form of smart contracts. A smart they’re combined with other technologies,
07
contract makes sure each part of a such as automation or artificial
transaction is validated the instant it intelligence, to reimagine an entire end-to-
happens, triggering the next required end process. 08
action, exactly when it is supposed to
occur, until the process is complete. All that said, blockchain is a new and
nascent technology. No one has put it all
together yet. There’s time to explore your
options. 5
Frequently asked questions
01
CFOs we talked with about blockchain have many questions about what they should be
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doing and why. Here are the most common questions we’ve encountered.
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02
Why are we talking only What does business Some people say
about business blockchain actually do? blockchains are largely
blockchains? free of risk. Is that true? 03
Blockchains integrate different systems
Business blockchains are set up by a to get data right at the point of Yes. Blockchains enable trust through
04
single company or a group of origination, which can eliminate transparency. A shared ledger is visible
companies where participants are downstream reconciliations. This enables only to participating organizations and
specified and known. They’re straight-through processing, also known access to data on the blockchain is 05
designed to improve transaction as touchless transactions. For example, restricted by users.
processing. Public blockchains that a company uses blockchain to match a
support cryptocurrencies like Bitcoin customer purchase order with the buyer 06
are an entirely different thing. Finance order, and records that action on a How are blockchains
can generate significant value from blockchain. Now there is one source of
governed and controlled? 07
business blockchains without having the truth, which is visible to both parties.
anything to do with digital currencies.
Smart contracts provide the governance
mechanism for business blockchains. 08
Once a smart contract is locked down,
the terms and conditions can’t be
changed unless all those affected agree.
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Frequently asked questions
01
02
What are auditors Why is it called blockchain?
and regulators
going to say? This technology uses data elements 03
encrypted in blocks of computer code.
In the short term, they’ll be skeptical. The blocks are chained together across a
04
Blockchain is new, and companies are shared ledger through cryptology. If
still working through operational and someone tries to hack the ledger, it is
compliance issues. But because immediately known by the involved 05
blockchains rely on self-executing smart parties and the chain falls apart.
contracts and the transactions are
06
irreversible, many auditors and
regulators see the technology as a way
to save time and improve compliance. 07
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Assessing blockchain opportunities
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Assessing blockchain opportunities
Fitness factor 01
Number of participants involved
02
Limited or no fit Strong fit
Blockchain doesn’t make sense when there is no When multiple separate companies need to write Blockchain is an excellent solution when
need for multiple parties to share in creating or or add to the ledger, blockchain can be an participants include multiple 03
maintaining a transaction record. For multiple effective way to streamline transaction manufacturers, suppliers, customers,
trading parties inside of a single parent company, processing. By using blockchain service providers, transportation providers,
blockchain could be an effective solution for you create one source of the truth. regulators, and possibly tax authorities. 04
processing intercompany transactions.
Intercompany is also a good way to pilot a
blockchain solution.
05
Fitness factor 06
Complexity of business purpose
Fitness factor 06
The need for real-time transfer of assets or payments
If you don’t need—or are already getting—near For companies that want to improve working capital Blockchain can eliminate the lag in payment
real-time payment transfer and instant recording or liquidity, the lower friction of blockchain enables cycles and asset transfer, which can help 08
of transactions, blockchain may not provide any near real-time transfer of assets. reduce cost, improve accuracy, and provide
new or additional benefit. compliance efficiency. Additionally, the
transparency of blockchain can help
streamline trade finance or supply chain
financing in a multi-party network setting.
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How blockchain could affect Finance
01
Blockchain has the potential to reshape processes that are defined inside Finance, primarily because of its cost and control
02
benefits. Even more interesting, though, is the impact on broader business processes that intersect with Finance such as
supply chain management.
03
Big picture blockchain • Companies, customers, and even • Order-to-cash and procure-to-pay
Here are examples of blockchain applications regulators are working together to integration
that are getting underway across different monitor the manufacturing, sales,
04
• Revenue cycle management
industries and sectors. registration, and maintenance of large-
ticket assets in aerospace and defense, • Trade finance
• A consortium of retailers, producers, and transportation, industrial equipment, and
05
freight providers is collaborating to electronics. • Working capital and cash-cycle
ensure the integrity or authenticity of improvement
06
products. Examples include organic Blockchain for Finance
• Fraud and risk detection
products, jewelry, prescription drugs, The Finance applications for blockchain
and replacement parts. apply to almost any kind of transaction • Warranty accruals and management
07
processing. These examples are being
• In health care, a group of companies is • Capital planning and performance
piloted or moving into production in
working together to track deductibles management
companies all around the world. 08
and out-of-pocket expenses across
providers, insurance and prescription
• Self-validating sub-ledgers for
plans, pharmacies, life science
receivables and payables
companies, device manufacturers,
patients, and employers. • Intercompany accounting and
consolidations 13
Show this to your CIO
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Make it real
02
Think big, but start small. Prove value with iterative bursts of design, build, and review to quickly learn from results—and adjust.
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Alternatives to blockchain
01
For many people, blockchain is colored by That said, we do see a role for “private
02
skepticism about cryptocurrencies like label” digital currencies that can be used
Bitcoin, Ether, and Ripple. In those arenas, as part of business blockchain solutions. 03
it seems as though the risks can often The value to CFOs is the potential for real-
outweigh the benefits. But that doesn’t time visibility to net position and the ability
mean there aren’t opportunities for to settle transactions digitally—without 04
pioneers to capture value. For more cash. We’re currently working on a number
information about cryptocurrencies, take a of digital wallet and token applications to 05
look at Bitcoin: Fact, Fiction, Future. do just that.
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How to think about blockchain today
01
Are there scenarios that could interrupt ERP vendors also want to be part of the
02
blockchain adoption in the marketplace? blockchain future. They’re working to
Here’s one way to look at it: integrate blockchain technology into their 03
products to help companies capture
Business blockchains are going to efficiencies in all kinds of processes.
happen, with significant impact across 04
the board. There are simply too many It won’t be long before blockchain goes
benefits to ignore. But how it happens mainstream. Over the next five years, it 05
could vary widely. In some industries, will likely become a commonly used
discussions around marketplace technology that is baked right into other
consortia to capitalize on blockchain are solutions companies are using to improve 06
already underway. The same is true for operations and manage risk. In the
development work related to smart meantime, consider focusing on building
07
contracts and governance standards. awareness, skills, and experience by
finding opportunities to collaborate with
close business partners on specific use 08
cases.
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CFO blockchain checklist
01
02
Develop a reading list that includes both Make sure your Chief Risk Officer is tracking
skeptics and evangelists. Blockchain is regulatory and compliance issues related to
moving fast. Keep up. blockchain. 03
Assign a team to stay on top of blockchain Identify a handful of opportunities where the
developments in Finance. Include both efficiency gains of blockchain are obvious. 04
technical and business people. Assess the business case for each.
08
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Authors Contacts
Dean Hobbs Claudio Fiorillo 01
Senior Manager, Partnet Strategy and Operations and
US Finance and Enterprise FSI Leader
Performance Leader Deloitte Consulting 02
Deloitte Consulting LLP Correo electrónico:
Tel: +1 512 226 4805 cfiorillo@deloitte.com
Email: dhobbs@deloitte.com 03
Rich de Moll
Specialist Executive,
Finance Blockchain
04
Leader
Deloitte Consulting LLP
Tel: +1 203 423 4540 05
Email: rdemoll@deloitte.com
David Griswold
06
Senior Manager,
US Finance and Enterprise
Performance Leader
Deloitte Consulting LLP 07
Tel: +1 214 840 7448
Email:
dagriswold@deloitte.com 08
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