The global economy saw significant activity in the past year. From banks raising interest rates in hopes of tackling inflation and Silicon Valley taking a hit, to the growing impact of AI on jobs worldwide and technology taking over global financial systems, 2023 was indeed a lot to take in. These also heralded significant changes in corporate finance that are seen solidifying as we settle into 2024. Being acquainted with these trends will enable businesses to get ahead of the race and make the best of opportunities available.
Before we delve into these trends, here’s a quick round up of the economic outlook for 2024.
Economic Outlook for 2024
The global economic landscape in 2024 is expected to be marked by recovery, with divergent paths for advanced and emerging economies. Challenges such as inflation and fiscal management in an uncertain global environment are seen as a drag on the growth prospects of developed economies. Meantime, emerging economies are expected to see stronger growth rates, aided by a “convergence premium,” as they work to close the gap with more developed economies. However, they, too, face hurdles, including the need for structural reforms and investments in infrastructure to ensure sustainable growth.
The International Monetary Fund (IMF) forecasts global growth at 3.1% for 2024, a slight increase from its previous outlook.
Let’s look at the emerging trends in Corporate Finance
Corporate Finance Trends In 2024
Embracing Digitization
Businesses will further embrace digital tools to make their operations faster and more efficient. This shift is commonly called digital transformation, and it’s all about using technology to improve how companies work. For example, using advanced automation and artificial intelligence (AI), companies can process data better, make smarter decisions, and save time. This doesn’t just apply to tech companies; finance departments and banks are also changing how they operate to stay ahead.
One of the significant changes is how banks fight fraud. They’re using machine learning to spot unusual patterns that could indicate fraudulent activity. Besides security, banks are making it easier for people to pay for things using their phones.
In line, corporates are increasingly seen adopting new age technology to achieve greater agility, implementing software for efficiency and enable smoother workflows. Automation is gaining traction in corporate finance, having proved its mettle with accounting flows and reporting.
Artificial Intelligence And Machine Learning
In 2024, finance departments will significantly benefit from advanced analytics and big data. This will transform how they make decisions and understand complex financial landscapes. The surge in financial data’s volume and complexity necessitates sophisticated tools for analysis. It will highlight the critical role of Artificial Intelligence (AI) and Machine Learning (ML) in understanding trends and generating actionable insights. AI applications, such as Natural Language Processing (NLP) and Automated Machine Learning (AutoML), enable the analysis of vast datasets to identify patterns and correlations critical for strategic decision-making.
Generative AI is a type of technology that can create detailed texts and analyses from just a small amount of information given to it. This is a big step forward in how the companies handle data and make predictions. It helps organize and clean up data and helps in areas like risk management. With AI, companies can better predict fraud and even run simulations to see how certain risks could play out, giving finance departments an advantage. They can plan and make smarter decisions because AI provides them with insights that were previously much harder to come by.
Sustainability and ESG Investment
The emphasis on sustainability and ESG (Environmental, Social, Governance) criteria in investment decisions and in the finance industry is growing significantly, reflecting a transformative shift. Key trends for 2024 indicate an intensified focus on climate adaptation, resilience planning, and the incorporation of sustainability throughout value chains, especially under new mandatory disclosure standards in various countries. The importance of high-quality data and transparent methodologies for assessing value chain impacts is becoming increasingly apparent. Sustainability also remains a priority for business leaders and policymakers in 2024; key renewable energy, sustainable finance, and climate tech trends are expected to gain momentum. This prioritization is expected to foster the development and commercialization of novel technologies, such as carbon capture, hydrogen, and sustainable aviation fuel, alongside infrastructure advancements that could enable the widespread adoption of these technologies.