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Introduction 5
CONSULTING
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI
Introduction
According to some, artificial intelligence is the most promising According to some, artificial intelligence is intelligence – both internally and for use with
the most promising development for the clients. The applications are diverse, make use
development for the future. From curing cancer to resolving future. From curing cancer to resolving the of different technologies and can be found in
the global hunger crisis, artificial intelligence is being global hunger crisis, artificial intelligence is a diverse range of industries. This shows that
being presented as the solution to all of our aside from all of the predictions for the future,
presented as the solution to all of our problems. Others, problems. Others, however, regard it as a threat artificial intelligence has already been a reality
however, regard it as a threat – artificial intelligence may – artificial intelligence may potentially give rise in the business sector for some time and forms
to unemployment and inequality, and could a resource that could possibly provide your
potentially give rise to unemployment and inequality, and even jeopardize the continued existence of company with a decisive lead.
could even jeopardize the continued existence of humankind. humankind. As the technology entrepreneur
Elon Musk put it: “The benign scenario is that What is AI?
As the technology entrepreneur Elon Musk put it: “The benign artificial intelligence can do any job that humans Artificial intelligence (AI) is a collective term
scenario is that artificial intelligence can do any job that do – but better.” for the science that is trying to make systems
Deloitte has positioned itself on the optimistic intelligent. The definition, however, has not
humans do – but better.” side of that spectrum. “We believe that artificial been definitely outlined: the type of behaviour
intelligence will be extremely helpful to us by a computer that we regard as “intelligent” is
and to our clients”, says Richard Roovers, a shifting as technology achieves new advances.
partner at Deloitte Netherlands and Innovation Systems that we would have called “intelligent”
Lead Transformational Solutions North-West back in the 1980s – such as a smart lift system
Europe. Artificial intelligence will enable us to or auto-navigation – have now become such a
solve problems that humans are unable, or regular part of everyday life that some people
hardly capable, of solving, explains Richard. no longer include them under the heading of
“Artificial intelligence is capable of processing artificial intelligence.
massive quantities of data and has the ability
to discover patterns that even the smartest The British mathematician, Alan Turing (1912
mathematicians are unable to find. That in itself – 1954), was one of the pioneers in the field
opens up a large number of new possibilities.” of artificial intelligence. According to Turing, “a
computer would deserve to be called intelligent
Those new possibilities are what this book is if it could deceive a human into believing that
about. The case studies provide an overview it was human”. That is the approach adopted
of the ways in which Deloitte is working to by the Turing test: people must be able to chat
develop applications incorporating artificial with a human being and a computer program
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI
– neither of which can be seen – and then must large quantities of data, but made it possible for can be considerable overlap between the AI
guess which one was the human and which one applications to be upscaled without restriction. applications being used in different industries.
was the machine. If the computer is selected, Take image recognition, for example – you
it has passed the Turing test and is therefore Finally, major technology companies are can use that technology for the automatic
“intelligent”. now offering smart application programme recognition of installations on satellite images,
interfaces (APIs). These make it possible to but also in an app in order to detect skin cancer.
The downside of that definition is that a human connect to standardised AI applications and Bringing people from different departments
judgement is used as a reference. The results make it much easier to develop applications together means that we can share knowledge
of Turing tests show that some people easily
assume that relatively unintelligent programs “At Deloitte, utilising artificial intelligence. For example,
if facial recognition is needed for an app, an
and accelerate learning.”
The aim of this was to draw attention to artificial “In order to keep ahead of the rest, you have if those turn out OK, they can then be scaled
intelligence in an accessible way, explains to stick your head above the parapet. By using up.
Roovers. “And it worked. Staff were surprised artificial intelligence, we can continue to offer
and intrigued. They started conversations our clients the best possible service – and that’s Deloitte is able to assist with all of these steps:
with AIME and took selfies with her. She what it’s ultimately all about.” from exploring the possibilities to developing
turned out to be a real conversation starter.” proofs of concept and long-term collaboration
Our employees could then voluntarily sign What types of solutions is AI able to offer processes and co-creation. “Artificial intelligence
up for our “AI for dummies” course to learn your company? is no panacea”, warns Roovers. “It’s a case
more about the subject. “The impetus was The case studies in this book give an of looking very carefully to identify precisely
considerable – even our CEO took part in the impression of the possible applications of what problem you wish to solve and what
course,” continues Roovers. artificial intelligence. Amongst other things, technologies are available. In some cases, less
AI technologies are used to improve service advanced technologies are already sufficient to
As far as the company is concerned, Roovers by means of chatbots, to avert cyberattacks, solve the problem.”
regards artificial intelligence as an opportunity, to trace potential fraudsters, to generate
not a threat. “It’s true that artificial intelligence benchmarking reports automatically, to Thanks to the availability of APIs and cloud
can take over tasks previously carried out by estimate the risks that new customers pose to computing, however, developing a proof of
people – and can even do them much more insurance companies, to sort large quantities of concept is a relatively simple matter. “The nice
quickly and accurately. But the most important digital evidence and much more besides. thing is that you can start small and if it works,
part of our business, the work that sets us you can quickly scale it up”, says Roovers.
apart from the others, lies in the contact we In short, the potential of artificial intelligence “There is such a lot you can do if you are smart
have with our clients and in providing a tailor- is huge. Roovers: “The trick is to find out when deploying artificial intelligence. Right now,
made service and those are things you simply how we can make it useable within our own we’re just at the beginning.”
can’t outsource to an algorithm.” He goes organisation. On the one hand, we can do that
on to point out that artificial intelligence can by creating smarter processes, but we can also
actually make our work more interesting. “The use artificial intelligence to set up entire new
dull, more repetitive work can be outsourced, products or services.”
leaving more time for the creative work that
enables we humans to make a difference.” But where do you start? The first thing you
Definitions
There is a whole host of technologies that are associated with artificial intelligence.
Here are just a few: “Artificial intelligence
• Machine learning is a research field that is capable of recognising patterns in data and
developing systems that will learn from those.
• Supervised machine learning trains systems using examples classified (labelled) by
will enable us to
humans – for example: these transactions are fraudulent; those transactions are not fraudulent.
Based on the characteristics of that classified data, the system learns what the underlying
patterns of those types of item are and is then able to predict which new transactions are highly
solve problems that
likely to be fraudulent.
• Unsupervised machine learning is able to discover patterns in large quantities of unlabelled
data. It attempts to discover an underlying structure of its own accord, such as by clustering
humans are unable,
cases that resemble one another and making associations. For example, retail companies are
able to use purchasing data to recognise what products are often bought together and can
adjust their offer to reflect that, or can even provide personalised offers.
or hardly capable, of
• A neural network is a machine learning technology that mimics a structure resembling
a human brain (consisting of neurons and connections), and is capable of adapting its own
structure to perform the task it has learned more effectively. The more complex neural
solving”
networks become and the more often they consist of several “layers”, the more we can make
use of the term: ‘deep learning’.
• Natural language processing is an area of research that focuses on training artificial models
to process a human language.
• Computer vision is an area of research that focuses on the processing of digital image
material.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
TAX-I:
your virtual
legal research
assistant
Whether searching for relevant case law, analysing rulings,
or assessing whether a tax case is likely to be successful,
tax lawyers have a lot on their plate. And the result is by
no means always accurate.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
Bulk quantities of data that already gives us 2.5 million cases,” says
“EU Member States are required by law Derksen. “This much data will enable us
to publish their rulings and to make them to use deep learning, and produce more
easily accessible to third parties,” says Marc accurate insights.”
Derksen, Consultant in Data Analytics & A.I.
at Deloitte Indirect Tax, and a member of the Continued development
team that developed TAX-I. “So there are bulk The team has been working for a few
quantities of data available.” Working in two months now on making TAX-I simpler
sprints of six weeks, the TAX-I team examined and more powerful. The analyses of TAX-I
what they were able to do with it, and it are being evaluated in the meantime by
What if you could automate this preliminary soon turned out that the possibilities were Deloitte’s scientific office and in a study by
legal work? Not only would it enable a tax numerous. Vrije Universiteit Amsterdam and Tilburg
University.
case to be settled more quickly, but also more First of all, the tool visualises the way in which
efficiently and accurately. That was the idea a new case corresponds to earlier cases. An In the long term, TAX-I is intended to become
interactive chart of lines shows how cases accessible for all Tax & Legal consultants in
behind TAX-I, a virtual legal research assistant relate to one another, and the size of a dot Europe. “It will enable them to save time and
developed by Deloitte. TAX-I is able to use indicates the relevance of the case based improve the quality of their services,” asserts
on the number of references. The tool also Derksen. But the current prototype has
artificial intelligence to analyse thousands of produces a summary of all cases, based already proven its worth. “I regularly speak
tax cases of the European Court of Justice, on how often sentences or parts of them to colleagues who found related cases using
repeatedly occur in a ruling. “The summaries TAX-I that they themselves had missed. That
relate them to similar cases, summarise them, still aren’t well-written, flowing texts,” remarks is a valuable achievement in itself.”
and even predict how a court would rule in a Derksen. “We intend to improve that in
the future. In any case, the summaries are
case. currently at a level that enables you to quickly
assess what the case is about.” All 1153 tax cases of
Finally, TAX-I is able to predict how the the European Court
European Court of Justice is likely to rule in
a case, based on facts that the user of the of Justice have been
tool can enter. It uses a machine learning
algorithm that is trained to recognise patterns entered into TAX-I
in tax cases and to draw conclusions. All
1153 tax cases of the EU Court of Justice have
now been entered into TAX-I. The team also
hopes to analyse all cases from individual
countries later on. “In the Netherlands alone,
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
An AI benchmark
study of transfer pricing
If a company forms part of an international group, the prices and conditions
applied to the sale of goods and services within this group must be similar to
those of third parties. This is intended to prevent improper diversion of profits
between countries. However, it saddles companies with a problem, says Martijn
Krassenburg, Manager Transfer Pricing at Deloitte. After all, which prices of
which companies are deemed ‘similar’?
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
A benchmark study is required in order to Soon, a percentage will appear next to the
answer that question. One variant of such name of each company, indicating the likelihood
studies looks at what companies undertake of that company being similar. This will mean
identical activities in a similar industry, and the that an ever-smaller number of companies will
reported margins are checked against those of need to be checked manually. Ultimately, the
the company in question. That is quite a aim is to complete part of the task fully
laborious process, in which many repetitive automatically.
tasks are carried out manually. “This is why we
decided to find out whether it was possible to The finishing touch
automate this work,” explains Krassenburg. The project is still in the testing stage, but
Krassenburg believes that the technology can be
The technology is now being Thousands of screenshots rolled out widely once it is up and running. “In
SONAR:
find labelling
errors in
databases
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
Just under a year ago, Deloitte was approached by a major “Previously, we would have carried out spot as a phone, or as a navigation system, for
retailer. Its range consisted of over 30,000 products, and checks,” says Gerhard Smit, information example?” Such cases need to be assessed by
architect and data analyst at Deloitte. an expert. SONAR allows the checking of the
the commodity codes provided by suppliers had to be “But then we thought, can’t we automate vast majority of products to be automated,
checked manually for around 600 new products every the checks?” Within one week, he and his so that additional attention can be paid to the
team members created a proof of concept: difficult cases.
month. In addition, information had to be entered relating Similarity Observant Network Analytics
to the VAT rate and any local levies, such as the battery tax Report, or SONAR for short. It is a tool that Bicycle lights
predicts the likelihood that the information The SONAR team went to a shop together
that applies in Belgium for products containing batteries. It relating to VAT, the commodity code and local with the client to test the tool, and carried
was not unusual for something to go wrong when it came levies entered into in a product database is out a random check on a shelf of bicycle
correct. lights. In the case of one bicycle light, SONAR
to this labelling. The retailer asked Deloitte for assistance indicated that something was likely to be
in checking the information entered by human staff Comparing data incorrect regarding the battery tax. “Upon
It works like this: a client supplies a data file closer inspection, it turned out that there
members. containing as many details as possible – the was indeed a small battery included in the
commercial product description, the VAT packaging, although that wasn’t included in
rate, the commodity code and an indication the description,” recalls Smit. “We thought it
of whether or not each local levy applies. But was highly amusing: something we had built
it also contains, for example, the barcode within a week had an immediate impact.”
and other information that can assist with
understanding the nature of the product. SONAR was developed for a client, but Smit
believes the technology is generic enough to
SONAR compares this information against a be implemented for other problems. It works
“SONAR allows you to check customs database containing all commodity particularly well with databases containing
the information entered by codes, a textual description for each at least 2,500 products, and a reference
commodity code, and the applicable rate of database must be available. “SONAR allows
humans far more quickly and VAT. The comparison results in a percentage you to check the information entered by
accurately” to indicate the likelihood that the label added humans far more quickly and accurately,”
by the client is correct. If a label is more than asserts Smit. “And the best part about it is,
80 percent likely to be incorrect, for example, the more often you use the technology and
the product can be checked by a person. the more product information that becomes
available, the more accurate the results will
A great deal of label-related work is simple, be.”
but new, innovative products often require
additional attention. “Legislation often fails
to keep up with reality,” remarks Smit. “Take
smartphones. Should we classify them
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI TAX & LEGAL
cost regulations
Financial HR Analytics team developed an clients. “I have noticed that the time is ripe for
intelligent system that reads descriptions of smart solutions,” says Thien. “Back in 2014,
expenses and is able to categorise them: WKR when I told employers about WKR Analytics,
Analytics. “You enter all your expenses, and the they scarcely believed that it would really
system then picks out what is covered by the work. Now, they are actually curious as to
WKR. Without our tool, a client might achieve a what we can offer.” Not only is the number of
The work-related expenses scheme in the Netherlands, quality level of 20 percent in its implementation users growing, WKR Analytics is continuing to
known as WKR, causes a world of problems for many of WKR. We increase it to 95 percent,” asserts develop too. “We are continuing to improve the
Thien. dashboard, as well as adding new information
companies. Deloitte has developed a clever solution to assist and constantly increasing the degree of
its clients in implementing this tax scheme correctly. A tax expert is called in for the remaining 5 integration with VAT analytics,” says Thien. “We
percent. The expert wastes far less time on are now also demonstrating what the level of
WKR than was previously the case, and is able data quality is. In just two hours, we can know
to focus his attention on the doubtful cases. whether a company’s data are good enough to
Unfamiliar scheme “If WKR Analytics categorises an expense enable WKR Analytics to be used.”
The WKR permits companies to spend 1.2 incorrectly, you can correct it and the system
percent of taxable wages on tax-free allowances will learn from it,” explains Thien. “Every The success of WKR Analytics has not gone
and benefits in kind for their employees. correction makes the system smarter and more unnoticed. There are even a few companies
“When the scheme became compulsory for efficient. The longer you use it, the less time you that have attempted to copy it. Thien considers
all employers back in 2015, it soon revealed a waste on it.” it a compliment: “That doesn’t scare me. Once
number of problems,” explains Guy Thien, tax you have gained an advantage with AI, you don’t
consultant at Deloitte. “In practice, for example, “Once you have gained an lose it very quickly.”
there is a major lack of clarity regarding who
is responsible for implementing the scheme.
advantage with AI, you don’t
It requires data from HR, salary and financial lose it very quickly”
records, to name a few, but no one takes the
role of managing it.” WKR Analytics comprises a combination of
machine learning technologies and natural
What is more, it is still a fairly unfamiliar language processing – in other words,
scheme, and consequently many expenses knowledge of language and use of words.
are incorrectly excluded from it. “If a director “The WKR is relevant in specific situations,”
gives ten employees an iPad each, he is often continues Thien. “Take going for lunch. When
unaware that this has implications under the I go and have lunch with a colleague, that may
WKR,” continues Thien. “He fails to inform the have different implications under the WKR to
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Audit
16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI AUDIT
GRAPA:
assistance
with risk
strategies
When auditors determine a risk strategy, they partly base
it on knowledge that they gained during previous audits.
Deloitte is now developing a smart personal assistant that
supports auditors using the pooled expertise of all their
fellow professionals.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI AUDIT
important part of an audit. Twan van Gool, different, of course, but an audit is an audit,”
notes van Gool. “While lingerie and cycling Benchmarking and planning
Director Innovation & Analytics within the Audit might have nothing in common, the retail and The tool is therefore not intended to replace
department at Deloitte, explains: “The auditor stock process of Hunkemöller is largely the
same as that of Halfords. So the associated
auditors. “When it comes to critical
consideration of processes, developments
determines which sections of the annual risks are also similar to one another.” and risks, you still need creativity and human
or events within the company, for example. could use not only their own knowledge and
experience, but also those of fellow auditors,
risk strategy and audit method have been
determined: “Those activities are so
The chosen risk strategy determines the when determining the risk strategy. With that standardised that a robot could do them.”
subsequent audit method.” idea in mind, Van Gool’s team developed the
AI tool Guided Risk Assessment Personal Deloitte intends to use GRAPA in 2019 for the
Assistant, or GRAPA for short. audit of the 2018 tax year. “We are currently
working on a proof of concept,” says Van
“GRAPA assists an auditor in marking out Gool. The next step is to use GRAPA for more
their chosen strategy against all other risk than just examining data from the past. “We
strategies that have been used before,” want to feed the tool with market
explains van Gool. It uses a Deloitte database development data, such as those relating to
of 10,000 cases, and each case contains an Brexit, or high-risk derivatives in the housing
average of fifty risks. market. That knowledge will enable the tool
to also present potential future risks to the
GRAPA is not a stand-alone application; accountant.”
rather, it is added to the software that
auditors use when determining the risk
strategy. “It’s as if you can ask a second “When it comes to critical
person to read alongside you,” Van Gool
continues. “But the advantage is that this
consideration of processes,
second reader has the pooled expertise of developments and risks,
Deloitte.” He emphasises that the auditor
remains responsible for the chosen risk
you still need creativity and
strategy and audit method. “GRAPA indicates human intelligence”
what has happened in similar cases. But if
there is anything about the client’s situation
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI AUDIT
technical library
accounting or an audit issue, and then poses process, but also produces valuable data.
follow-up questions. “While the present search engine shows us
what is being searched for and what is being
“The smart algorithm uses those questions to found, it doesn’t tell us whether the user
guide you to the appropriate information,” considered the answer satisfactory,” says Van
continues Van Gool. Users chat with the bot in Gool.
Deloitte’s online technical library is so extensive that you could a separate pop-up window, “just as if you were
easily get lost in it. That is why employees will soon see the typing a message in Skype. Because it feels as The chatbot shows what exactly is being
if you are chatting with a real person, you use searched for, and the route by which the user
introduction of a smart chatbot that will guide them through natural sentences, and you find it easier to give arrives at the result. “We can use that
the jungle of laws, regulations, auditing and accounting details about exactly what you are looking for.” information to feed back into the algorithm in
order to make the chatbot faster and more
standards, and specialist literature. Japanese model efficient.” The data are also of value outside of
This is not the first time the team has the technical library. “If we identify trends,
Question-and-answer game attempted to make the technical library more developments and current issues, we are able
“Although the technical library has a search user-friendly. “We spent a long time tagging to anticipate them immediately,” adds Van Gool.
engine, you have to enter very specific search content and enhancing the search function,
criteria to use it,” explains Twan van Gool, but that achieved very little,” admits Van Gool.
Director Innovation & Analytics within the “That is why we are now devoting our energy
Audit department at Deloitte. “People use the to improving the input side of it. The chatbot is
search function in the same way as they use relatively easy to create.” “Because it feels as if you are
Google. They type in ‘materiality’ when chatting with a real person,
searching for how to determine the materiality The chatbot is currently being built for one
of a public interest entity. But the library collection in the technical library, and the plan you use natural sentences,
contains a vast array of specialist information, is to roll out the chatbot for all forty collections and you find it easier to give
and the contents are closely related. You won’t in due course. Van Gool’s team is using the
find the answer by using a general search chatbot built for Deloitte Japan’s technical details about exactly what
criterion; it generates far too many search library as the model for development, and the you are looking for”
results.” results of the Japanese pilot are encouraging.
“The technical library has been consulted far
In order to help employees to search more more frequently since the introduction of the
efficiently, the analytics and innovation team is chatbot,” notes van Gool. “Users have also
working on a smart chatbot. “The chatbot started performing slightly more detailed
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI AUDIT
Argus:
an eye for
detail
The Engagement Team at Deloitte doesn’t need to be told
how massively labour-intensive it is to scan through lengthy
contracts in order to identify minor differences.
Fortunately, they will soon receive a helping hand in the
form of Argus, an artificial intelligence solution that
compares documents quickly and picks out the tiniest
details and discrepancies.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI AUDIT
HR agent
Edgy:
the future
of Human
Resources
It sounds futuristic: a robot that eases the workload of
the Human Resources department by resolving employee
queries and supporting recruiters at events. Yet a team
at Deloitte has shown that it is possible. Its smart robot,
named Edgy, has demonstrated a number of areas of
application for robotics-based automation within HR.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI CONSULTING
Doing and thinking More than a gadget Drogulski does not expect that the HR
There are numerous processes within HR that The end result of their efforts was Edgy, department will be operated entirely by
lend themselves especially well to robotics- a cognitive chatbot within a humanoid robots in the future, though: “What we
based solutions, says Henri Drogulski, robot. Edgy has speakers, cameras and actually want to do is to free up employees
Human Capital business analyst at Deloitte. microphones, and is able to interact with to do the tasks that can only be done by
He describes them as “processes with a high employees and potential candidates. It humans.” Recent research by Deloitte
volume of identical transactions and few recognises faces, and welcomes people it confirms this idea: directors reported that
exceptions,” such as checking the documents has met previously by name. It also answers they intended to use software robotics
submitted in a job application, and all manner of questions using a wide variety primarily to make sustained improvements to
subsequently forwarding them to the correct of cognitive cloud services, such as speech quality and service-orientation, rather than to
department. “Those types of repetitive tasks recognition, computer vision and natural make cuts to staff.
performed according to fixed rules are easy language processing from Google and IBM
to automate using RPA, or Robotic Processing Watson. “And to add the personal touch, Edgy
Automation,” says Drogulski. can make jokes and cool gestures, like the And to add the personal
dab,” says Van Werven.
touch, Edgy can make
Rob van Werven, senior consultant in Strategy
& Operations at Deloitte, agrees: “HR is also “A walking, talking robot can easily be jokes and cool gestures,
the ideal field for cognitive robotics solutions, regarded as a gimmick,” adds Drogulski.
like the dab.
in which a robot makes its own assessments “That is why we are only using Edgy to
and initiates interactions.” For example, explain the application of robotics in HR.”
a software robot can analyse a CV and Edgy is therefore used to record employees’
determine whether the applicant is open and sickness and recovery reports, or to assist
sociable, or is more of an introvert. “These them with entering expenses claims. Edgy
technologies have matured in 2018, and are can also tell you everything about working at
accessible enough for our clients to also Deloitte. “It can even match candidates to an
benefit from them within HR,” adds Drogulski. existing vacancy during an interview,” asserts
Drogulski.
A cross-functional Deloitte team, with
members from Human Capital, Strategy & Inspiring
Operations, and Technology, began working From this spring, Deloitte has been using
on combining RPA and cognitive technologies Edgy for robotics demonstrations and
into a single robot. “We wanted to produce inspiration sessions. “We want to encourage
a robot that demonstrates state-of-the-art our clients to think about how they could
technologies, while at the same being fun and use robotics,” says Drogulski. An initial
appealing,” says Van Werven. demonstration of Edgy is followed by a deep
dive session on the subject. “We look at which
of the client’s HR processes could be suitable
for a robotics solution.”
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI CONSULTING
Risk Advisory
27
16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI RISK ADVISORY
Using machine
learning to
assess risks
for insurance
policies
The idea that you can quickly find out exactly what the risk
associated with a new policyholder is will be music to the
ears of many an insurance company.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI RISK ADVISORY
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI RISK ADVISORY
behaviour
now,” explains Wouter Pepping, Senior Manager prediction of each debtor’s future payment
of Technology & Data Risk at Deloitte. The behaviour. “We validated the system and
request was to identify for each municipality ended up with an average error margin of four
and debt type the percentage of debtors that percent,” says Pepping.
had paid off their debt in the past, and to
deduce the value from that. “We proposed to An end to the ‘tug of war’
A client had already spent three years grappling with a take it a step further,” says Pepping. “By using The solution provided the client with a
problem. The client was a foundation that was to take over advanced analytics, you can, in fact, make much breakthrough. The foundation’s interest was
more accurate predictions, down to the level of to arrive at the highest possible value of the
tasks from six municipalities in order to save costs. However, individual debtors.” debts, while the municipalities’ interest was
talks with the municipalities were not progressing very to have them as low as possible. “Our method
A step further made it possible to determine the value with
smoothly with regard to one of those tasks, managing bad The team tried out a number of models, and a very high level of reliability,” says Pepping. “It
debts. The foundation was meant to take over the debts, but decided on a Random Forest model. “This is a was considered a fair outcome by all the parties
machine learning algorithm, which uses data concerned.”
how much were they worth? It was unlikely that all the debts to train decision trees, and then creates a
would be repaid, so the amount had to be lower than the ‘forest’ of decision trees with random variables,” The model is broadly comparable with the risk
explains Pepping. “By navigating very large analyses that banks perform on clients with
total debt, but the parties could not work out between them numbers of decision trees and allowing them debts, “but organisations outside the financial
exactly how to determine that value. to decide on the outcome, you get a close sector still rarely use advanced risk models,
approximation of the risk of each debtor.” although they offer significant opportunities,”
adds Pepping. “You can gain far more insight
This method is very effective when using into data sets, which enables you to set your
inconsistent data sets, continues Pepping. strategy much more accurately. And, as in this
“Two debtors may display the same payment case, it could resolve a dispute after many years
behaviour over an extended period of time, spent playing tug of war.”
but if one suddenly receives an inheritance
or is promoted, that can change overnight. By
creating a large number of random trees, the
system is able to handle such differences more “With advanced analytics,
effectively.”
you can make far more
The result was a dynamic dashboard that accurate predictions”
can be sorted by different criteria, such as
municipality, debt type, debt amount or period.
You can zoom in closer and closer on the full
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI RISK ADVISORY
analysis through AI
a challenge, says Marc Verdonk, Partner knowledge is converted into figures, which
and Innovation Manager at Deloitte Risk are used to calculate and make predictions.
Advisory. “In accordance with the new IFRS We also add information to it. By feeding in
16 accounting standard, virtually all lease annotated contracts, showing what data we
contracts must be listed on the balance are looking for, Robin learns how to recognise
sheet from 2019.” For a telecoms company, lease contracts.” Because the system’s
In order to comply with international regulations, for example, which leases every mast and recognition becomes more and more
companies with lease contracts will be required over the every plot of land on which that mast stands, accurate, but does not store any privacy-
this means it will be required to go through sensitive client data, it can be taken from one
next few months to go through thousands of contracts hundreds of thousands of contracts in all client to the next. “It means our clients benefit
one by one. It’s an immense task, certainly when you manner of different languages. “Our team from the experience it has already gained.”
began working on the question of how
consider that an analyst will spend around 90 minutes on machine learning could extract the relevant Broader application
each contract. That time can be drastically reduced using data points from those contracts. Not to The use of new technologies also gives rise
replace contract analysts, but in fact to assist to a new form of doing business. “With
machine learning technologies. To assist companies with them with smart suggestions.” DocQMiner, we are not selling the amount of
tasks like this one, Deloitte has developed DocQMiner: a work that goes into it, but rather the result,”
The result was DocQMiner, a user-friendly says Verdonk. “Instead of stating the number
self-learning application that reads through and analyses application that can be used by analysts to of hours that we expect to spend on it, we
contracts. review contracts. “The application features make an agreement regarding the number of
a bot, which we have named Robin. You feed contracts that we will analyse. That results in
in a number of contracts, and Robin gives a low price for the client, and an incentive for
you suggestions for the data that you will us to do it as efficiently as possible.”
need, such as the start date of a contract,”
explains Verdonk. The analyst sees the Although DocQMiner was developed for
highlighted suggestion and indicates whether clients who are required to comply with the
The use of new or not it is correct. “Robin learns from this, IFRS 16 or US GAAP accounting standards,
which means that subsequent contracts are there are numerous other conceivable
technologies also analysed a little more smartly each time, and applications in which large quantities of
gives rise to a the reliability of his predictions increases. The contracts need to be read through. “One
analyst is constantly training Robin during the example is Brexit repapering, when all
new form of doing review process.” contracts will need to be revised if companies’
business. headquarters relocate. Or the General Data
DocQMiner works using state-of-the-art Protection Regulation, which will require
machine learning and natural language clauses in many purchase contracts to be
processing technologies. “It features a checked. We can use DocQMiner in all kinds
neural network that understands language, of situations.”
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI RISK ADVISORY
credit migrations
and opportunities. Balatka: “We initially made in the technology. And when we tested the
Eagle Eye for a financial company that wanted concept, our client feedback was really positive
to know whether their creditors were likely too.” This led to a collaboration with Balatka’s
to go into insolvency.” Traditional monitoring team and a joint approach to market.
systems review creditors by checking their
bank accounts, credit transfers or financial Eagle Eye is tailor-made for each client, explains
Imagine if you could search the entire internet to look for statements. But by the time you start to see Waaijer. “Depending on their needs and
early warning signals for all kinds of events. To see whether warning signs there, it is too late, explains preferences, clients can work with an application
Balatka. “By then the company is already in that gives them access to the monitoring system.
a company is likely to experience financial distress in the financial distress.” Or we can simply supply alerts whenever a signal
near future, for example. That is exactly what Eagle Eye, is spotted.” Balatka adds: “Eagle Eye serves as a
Before you can see it in the financial starting point. Even though the system is right
Deloitte’s new and state-of-the art AI tool, does. statements, early warning signals of potential in the majority of the cases it flags, it still only
decline can be observed online. This is precisely provides an early warning. The client can follow
what Eagle Eye does. Balatka: “Eagle Eye uses up with its usual reviewing process.”
open source intelligence to collect signals. It
was built and tested for one particular problem, Waaijer sees a wide range of possible
but the idea is to retrain the model for different implementations of Eagle Eye: “Think of
markets and countries.” monitoring compliance, detecting fraud or
being able to identify potential takeovers in a
How does Eagle Eye know what is relevant very early phase.” As of 2018, the technology
information – a signal – and what is not? is live and Eagle Eye is being used in different
Balatka: “It considers any and all information it prototypes for clients across Europe.
finds about the company, client or market we
assign it to as a signal.” With help from machine
learning, Eagle Eye then starts to analyse
signals, correlates them and recognises certain “Depending on their needs
patterns. Balatka: “Only AI can handle the
vast volumes of data on the internet and find
and preferences, clients can
correlations between parameters that humans work with an application
would not even think of. Once we find certain
patterns, Eagle Eye constantly monitors the
that gives them access to
internet to look out for them.” the monitoring system”
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI
Financial Advisory
Services
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FINANCIAL
16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI ADVISORY SERVICES
Combating
welfare fraud
with machine
learning
A government organisation in the Netherlands had
to contend with cases of fraud. The organisation was
responsible for paying allowances to citizens, but hundreds
of millions of euros were being paid to ineligible persons.
An internal department had identified that processes were
not running effectively, and in the aftermath of negative
publicity it was clear that the method of tackling fraud
needed to be improved.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI ADVISORY SERVICES
Increasing the hit rate and an internal team has been trained to
Within four weeks Van Rooijen’s team had manage the technology.
created a proof of concept. Following a
comparative study of various artificial From detection to prevention
intelligence technologies, they decided on a After six months, the technology’s hit rate had
form of logistic regression. Huge numbers of increased to 87 percent. Another six months
The existing method consisted of human past cases were fed into the system, enabling later, it fell again. “It showed us that simply
assessors who performed random checks based it to learn in which new cases something was
suspected to be wrong. The result was
less fraud was being committed,” remarks
Van Rooijen. “Obviously, the detection
on what are known as business rules: patterns amazing: where cases of suspected fraud techniques had become so effective that
established by fraud experts that can point out were assessed by human experts, fraud was
found to have actually been committed in
they served as a deterrent to fraudsters. As
well as providing a means of detection, the
when something is amiss. “We wanted to find out 10 percent of cases; this hit rate rose to technology had also begun to act as a form
whether it was possible to improve processes 50 percent in the proof of concept. of prevention.”
with the aid of machine learning,” explains Hilko The technology was improved and refined The approach has successfully prevented
van Rooijen, Senior Manager of Financial Crime over the subsequent months, and one of the
challenges in this respect was ensuring the
fraud worth tens of millions of euros. “And
those savings are still ongoing,” adds Van
Analytics at Deloitte. “The benefit is twofold: representativeness of the data. “The system Rooijen. Deloitte has since assisted public
fewer citizens are wrongly suspected of fraud, learns from the information you feed into it,
so it is important that this information gives
authorities in various other European
countries in the integration of this technology.
while the inspectors are able to spend their time the fullest picture possible,” says Van Rooijen.
haystack
that combined machine learning and network links between them. Ultimately, the team were
analytics with clever human detective work. able to identify around thirty payments that
were related to the accusations.
One hundred and fifty names and entities
The first stage consisted of classifying internal Settlement
documents and emails in order to retrieve It was, of course, unfortunate for the company
A corporate client contacted Deloitte with a serious problem: relevant information. To do this, Wesley van that bribery had taken place. However, the
the company had been charged with bribing public officials. Saane of Deloitte’s Forensic Discovery team company was pleased that incidents could
used a machine learning module from the be traced quickly in order to produce a swift
It needed to find out quickly what exactly had happened Relativity software suite and the categorisation and cogent response to the allegations. This
in order to prepare its defence. Could Deloitte assist in and visualisation tool, BrainSpace. Lawyers enabled the matter to be settled relatively
checked through a few hundred documents quickly with the relevant supervisory
determining whether unacceptable transactions had indeed manually to indicate whether or not they were authorities. The investigation also shed light on
taken place? relevant to the investigations, and these were the business processes that had allowed the
used to train the system. “We carried out a few undesirable payments to take place, and the
of these iterations, which gradually made the company was able to take action accordingly.
results more accurate,” explains Van Saane.
It meant that, ultimately, the lawyers actually Machine learning and advanced analytics can
had to study only a fraction of the millions of be of considerable assistance in carrying out
documents. an investigation involving large quantities of
data. As far as potential legal proceedings are
Around fifty names of individuals and entities concerned, however, it is important that all
Thanks to artificial intelligence, emerged from this investigation that were parties concerned understand the technology
the lawyers only had to study potentially implicated in the alleged corruption. fully and trust it, cautions Cnossen. “The lawyer
Cnossen’s team then built a custom-made must be able to explain the process, and the
a fraction of the millions of tool to perform a network analysis of the court or the Public Prosecutions Service must
documents relationships between these individuals and consider the approach acceptable. Thanks
entities. Searches of publicly accessible online to our method of working, we were able to
sources, such as the Paradise Papers and provide detailed statistical substantiation, and
OpenCorporates revealed around one hundred the parties concerned were convinced of the
new names that were potentially implicated in outcome.”
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI ADVISORY SERVICES
Clustering
unstructured
information in
BrainSpace
In e-Discovery – the gathering of evidence from digital
data – heaps of data have to be gathered and rendered
understandable. But what exactly is a feasible way of
searching through millions of documents within a short
space of time? The e-Discovery team at Deloitte has spent
three years working with BrainSpace, a smart tool that
categorises data and renders it understandable with
extraordinary speed and accuracy.
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16 Artificial Intelligence projects from Deloitte | Practical cases of applied AI ADVISORY SERVICES
Contact persons
Partner Tax & Legaly – Frank Nan
Partner Consultingy – Patrick Schunck
Partner Financial Advisory – Oscar Sneijders
Partner Risk Advisory – Marc Verdonk
Partner Audit & Assurancey – Theo Jongeneel
Partner GSC – Liesbeth Mol
Partner Innovation – Richard Roovers
Contact Details
If you would like to learn more about Deloitte Innovation and our activities,
please contact us via email NLInnovation@deloitte.nl
Colofon
Tekst: De Graaf & De Valk
Vertaling: Wilkens
Vormgeving: Visual Heroes
In opdracht van Deloitte Innovation B.V.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited
(“DTTL”), its global network of member firms, and their related entities.
DTTL (also referred to as “Deloitte Global”) and each of its member firms are
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clients. Please see www.deloitte.nl/about to learn more.