Preparing for the Digital Age: Accountants’ Evolving Role and

Preparing for the Digital Age: Accountants’ Evolving Role and Changing Competencies Raef Lawson, PhD, CFA, CMA, CSCA, CPA, CAE Vice President-Research & Policy, Professor-in-Residence Accounting Educator Conference Kansas City, MO March 1, 2019

Agenda I. Introduction II. The Value Chain Goes Digital III. The Changing Role of Accountants IV. Evolving Competencies for Accountants V. The Call-to-Action 2

About IMA IMA (Institute of Management Accountants) is the worldwide association of accountants and financial professionals in business. Founded in 1919, we are one of the largest and most respected associations focused exclusively on advancing the management accounting profession. We are committed to: Empowering our 100,000 members Supporting our 300 professional chapters Nurturing our 150 student chapters Providing continuing education opportunities to our 27,000 active CMAs Growing our footprint globally with a presence in 140 countries

The Value Chain Goes Digital

The Value Chain Goes Digital Companies are encountering an industrial revolution in which companies use digitization to orient themselves to customers through ecommerce, digital marketing, social media, and the customer experience. New business models are being developed today based on a connection to “information.” Digitization is eliminating functional silos, and value chains are becoming integrated ecosystems that are fully transparent to everyone. 5

A Wave of New Technologies An IMA research study1 identified 10 technologies that will reshape the business landscape: Mobile Big Data Artificial intelligence (AI) and robotic process automation (RPA) Cybersecurity Educational technologies Cloud Payment systems Virtual and augmented reality Digital delivery systems Social media Other studies have identify additional technologies (including the Internet of Things, blockchain, 3D printing, and drones) that will also radically alter how business is conducted. ACCA-IMA, “Digital Darwinism: Thriving in the Face of Technology Change,” October 2013, www.accaglobal.com/content/dam/acca/global/PDF-technical/futures/pol-afa-tt2.pdf. 1 7

AI and RPA Our research notes the following potential benefits to business from adopting AI and RPA (robotics process automation): automating routine, repetitive, and labor-intensive tasks and processes, reducing operating costs and increasing efficiency, providing 24/7 service via myriad fixed and mobile devices, developing innovative new products and services, ensuring that products and services meet customer needs, scaling up operations with fewer and cheaper resources, and extracting more value from existing investments in technology. ACCA-IMA, “Digital Darwinism: Thriving in the Face of Technology Change,” October 2013, www.accaglobal.com/content/dam/acca/global/PDF-technical/futures/pol-afa-tt2.pdf. 1 8

The Internet of Things Connecting any device with an on and off switch to the Internet Example: Haier’s Smart Fridge Ability to collect vast amounts data Ubiquity of data: Big Data Leverage data to create value, new business models 9

CLICK HERE TO VIEW Source: CGP Grey, August 2014

The Changing Role of Accountants

What Does the Future Hold? Accounting Today, November 2018 The Wall Street Journal, September 2018 CPA Trendlines, December 2018 12

It’s Crunch Time for Accounting Both the accounting and auditing functions are experiencing a major wave of automation that most likely will result in substantive reduction of staff. Li Zhang, Duo Pei, and Miklos A. Vasarhelyi, “Toward a New Business Reporting Model,” Journal of Emerging Technologies in Accounting, Fall 2017, http://bit.ly/2odcUgD 13

Transactional Activities Most Automatable 14

The CFO Team of the Past In the past, the CFO team was largely focused on: Protecting value (value stewardship) Oversight and Hindsight Reporting, standards, and compliance 15

The CFO Team Today Today, the CFO team has evolved to include: Value creation Insight and foresight Role as business partner, including strategy, IT, operations, and data analytics 16

Robots Can’t Do Everything Source: “Where machines could replace humans-and where they can’t (yet),” McKinsey & Company, July 2016 17

Evolve or Get Left Behind “I’ll let the IT department handle implementing a more advanced data analytics function. It’s not my job.” “I’m taking CPE courses in “I’m taking an advanced data analytics and working analytics with course IT and and senior working with IT andon senior management management on advanced data implementing implementing analyticsatodata inform decisionanalytics function.” making.” 18

Everyone Must Pivot to Technology Digital Natives High stakes pursuit of higher education Dual degree programs or electives in data analytics, computer science recommended Executive leadership or individual contributor Leading digital transformation efforts Need to improve tech skills for credibility Graduating into a competitive job market Like to be “mentored” vs. “managed” Open to tech for process improvement Gen Z (under 21) Gen Y (ages 21 to 33) Boomers (ages 54 to 70) Gen X (ages 34 to 53) May be occupying middle management roles More tech skills will enable them to move up within their organization or pursue freelance, independent work 19

The Accountant as Business Partner1 The essential role of accountants is and will continue to be value creation. Accounting’s value proposition can be defined in terms of strategy formulation and analysis, planning, and execution. Accountants must move up the valuechain, performing higher value-added work “Focusing Accounting Curricula on Students’ Long-Run Careers: Recommendations for an Integrated Competency-Based Framework for Accounting Education”, Raef Lawson, Edward Blocher, Peter C. Brewer, Gary Cokins, James E. Sorensen, David E. Stout, Gary L. Sundem, Susan K. Wolcott and Marc J. F. Wouters), Issues in Accounting Education, May 2014. 1 20

Four Roles for Today’s Accountants Steward (26%) Catalyst (20%) 21 Operator (37%) Strategist (17%) Source: Enterprise Performance Management and the Role of the Management Accountant in India, 2018

The Evolving Role of the Accountant as a Trusted Business Advisor ACCA-IMA, “The Future CFO Role,” November 2014 22

Data Analytics Evolution Source: Gartner Inc., as published in Strategic Finance, Tech Practices, January 2015 23

An Emerging Role - Analytics Translator Data scientists can serve as valuable support for finance professionals, making it possible to derive recommendations for action from large quantities of unstructured data. Finance and accounting professionals must learn to communicate with data scientists and technology specialists, helping to translate data into business insights. This role has been described as being that of an analytics translator 24

Evolving Competencies for Accountants

Preparing for the Future of Work No simple or prescriptive solutions Many jobs today, and many more in the near future, will require specific skills - a combination of technological know-how, problem-solving, and critical thinking - as well as soft skills such as perseverance, collaboration, and empathy Source: “The Changing Nature of Work” World Bank Group, 2019

It’s Crunch Time for Accounting “ Employees will be doing things in new ways, some of which will make CFOs uncomfortable. Finance talent models are evolving quickly, with a premium placed on data scientists, business analysts, and storytellers. All of your people should be able to contribute to elevating the value of Finance in terms of communication, impact, and influence. Make every new hire count. - Deloitte’s “Crunch Time V, Finance 2025” 27

Top 10 Skills Employers Want https://www.weforum.org/agenda/2016/01/the-10-skills-you-need-to-thrive-in-the-fourth-industrial-rev olution/ 28

The Skills Gap Nontechnical Skills Decision analysis (37%) Process improvement (35%) Strategic thinking and execution (32%) Adaptability to change (31%) Communication skills (29%) Leadership (28%) Problem solving (27%) Relationship building (19%) Industry knowledge (15%) Technical Skills Identify key data trends (29%) Operational analysis (28%) Data mining and extraction (28%) Technological acumen (27%) Statistical modelling & data analysis (26%) Planning, budgeting, & forecasting (22%) ERP systems (21%) Cost management (20%) Financial analysis (18%) Source: IMA-RobertHalf study, 2018. 29

Challenges and Opportunities for Accountants Accountants don’t have to be data scientists or applied mathematicians We do need to be able to ask the right questions We do need competence in regression, correlation, segmentation analysis and other analytical techniques We need to be able to work with AI – augmented intelligence Accountants can serve as the link between the experts and business leaders 30

IMA’s Updated Management Accounting Competency Framework Accounting & finance professionals need to be able to see the organization as a whole and develop the analytical and integrated thinking skills necessary for value creation. 31

Competencies by Domain 32

Competencies by Domain 33

The Call-to-Action

Relevance Lost or Relevance Gained in the Digital Age? Automation has been around for a long time. This time, it is different. Our profession can become MORE or LESS relevant in the face of digitization (AI, robotics, intelligent process automation) based on how urgently we focus on building COMPETENCY and TALENT; technology is secondary The entire professional ecosystem must UPSKILL in strategy management and data science 35

The Call-to-Action For individuals – Adopt and adapt to skills in artificial intelligence, robotics, and intelligent process automation. Upskill!! For academia – Raise the stakes in better aligning what is taught vs. what today’s “accountants” actually do. For corporations – Tone at the top in embracing data analytics as the new science of winning in a competitive age full of disruption. For accounting associations – Be part of the solution by advancing competency with training and education. 36

Accounting firms & Companies Accounting firms and Organizations’ finance functions must: Assess and prioritize tasks and processes for automation, Identify the areas most likely to be “de-skilled” or commoditized, Develop new skills to take advantage of the potential to focus on higher-value tasks and services, and Develop new ways to communicate and measure value and success, including advanced data analytics (moving beyond descriptive statistics to predictive and prescriptive analytics), data visualization, and “storytelling.” 37

Practitioners - Preparing for the Future Develop an appropriate (data-oriented) mind-set. Develop enhanced communication and relationshipmanagement skills. Develop the ability to think critically. Develop strategic management/thinking skills. Develop enhanced risk management skills. Focus more on innovation and change management. Develop skills in data analytics. Consider obtaining a professional certification. 38

Questions for Accounting Educators To what extent does my school’s curriculum prepare students for long-term career success? Does my school’s curriculum reflect the businesspartnering role of accountants? To what extent does my curriculum cover essential technological skills? To what extent is professional ethics integrated into my curriculum? Interpersonal and Communication skills will be increasingly important. Is my school rethinking its coverage of these competencies in my curriculum? 39

Questions for Accounting Educators To what extent do my curriculum and instructional methodologies foster the development of higherorder learning skills? Does my curriculum help students develop competencies in an integrated manner? Do my school’s business model and course offerings reflect the changing education landscape? 40

IMA Educational Resources IMA’s new Technology & Analytics Center Contains a wide variety of resources, including articles, research reports, and webinars Examples: New research report, “Management Accounting Competencies: Fit for Purpose in a Digital Age?” (May 2018)1 Excel Data analytics online course (July 2018) Tech Talk Webinars Data Analytics (July 2018) Data Visualization (September 2018) Strategic Finance articles: “How to Master Digital Age Competencies” (September 2018) 41

Questions? 10 Paragon Drive, Suite 1 Montvale, New Jersey 07645-1760 Raef U.S.A. Lawson (800) 638-4427 (201) 573-9000 [email protected] 201-474-1532