Ep. 92: Liv Watson & David Wray - Digital Transformation: Business Reporting in the Fourth Industrial Revolution

Contact Liv:
https://www.linkedin.com/in/livwatson/
Contact David:
https://www.linkedin.com/in/david-w-29627882/
IMA's Paper - "A Digital Transformation Brief: Business
Reporting in the Fourth Industrial Revolution":
https://www.imanet.org/-/media/e8faf3260e904bf5984fff9c9cf70382.ashx


FULL EPISODE TRANSCRIPT
Adam: (00:05)
Welcome back to Count Me In. IMA's podcast about all things
affecting the accounting and finance world. I'm your host, Adam
Larson, and I'm here to bring you episode 92 of our series.
Today's conversation features two guest speakers, Liv Watson and
David Wray. They joined my cohost, Mitch to talk about a paper
they coauthored with others about digital transformation. The
paper, A digital Transformation Brief Business Reporting and the
Fourth Industrial Revolution, highlights the staggering
compliance costs and boldly calls for digital transformation
across businesses. Liv and David share their perspectives with
Mitch as they share many facts and examples of what businesses
should do to maintain compliance through the data revolution.
Let's listen to their conversation now.
 
Mitch: (00:55)
From the research paper, you classify six reg data ecosystem
challenges that are contributing factors to the material costs
and risk in global compliance that you discovered during the
Workiva research. Is that correct?
 
Liv: (01:08)
Yeah, not that the paper really was exhaustedly addressing all of
the spectrum, but some of the key challenges for companies to
produce regulatory reporting is obviously set in their reg data.
The regulatory data, they got it captured that sits in silos in
different types of systems throughout the organization, and then
sometimes as a reporting goes beyond just financial systems, they
are integrating non-financial data. That data is not hardly
accessible in any system. So the data processes being able to
access data is kind of key to be able to digitize that data. Some
of the challenges are the data types, right? You have different
data types, different formats of data. So they sit locked up in
documents. So the data, even if it's stored digitally, it's not
accessible. Standards and supporting documents. I mean, you have
many standards to follow many frameworks to follow multiple
regulators, asking for multiple data points that are aligned with
different supporting documents and regulation. We need to
digitize these documents and they need to be machine readable.
They need to be discoverable. They can't just be digitized into a
word document. Technical standards. There are XBRL. There is XML,
there is Excel, there is Word, there is PDF. When regulators ask
for data, they need to start considering one data format because,
and in machine readable way, because just aggregating all of this
data and then try to create documents and report both internally
and externally. There's some mission marbles. There are many
different ways. Some allows the software vendor to directly
connect to these digital repositories, but some you have to
upload some, you have to fill out an online form. We need one way
or connecting, and then the digital way and data definitions.
Let's not forget that. Data definitions is just an issue all
around standard sharing many data definition are the same, but
mean something different. Some are the same, but describe the
front. We need the digital transformation in a central place,
just like a library to register these data definition into
taxonomies so they can be discoverable machine readable. So
during this paper, we discovered some of the key points that is
costing industry today. IFAC recently said  over $780
billion a year costing the industry just to address many of these
problems that we discovered in our research. So yes, quite a
technical challenge that we still have today, Mitchchell, thank
you. 
 
Mitch: (04:33)
Well, thank you for that, and with this whole data revolution,
you know, I'd like to direct this question to David as the
seasoned finance leader, I know you were both in a publicly
traded and privately held Fortune 500 companies. What is your
personal observation on the willingness of compliance teams to
really embrace this whole digital transformation? 
 
David: (04:56)
Thanks, Mitch. It's a great question. I mean what I've noticed
throughout my career, and I think it's really accelerating the
last few years is that users on the ground are really beyond
crying and now screaming out for digital transformation. And
that's now being echoed in a very loud way by CFOs. In fact, in
2018, Accenture conducted a study, which is called From the
Bottom Line to the Frontline, and they found that about 80% of
CFOs said that control compliance and reporting is largely going
to be digitized because they want to free up those resources to
be able to business partner. That's where they see value.
Additionally risk and compliance data accounts for almost three
quarters of all of the data requests. So the issue is definitely
not going away, and of course it naturally prompts the question
around how can we digitize the end to end process, so the
talented finance resources can in fact be deployed to better
support the business and drive value for organizations. Our paper
really captures this at its most basic level, right? The ultimate
reporting objective is really trustworthy auditable accessible
and machine readable information that is definitely relevant to
user groups. And to do so, we've gotta be near real time as Liv
alluded to earlier. It probably goes without saying that any
transformation success is really going to depend on robust data
governance and each business reporting data and compliance
framework as well. 
 
Mitch: (06:20)
Thank you, David. And now leave, I'd like to pose the same
question to you, but from a software service provider, I know you
were supporting roughly three quarters of the Fortune 500
companies. What are your observations on the willingness of
companies and their compliance teams to embrace this and the data
revolution as well? 
 
Liv: (06:38)
It's an interesting question because as our company tried to
build a compliance platform that allowed companies to digitize
their processes 10 years ago, we spent most of the time educating
the market, what the cloud was, because sitting on system on
local hard drive and data setting, you had to change your mind
and trust the cloud. What we are seeing 10 years later is
something that a cloud is no longer an issue. And now with the
virus and these externality that must allow data to be accessible
from anywhere. We are seeing a huge change in the demand of, of
the solutions that can bring this, technology transfer nation,
because business reporting has never been more complex. If you
were to kind of just even talk about the cost of compliance and
how much data that is being generated today, just in the last
five years, 90% of the data has been is being generated. There is
a $221 billion last year and spent on data management. The risk
of noncompliance and fines are getting much higher. So the
challenge is good data governance is what is going to be a use
differentiator to the profession and this, and David I also say I
am a, new, competency frameworks allows for a lot of these new
technology skills says that the profession needs to adapt to be
able to drive the digital transformation. And in our research
that David, my coauthor here and we did, we also discovered
speaking to accounting professionals that yes, they know they
need to change and transform and software and embrace the cloud
and digital technology like ...