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 ...