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Tech Solutions For IFRS: Posted At 35,000 Feet

Dina Medland

Technology can give a real boost to better corporate governance. We saw that with the tech challenge to #rethinksupplychains I wrote about on Forbes earlier this year (Competing To End Labor Trafficking in Global Supply Chains: With Technology). Making the process of documentation quick and easy is an important first step to transparency. It is also critical for compliance.

New International Financial Reporting Standards (IFRS) will address a suite of measures by the International Accounting Standards Board to overhaul accounting in the long wake of the financial crisis and to increase international regulatory cooperation.

But with less than 18 months to go before the new IFRS rules go into effect, a survey by Deloitte reveals that nearly two-thirds of banks are unclear on the effect the rules may have on their balance sheets – and uncertainty abounds.

A staggering 99% of respondents to Deloitte’s Sixth Global Banking IFRS survey said their local financial regulator had yet to say how they might incorporate IFRS 9 numbers into regulatory capital requirements. The survey included 91 banks, including 16 global, systemically important financial institutions (but excluding U.S. banks).

Almost half of banks think they do not have enough technical resources to deliver their IFRS 9 project and almost a quarter of these do not think that there will be sufficient skills available in the market to cover shortfalls, says Deloitte. Some 60% of banks either did not or could not quantify the transition impact of IFRS 9. Of the banks who responded, the majority estimate that total impairment provisions will increase by up to 25% across asset classes.

Seventy percent of respondents anticipate a reduction of up to £50 in core tier 1 capital ratio due to IFRS 9, according to the survey.

But amid the guesswork, time is running out. One answer comes from SAP; I was at 35,000 feet, en route to California to learn more when I wrote this blog. SAP has just announced the latest enhancements to its revenue accounting platform designed to help CFOs and chief accounting officers master the new IFRS 15 (which is known as ASC 606 in the U.S.) revenue-recognition standards.

It is not just the banking sector that’s taking note. These new accounting standards will apply to all entities – public, private, and not-for-profit – that have contracts with customers, and will supersede virtually all current revenue accounting requirements.

IFRS 15/ASC 606 eliminates the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replaces it with a principle-based approach for determining revenue recognition. The change can affect companies’ reported revenue, how and when they report financial performance, and overall financial decision making.

It sounds like a discussion for the boardroom. But time to implement the new process is running out. To find out how much time you have, visit the IFRS 15 Doomsday clock here.

For more on making sense of the new IFRS regulations, see The Digitalist’s post on Wrestling With IFRS 15.

This article appeared originally in Board Talk. It is republished by permission.

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Dina Medland

About Dina Medland

Dina Medland is an independent writer, editor, and commentator with a strong focus on issues around corporate governance, ethics, and the workings of the boardroom. She is on the team of contributors to @ForbesEurope with a page on corporate leadership, the boardroom and governance, and is an ex-Financial Times permanent staff member who has been a regular contributor in recent years.

Why You Should Bring Diversity Into Procurement, Where It Belongs

Susan Galer

Many companies agree that diversity is a good thing, but connecting buyers with minority-owned suppliers has long been a challenge. Rod Robinson, CEO of ConnXus, founded his company out of his growing frustration as a government procurement officer and small business owner.

Speaking during an expert roundtable at the recent SAP Ariba Live 2017 event, Robinson explained why partnering with SAP Ariba supports both companies’ shared purpose-driven mission.

“I created ConnXus after realizing how inefficient and under-invested the market was,” he said. “Bringing technology to bear on the problem to shine a light on the data was the first step. Being able to attract a partner like SAP Ariba is the second. I knew we’d begin as a direct channel to customer, but to truly change the world for greater efficiencies and effectiveness, you have to partner with world’s largest business network.”

The partnership aims to help companies improve supplier diversity whether it’s because of direct or unconscious bias, or lack of awareness of their existence. Jon Stevens, global senior vice president of Business Networks at SAP Ariba, said that companies want diversity not only in their workforce, but also across suppliers for speedy innovation.

“Small, diverse companies are nimble and very responsive. Having a diverse supply chain allows you to react quickly,” he said. “The other major benefit is having diverse opinions and points of view, which lead to greater innovation at a faster pace. One of the challenges our customers have is awareness of diverse suppliers. Our partnership connects the largest business network to the largest diverse network.”

Unlike past diversity solutions, which often reported to human resources, Robinson said integrating it with procurement produces stronger results. “We’re focused on bringing diversity into procurement where it should be,” he said. “What differentiates ConnXus is that we’re staying true to our expertise.”

Process innovation is just as important

Robinson shared examples of how companies are using the network to innovate faster by developing both new products as well as “new ways to approach old problems.” One supplier responded to an RFP opportunity with an idea for changing the buyer’s product specifications that would significantly reduce costs. Stevens discussed the collaboration network in the context of post-apartheid empowerment programs in South Africa. He cited how two sisters operating a cleaning service used the network to develop new offerings by working with a broader set of customers.

Diversity that makes a difference

As companies expand, many want to track diversity spend for preferential procurement programs or meet geographically specific objectives. Robinson said ConnXus is supporting these demands, along with others including “matchmaking” within a company’s larger supplier base, as well as a subscription-based model for small and midsize business. One new offering provides impact results to buyers reporting on outcomes like jobs and wage rates.

IDC research predicts that by the end of 2018, 90% of manufacturing supply chains will use B2B commerce networks as the primary collaboration tool for demand, supply, service, and new product development. That’s just one sector. Cloud-based B2B networks like are the innovation growth engines for the new economy.

Follow me: @smgaler

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | Facebook | YouTube

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Machine Learning: What’s In It For Finance?

SAP News Center

Automating standard processes has long been the top priority for finance departments. Now, things are moving to the next level: Thanks to machine learning, intelligent software can now handle tasks that it has never been able to perform before.

Most enterprises deploy software that posts payment transactions automatically and ensures that compliance rules are met. Which means that finance personnel are only called on to intervene manually when exceptions occur – such as customers omitting key payment data, making a typing error, or paying multiple invoices in a single transaction.

“This is precisely where machine learning comes in,” says Robin Bau, director of Shared Service Automation at SAP. “The new technology can now be deployed in any scenario where additional knowledge is required.”

Machine learning-enabled software learns in a similar way to humans, that is, chiefly through experience, observation, and historic data. It uses self-learning algorithms to spot patterns; it recognizes contexts, and it makes predictions. And while the concept of artificial intelligence is by no means new, it’s only now that computers have become powerful enough to analyze sufficient volumes of data and to allow data scientists to develop corresponding models from it.

Using machine learning to identify universal processes

Of course, theoretically, you could create a set of rules for every conceivable error by hand. But self-learning software saves you the trouble. “The technology runs in the background and ‘observes’ human actions. When an employee in finance allocates a consolidated payment to multiple invoices, the software remembers the action and performs it autonomously the next time around – without being explicitly programmed to do so,” explains Bau.

After a brief “familiarization” phase, the software understands comparatively simple, universal processes. It is also quick to learn company-specific compliance procedures: “Each company has its own rules and business scenarios. All the software needs is access to historic in order to be able to respond correctly,” says Bau.

Built-in AI for SAP solutions

In the medium term, SAP plans to build artificial intelligence into its entire software suite and all of its cloud solutions. One key objective is to ease the workload of shared service organizations.

“Many of the inquiries processed by shared service centers are fairly similar: When was my invoice paid? Why did I receive a reminder? Answering them is a very time-consuming process. [Software] identifies the correct processor when a ticket arrives and can often answer questions itself,” says Bau.

Going forward, artificial intelligence will be used for strategic matters, to provide accurate forecasts, and thus to support a company’s growth.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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Unleash The Digital Transformation

Kadamb Goswami

The world has changed. We’ve seen massive disruption on multiple fronts – business model disruption, cybercrime, new devices, and an app-centric world. Powerful networks are crucial to success in a mobile-first, cloud-first world that’s putting an ever-increasing increasing amount of data at our fingertips. With the Internet of Things (IoT) we can connect instrumented devices worldwide and use new data to transform business models and products.

Disruption

Disruption comes in many forms. It’s not big or scary, it’s just another way of describing change and evolution. In the ’80s it manifested as call centers. Then, as the digital landscape began to take shape, it was the Internet, cloud computing … now it’s artificial intelligence (AI).

Digital transformation

Digital transformation means different things to different companies, but in the end I believe it will be a simple salvation that will carry us forward. If you Bing (note I worked for Microsoft for 15 years before experiencing digital transformation from the lens of the outside world), digital transformation, it says it’s “the profound and accelerating transformation of business activities, processes, competencies, and models to fully leverage the changes and opportunities of digital technologies and their impact across society in a strategic and prioritized way.” (I’ll simplify that; keep reading.)

A lot of today’s digital transformation ideas are ripped straight from the scripts of sci-fi entertainment, whether you’re talking about the robotic assistants of 2001: A Space Odyssey or artificial intelligence in the Star Trek series. We’re forecasting our future with our imagination. So, let’s move on to why digital transformation is needed in our current world.

Business challenges

The basic challenges facing businesses today are the same as they’ve always been: engaging customers, empowering employees, optimizing operations, and reinventing the value offered to customers. However, what has changed is the unique convergence of three things:

  1. Increasing volumes of data, particularly driven by the digitization of “things” and heightened individual mobility and collaboration
  1. Advancements in data analytics and intelligence to draw actionable insight from the data
  1. Ubiquity of cloud computing, which puts this disruptive power in the hands of organizations of all sizes, increasing the pace of innovation and competition

Digital transformation in plain English

Hernan Marino, senior vice president, marketing, & global chief operating officer at SAP, explains digital transformation by giving specific industry examples to make it simpler.

Automobile manufacturing used to be the work of assembly lines, people working side-by-side literally piecing together, painting, and churning out vehicles. It transitioned to automation, reducing costs and marginalizing human error. That was a business transformation. Now, we are seeing companies like Tesla and BMW incorporate technology into their vehicles that essentially make them computers on wheels. Cameras. Sensors. GPS. Self-driving vehicles. Syncing your smartphone with your car.

The point here is that companies need to make the upfront investments in infrastructure to take advantage of digital transformation, and that upfront investment will pay dividends in the long run as technological innovations abound. It is our job to collaboratively work with our customers to understand what infrastructure changes need to be made to achieve and take advantage of digital transformation.

Harman gives electric companies as another example. Remember a few years ago, when you used to go outside your house and see the little power meter spinning as it recorded the kilowatts you use? Every month, the meter reader would show up in your yard, record your usage, and report back to the electric company.

Most electric companies then made a business transformation and installed smart meters – eliminating the cost of the meter reader and integrating most homes into a smart grid that gave customers access to their real-time information. Now, as renewable energy evolves and integrates more fully into our lives, these same electric companies that switched over to smart meters are going to make additional investments to be able to analyze the data and make more informed decisions that will benefit both the company and its customers.

That is digital transformation. Obviously, banks, healthcare, entertainment, trucking, and e-commerce all have different needs than auto manufacturers and electric companies. It is up to us – marketers and account managers promoting digital transformation – to identify those needs and help our clients make the digital transformation as seamlessly as possible.

Digital transformation is more than just a fancy buzzword, it is our present and our future. It is re-envisioning existing business models and embracing a different way of bringing together people, data, and processes to create more for their customers through systems of intelligence.

Learn more about what it means to be a digital business.

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Goswami Kadamb

About Goswami Kadamb

Kadamb is a Senior Program Manager at SAP where he is responsible for developing and executing strategic sales program with Concur SaaS portfolio. Prior to that he led several initiatives with Microsoft's Cloud & Enterprise business to enable Solution Sales & IaaS offerings.