Download - 1 BAP Presentation_08.2015
Kenneth Witt, CPA, CGMAAICPA Technical Manager, Management Accounting
Developing the Future: From Strategic Management Accounting to Integrated Reporting
Beta Alpha Psi Annual Meeting
August 7, 2015
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Kenneth W. Witt, CPA, CGMA
Technical Manager, Management Accounting in the Business Industry and Government team at the AICPA.
Staff liaison to the Business & Industry Executive Committee which provides insight and guidance on professional issues and trends
Involved in thought leadership and professional development activities for the Chartered Global Management Accountant (CGMA) designation.
Managed the development of a portfolio of guidelines on strategy, risk and performance management topics
Launched the AICPA Sustainability Initiative
Created and manages the AICPA Business & Industry Economic Outlook Survey
Member of the task force for the COSO Internal Control over Financial Reporting – Guidance for Smaller Public Companies
BBA in accounting from the University of Iowa; Started career with Touche Ross & Co.
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Agenda
Complexity and Competencies
Developing the Future Accountant
Business Strategy Game –LaVie Clothing
Management Accounting –Delivering Growth, Managing Complexity
Sustainability and Integrated Reporting
Fast Track to Leadership -Challenges, Opportunities
Complexity and Competencies
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Complexity is increasing
AICPA Business and Industry Economic Outlook Survey
CPA decision makers (primarily CFOs, CEOs and Controllers)
Given the changing US and global economic and regulatory environment…
666
…how would you gauge the change in the level of general business complexity that you and your business have experienced over the past 3 years?
Significantly
more
complex
30%
Moderately
more
complex
38%
Slightly
more
complex
25%
No change
in
complexity
7%
Slightly less
complex
0%
More Complex = 93%
777
Significantly
more
complex
32%
Moderately
more
complex
40%
Slightly
more
complex
22%
No change
in
complexity
5%
Slightly less
complex
1%
Even More Complex = 96%
…looking ahead 3 years, how do you see the level of general business complexity changing?
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And… The role of finance is changing
In addition to traditional financial accounting and reporting…
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…what areas have become your focus?
39%
41%
43%
44%
46%
55%
58%
67%
0% 10% 20% 30% 40% 50% 60% 70%
Human Resources
Pricing and Cost Analysis
Tax Strategy and Planning
Legal and Compliance
Management/Governance
Acctg Information Systems
Strategic Business Planning
Risk Management and I/C
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And the role is changingNot just for senior executives
For recent graduates and new finance professionals, how important are…
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…business skills, people skills and leadership skills that you would not have expected or required in the past for the same role?
Somewhat important
22%
Not very important
2%
Very Important
= 76%
Developing the future accountant
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What do employers need?
Pathways Commission
Education
Old School New School
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CGMA Competency Framework
Applying accounting and finance skills in the context of the business…to influence and lead
Business strategy game
LaVie Clothing What needs to change?
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CGMA Business Game
Your Role
• You are the Senior Manager of Finance, reporting directly to the CFO
Major Stakeholders
• CEO
• Board of Directors
• US-based clothing manufacturer, est. 1952 - 6 manufacturing facilities in US selling directly to key customers
• Well-designed, well-finished ladies and children’s clothing at medium to higher end of market – quality is key which is main reason for keeping manufacturing in US.
• Introduced new design center in US and new distribution center in Europe which also increased profitability.
• Facing hostile competitive environment – considerable buyer power of large customers driven by lower cost and increasing quality of imports, especially from China
LaVie Clothing Pre-read info
“What needs to change?”
Business Scenario
• Dependent on small number of key contracts – increasing cost pressure from major buyers
• Increasing quality of low-cost goods from China - price is main bargaining tool
• Responsive action to competition is to increase efficiency/lower costs – wage cuts, factory closings under consideration
• Morale is low, quality is falling
First Trigger – Email from CFOBoard of Directors Meeting Next Tuesday
Three Proposals• Appoint Famous Designer• Manufacturing Center in Eastern Europe• Franchise Shops in US, Europe and Asia
LaVie
LaVie Clothing – possible solutions
• Designer to prepare 4 collections per year –
expected to increase sales, expand customer base
• Manufacturing center – expected to reduce
manufacturing and distribution costs
• Franchise stores – expected to provide access to
new markets, reduce dependence on major buyers
Task 1
Prepare a presentation for the CFO to present to the CEO summarizing the advantages and risks of the 3
growth proposals and make your recommendation whether to proceed
or not
15 mins
What are the implications? Potential Revenues? Costs? Competitors? Risks?
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Report Out
Each team should identify 3 speakers to report out:
1. What are the primary advantages?
2. What are the major risks?
3. What key information you would need for a full analysis?
Management Accounting
Delivering Growth and Managing Complexity
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How do we make money?
Customer Value Profit Margin Processes
Strategy and the Business Model
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Finance as business partner throughout the innovation lifecycle
Managing Innovation and Risk
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The role of finance throughout the innovation lifecycle
Leading innovation and managing risk Managing Innovation
CGMA - 2013
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Risk Management and Internal Control
Who is COSO?
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COSO Internal Control – 2013 Update
Why the update?
Expectations for governance and oversight are greater
Globalization
Complexity
Technology
Expectations for fraud prevention and detection
2013 COSO CUBE
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COSO Enterprise Risk Management -ERM
Aligning risk appetite and strategy
Enhancing risk response decisions – risk avoidance, reduction, sharing, and acceptance
Reducing operational surprises and losses
Identifying and managing multiple and cross-enterprise risks
Seizing opportunities
Improving deployment of capital
ERM Cube
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Big Data, Business Intelligence, Business Analytics
From Insight to Impact: Unlocking the opportunities of big data
Focuses on finance role in linking decisions to data
Key questions:
What drives the business?
What do customers care about most?
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What is Big Data? Levels
of
An
aly
sis
Scale and Complexity of Data
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Managing Big Data
The three Vs
Volume
Velocity
Variety
SAS.com
Also
Variability
Complexity
343434
Management Accountant and Big Data
Reduce CostsIncreased Efficiency
Driver –BasedForecasting
Develop and Monitor KPIs
Increase Revs –Customer
Segmentation
Monitor External Risks
353535
Data Quality – An obvious concern
Sustainability and Integrated Reporting
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What is Sustainability?
Image – Ethical Corporation
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Green Growth Indicators
The 3Rs
Reduce
Reuse
Recycle
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More than Green Initiatives
“CORPORATE SUSTAINABILITY IS A COMPANY’S DELIVERY OF LONG-TERM VALUE IN FINANCIAL, ENVIRONMENTAL, SOCIAL AND ETHICAL TERMS.”
404040
Life Cycle of a Pair of Levi Jeans
Sustainability Accounting and Reporting Frameworks
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Sustainability Accounting and Reporting
Triple Bottom Line
• Economic Viability
• Social Responsibility
• Environmental Responsibility
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Major Sustainability Frameworks
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Data and Reporting Considerations
• Relevant
• Consistent
• Comparable
• Clear and understandable
• Inter-connected
• Forward-looking
Data
• Materiality
• Reporting boundary
• Reporting period
• Faithful representation
•Assurance
Reporting
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Climate Disclosure Standards Board
CDSB is an international consortium of business and environmental organizations committed to the integration of climate change-related information into mainstream corporate reporting.
“CDSB connects corporate non-financial reporting approaches”
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Global Reporting Initiative – New GRI G4 Guidelines
Designed to be a universally recognized standard
Compatible with other frameworks including Integrated Reporting
G4 Focus on -
Materiality
Key stakeholder views
Link between business strategy, operations and sustainability impacts
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GRI Content – Aspects and Boundaries
Boundaries
Assess whether inside or outside of organization
Own operations, suppliers, distributors, etc.
Aspects
Significant economic, environmental and social
impacts, that
Substantively influence assessments and decisions
of stakeholders
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G4 Economic and Environmental Aspects
Economic Aspects
• Performance
• Market Presence
• Indirect Impacts
• Procurement Practices
Environmental Aspects
• Materials
• Energy
• Water
• Effluents and Waste
• Biodiversity
• Emissions
• Other
494949
G4 Social- Sub-categories and AspectsLabor Practices and Decent Work
• Labor relations
• Occupational health and safety
• Diversity and equal opportunity
Human Rights
• Child labor
• Freedom of association and collective bargaining
• Non-discrimination
Society
• Local communities
• Anti-corruption
• Compliance
Product Responsibility
• Customer health and safety
• Privacy
• Product and service labeling
505050
What is Integrated Reporting?
The primary purpose of an integrated report is to explain to providers of financial capital how an
organization creates value over time.
International Integrated Reporting Committee
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Key Concepts of Integrated Reporting
The creation of value
The use of “capitals”
The definition of the organization’s business model
Integrated thinking
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What is Integrated Thinking?
IIRC and PwC
Integrated thinking begins with a thorough understanding of the
business model within the context of the external environment.
This understanding creates a more robust basis for identifying risks
and opportunities.
Integrated thinking helps companies develop a better
understanding of financial and non-financial factors and how
they impact their businesses.
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Traditional Financial Statement Model
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Integrated Reporting Model
International Integrated Reporting Committee
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Integrated Report Content Elements
Organizational overview and external environment
Governance
Business model
Risks and opportunities
Strategy and resource allocation
Performance
Outlook
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What companies are doing -
Fast track to leadership
The challenges, opportunities and action plan
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Ethics Underscore the Profession
“Despite the increased prevalence of ethics policies and behaviouralstandards, professionals around the world are feeling pressured to compromise these norms, and bribery remains a concern for businesses.
Managing Responsible Business
CGMA 2015
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How Emotional Intelligence Drives Performance
Daniel Goleman Hay McBer
Personal Competence
How we manage
ourselves
Social Competence
How we manage our relationships
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How to develop EQ
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CFO of the Future will create strategic impact
TWTCPA Case Competition