Archive for February 2019

Problem-solving – Creating a culture of blameless 

Problem-solving – Creating a culture of blameless

Companies that fail exceptionally have the potential for greatness.

Finance is complex, and whenever you have complication and uncertainty, it is a given that things will go wrong at some point. When they do, the best way to deal with those mistakes is to use them to learn and grow. And the only way an organisation can be aware of issues while they’re still small-scale is to create an environment in which employees and managers at all levels feel safe voicing their concerns and thoughts.

“The reality is human beings will make mistakes,” said Amy C. Edmondson, Novartis professor of leadership and management at Harvard Business School and author of The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. “When we’re in novel settings, beyond just mistakes, we’ll also have failures that aren’t, strictly speaking, mistakes because no one’s ever been in that situation before. The most important thing is that you hear about what went wrong in a timely way because that’s how you can jump on it and avoid larger-scale problems.”

Companies that foster a culture of blameless problem-solving have the potential to learn from what goes wrong, and also to innovate, through smart experimentation, while companies that habitually blame individuals are in danger of running into large-scale disasters without a hint of impending doom, according to Edmondson.

Here are some tips for creating a workplace environment in which people feel they can speak up about what’s happening and collectively work hard to improve and avoid big problems:

Promote smart experimentation. Experimentation is how companies innovate and develop tomorrow’s new offerings, but you want to make sure that the experimentation strategy is a smart one. Organisations should never experiment on a grand scale in uncertain domains. Experiments need to be big enough to get valid data about their viability, but not so big that the potential failure will be devastating to the business.

“For organisations to create a culture that doesn’t blame or punish mistakes, they must embrace entrepreneurship culture,” said Ebrima Sawaneh, a Lagos-based accountant and finance blogger. “Every employee should be trained and empowered to innovate solutions without fear of being punished if they make genuine mistakes. Employees should be encouraged to report any mistake, and organisations have to clearly set what is acceptable and create a line of sight.”

Once you have a clear experiment strategy of an appropriate scale, you must make sure that everyone’s expectations are aligned.

“Everyone (high and low) must know that this is an experiment, and the nature of an experiment is we don’t yet know what will happen,” Edmondson said. “Make sure everyone is aware of the fact that this may or may not work, and in both cases, what happens will provide great data.”

Invite input. Leaders need to make it clear to people that their voice is not only expected but also welcomed.

“A lot of times, especially when they are nervous that there might be layoffs, people have the tendency to hold back,” Edmondson said. “There’s an implicit belief that no one ever got fired for silence. I think the job of leaders is to flip that around. In the complex, uncertain industry in which we operate, the people that we’re not hearing from are not of much value.”

Because the tendency for employees is to remain silent about issues, leaders need to be proactive in inviting input. It’s one thing to say, “I’d love to hear from all of you,” but it’s another to turn to a specific employee and ask, “What do you think of this situation? I’d love your thoughts.”

“After painting the situation we find ourselves in in such a way that it becomes clear that voice is necessary, leaders must be proactive in asking ‘What are you seeing out there? Is there anything not going well? What are you excited about?’” Edmondson said.

Foster psychological safety. In her latest book, Edmondson discusses why it matters for company performance that people feel psychologically safe to speak up and what leaders can do to help bring it about.

“I don’t mean to say we have to get rid of all fear,” Edmondson said. “I think it’s fine to be afraid of missing a deadline or afraid of the competition. It’s not fine to be afraid of one another or the boss.”

Edmondson explained that while managers have an outsized influence on the climate at work, any employee can make a more psychologically safe space for colleagues simply by showing up with a spirit of openness, asking questions, and truly listening.

“When you listen thoughtfully to a colleague or a subordinate, you are making a difference. You are making work life that much more safe and enriching,” she said. “In addition to asking questions, when you say things to colleagues, subordinates, or managers such as ‘I made a mistake’ or ‘That didn’t work out the way I thought,’ it sets a shining example of a learning orientation. If you model a learning orientation and interest in others, you will make that small difference, in your vicinity, in helping create a learning organisation.”

Sawaneh agrees that fostering psychological safety can help create a high-performing financial organisation.

“When people fear that they will be blamed for mistakes, it can affect their active participation and sometimes result in their being too careful,” he said. “The key resource of accounting firms are their people, and when individuals are less concerned about mistakes, they will be willing to delegate, create a learning culture, become team players, and embrace change.”

Avoid stretched goals and closed ears. While there are several examples of organisations doing a good job of creating a culture of blameless problem-solving, there are also examples of companies that have faced the consequences of squelching safe and open communication.

Wells Fargo’s recent failure, in which millions of accounts were created without consumers’ consent, is one such example. According to Edmondson, the bank’s initial cross-selling strategy wasn’t fully in touch with the reality of customers’ limited wallets, which created immense pressure to have more and more products per customer, leading employees to activities that became fraudulent and problematic in other ways. Had employees felt able to speak up, push back, and say what they were learning, the strategy might have been tweaked.

“A recipe for failure is stretch goals and closed ears,” Edmondson said. “When managers, getting the messages from on high, are saying, ‘You better deliver on this,’ the implied rest of that sentence is, or else. People will deliver, at least on the illusion of creating the desired results, so then what you will often see is the illusion of good performance rather than good performance itself.”

Develop a productive response to bad news. Psychological safety in the workplace can be shattered the second a boss erupts in anger over a reported failure.

“Leaders need to train themselves not to overreact emotionally to bad news,” Edmondson said. “They need to pause, breathe, and disrupt what might be the natural, instantaneous reaction of emotion or disapproval, and say, ‘Thank you for that clear line of sight. Now what should we do next? What are your ideas? Here are my ideas.’ It’s what I call a productive response to bad news, as opposed to a natural, in many ways normal, response to bad news.”

Source : GCMA

Finance innovators- Watchlist for future

Finance innovators – Watchlist for future

At a recent accounting conference in Malaysia, the chief executive of the Malaysian Institute of Accountants opened the first panel discussion by presenting statistics from a World Economic Forum report on the future of jobs. In the report, accountants and auditors are classified under “redundant roles” that will see steep decline in demand over the next few years due to automation. Minutes later, one of the most popular questions from the audience was “How accurate are those statistics?” It reflects a sense of incredulity amongst professionals in the accounting and finance industry. Change can’t be that soon, can it?

You may share the same sentiment. You may have heard buzzwords like automation and artificial intelligence generate chatter in the office or at networking events. They have become ubiquitous in our business vocabulary, yet they are minimally understood. Perhaps you can’t help wondering, “How many of these new technologies are truly ‘disruptive’ and not passing fads?” (History tells us: Whatever is practically useful and reaches a tipping point in adoption survives).

Experts are saying that these new tools are not an evolution of current technology. Rather, it’s a revolution. Klaus Schwab, executive chairman of the World Economic Forum, wrote that the scale, scope, and complexity of this revolution is “unlike anything humankind has experienced before”. And these changes are not limited to technology. Climate change is also affecting the availability of natural resources like water and arable land. It is forcing businesses to rethink the sustainability of their practices.

There’s a silver lining amidst these changes: We are only at the beginning, and there’s still some time to learn about them. Management accountants are needed now more than ever to help navigate this tumultuous time. We dug deeper into six must-know topics from a recently published watchlist by the Association of International Certified Professional Accountants and listed resources to help you learn more. Here’s to future-proofing your career.

1. BLOCKCHAIN

Invented as the technology behind bitcoin ten years ago, blockchain has garnered greater attention in recent years as a technology with the potential to transform financial transactions, supply chain management, and even large portions of the internet. A blockchain report by the American Institute of CPAs defines it as a distributed public ledger that makes a record of every transaction and adds it to a chain of all the transactions that have come before. In accounting and finance, blockchain may enable firms to create immutable and continually updated financial records that are difficult to tamper with. In other industries, companies such as Walmart and Pfizer have completed blockchain pilots to improve food safety and track medicine.

Large and consistent investments into blockchain startups are an indication of interest in the technology. In 2017, venture-capital funding for blockchain startups was up to $1 billion, according to a McKinsey report. In the same report, the consultancy identified some sectors that are inherently more suited for blockchain implementation; namely, financial services, government, and healthcare. In the short term, blockchain’s value lies in cost reduction, but meaningful scale is still three to five years away, according to the report. Some cite its instability, high cost, and complexity as causes for its stuttering path toward mainstream adoption.

Bottom line: Experiments with and implementation of blockchain will continue in 2019 as more applications are identified. But meaningful scale of blockchain implementation to realise its full value in reducing costs and generating revenue is still a few years away.

2. ARTIFICIAL INTELLIGENCE

Artificial intelligence (AI) refers to a branch of computer science that strives to create software that mimics human intelligence. AI-related applications already have been implemented in operations and finance to automate repetitive processes. In 2019, 20% of US organisations plan to implement AI enterprise-wide, according to a PwC survey.

Far from a single technology, AI is an umbrella term that covers a number of areas, among them machine learning, natural language processing, and deep learning. Banks are using AI surveillance tools to prevent financial crime, and insurers use automated underwriting tools in decision-making. In an FM magazine interview, UBS wealth managers spoke about building robo-advisers and using AI and natural language processing to conduct due diligence on the bank’s clients.

The software the bank built can conduct quicker and more convenient know your client (KYC) and anti-money laundering (AML) checks compared to a human worker. It parses hundreds of pages of search engine results for negative news and conducts checks on a potential client’s criminal history — a task that would have demanded a significant amount of a human employee’s time.

Technology expert Amy Vetter, CPA/CITP, CGMA, CEO of The B3 Method Institute, said in a series of video interviews with the Journal of Accountancy that “there are many who look at the technology that’s coming … that we’re going to be disrupted and accountants will go away. And I do not believe that is the case at all.” Instead, new technologies will free up time for finance professionals to provide analysis of financial data, she said. For that to happen, finance professionals will have to train on new technologies, whether through courses or hands-on experience. Communications skills will also be pivotal to help accounting and finance professionals explain their analyses effectively.

Bottom line: AI technology is already implemented in various finance functions and industries. The first step is to learn more about AI — its opportunities and limitations. Its potential is in freeing up human workers to provide more value-added services. Great opportunities await the eager student.

 

3. ROBOTICS

The inconsistent use of vocabulary to describe robotics, sometimes called automation, has created much confusion. Some may even imagine a physical robot sitting in an office. Robotics here refers to robotic process automation (RPA), and quite simply it’s a class of software used to process transactions, manipulate data, trigger responses, and communicate with other digital systems.

Although not an entirely new phenomenon, RPA’s capabilities have improved remarkably over time. Rob King, author of Digital Workforce and vice-president of education at RPA Academy, said in an Association podcast that “RPA has definitely arrived”.

Last year, FM magazine got an inside look at how a Koch Industries subsidiary successfully implemented RPA, freeing up almost 50,000 employee-hours after less than two years of implementation. At the company, RPA was used to automate invoice transactions and track third-party labour.

In 2019, companies will continue to explore RPA implementation and reskill employees to adopt the technology. Research firm Gartner estimates that global spending on RPA will reach $2.4 billion in 2022, compared to $680 million in 2018.

Bottom line: Robotics’ capabilities have matured over time. More companies will want to use RPA to automate repetitive tasks, increase efficiency, and reduce costs. Most large enterprises will embrace RPA in the next few years. For smaller firms, the cost barrier to implement RPA will gradually diminish.

 

4. NATURAL CAPITAL CONCERNS

The only nontechnology trend on this list, but no less significant, is natural capital concerns or environmental risks, which have been brewing in the background for years. We would need 1.7 planets to sustain our current global levels of consumption, according to the World Wildlife Fund (WWF) Living Planet Report 2018. The study estimated that at our current rate, we are using up natural resources faster than they are replenishing themselves. In relation to the Financial Times WWF Water Summit last year, Margaret Kuhlow, WWF’s finance practice leader, wrote that businesses need to get serious about water risks and disclose greater asset-specific location data to identify water investment opportunities.

Former New York City mayor Michael Bloomberg has led the establishment of the Task Force on Climate-related Financial Disclosures (TCFD), encouraging organisations to provide voluntary financial disclosures related to climate that can paint a fuller picture of their businesses. Momentum has also been gathering on nonfinancial reporting. FM magazine reported on a recent debate organised by Oxford Saïd Business School where speakers posed arguments on whether standardised nonfinancial reporting should be mandated for it to be useful to investors. “We need to make sure that climate change, biodiversity, and inequality are dealt with in the future. … There is an urgency,” said Paul Druckman, former CEO of the International Integrated Reporting Council, an organisation that advocates for natural capital and other nonfinancial information to be included in corporate reporting.

Bottom line: Businesses are realising that environmental sustainability must be given greater consideration in business decisions. In 2019, there may be greater support and practice of disclosing climate-related information in corporate reporting.

5. BANKING EVOLUTION

Last year in an issue of the IMF magazine Finance and Development, Stefan Ingves, the governor of the world’s oldest central bank, Sweden’s Riksbank, pondered the question, “In a cashless society, what would legal tender mean?” The question is not far-fetched because Swedish society has almost stopped using paper money, preferring transactions through cards and digital platforms.

Other than changing consumer preferences, banking is also evolving because of the rise of bitcoin and other cryptocurrencies. Although many do not consider cryptocurrency a reliable substitute for cash due to its price volatility, consumers and businesses are already performing transactions using these virtual currencies. Among many are Microsoft, Subway sandwich shops, and e-commerce site Shopify.

In 2019, Sweden’s central bank is expected to issue its first cryptocurrency, e-krona. In the UK, the Bank of England published a working paper last year to understand the implications of a central bank-issued digital currency. In this banking evolution, traditional functions of banks as clearing houses will also change, causing banks to rethink their business models. According to Deloitte, 2019 will see retail banks race to be digital leaders in embracing a mobile-centric customer experience, while fintechs attempt to devour a larger piece of the market share by providing faster payments that work seamlessly across borders.

Bottom line: Debates on whether cryptocurrency can be money will continue in 2019. But consumer preference for hassle-free banking introduced by fintechs is already the standard baseline. What happens in fintech doesn’t stay in fintech — “Why can’t I pay with my e-wallet?”

6. QUANTUM COMPUTING

IBM kicked off 2019 by launching the world’s first stand-alone quantum computer, the Q System One, for commercial applications. Quantum computers are radically different from today’s computers. Instead of running on bits, they run on quantum bits or qubits, and promise to surpass even the fastest supercomputers of today. But don’t run off to get a quantum computer just yet. IBM is not producing quantum computers for sale, and the quantum computer’s processing powers are only accessible through IBM’s computing cloud, similar to what the US’s Rigetti Computing and Canada’s D-Wave are offering. More importantly, the Q System One is still an experimental device used to figure out how quantum computers might work.

Winfried Hensinger, professor of quantum technologies at the University of Sussex, told The Verge that “it’s more like a stepping stone than a practical quantum computer. … Think of it as a prototype machine that allows you to test and further develop some of the programming that might be useful in the future.”

That said, banks like Barclays and JP Morgan Chase are already experimenting with quantum computing. IBM, as quoted in the American Banker, said that organisations are interested in using quantum computing to develop a competitive advantage. Financial institutions are testing it to help minimise risk and maximise gains from their portfolios.

In the US, a law was signed in December to provide $1.2 billion over five years to boost US quantum technology. In China, quantum technology was deployed in the Micius satellite to develop new forms of secure communications.

Bottom line: Albeit in its infancy, quantum computing will have huge political and economic implications once the technology matures. It will be enterprise-ready when it can deliver reliable performance. IBM expects revenue from its quantum computers in two years.

Source : GCFM