With the increasing volume and pace of big data, how to provide valuable information and insights to boards at speed with no error has become a challenge for global CFOs, according to the latest report released by EY Financial Accounting and Advisory Services (FAAS) – "How Can Reporting Catch up With an Accelerating World?"
Therefore, technological changes related to corporate reporting are imperative.
The annual global survey of CFOs or heads of reporting of large organizations across 25 countries in organizations with revenue greater than US$500m finds that the Americas, Asia-Pacific, Japan and the Middle East all cite changes to technology as their number one external reporting challenge.
Dealing with these technological changes, including cloud-based systems, data analytics, robotic process automation (RPA) and artificial intelligence (AI), is also the top issue for 35% of emerging markets respondents. This is more evident in the feedback provided by Chinese respondents.
“Companies in China are experiencing greater organizational complexity than their global counterparts at a jurisdiction and business unit level,” says Lawrence Lau, EY’s Greater China FAAS Leader.
“The key technology challenges associated with corporate operating model are the number of reporting systems and data inconsistency. As a result, CFOs may provide information that fails to meet stakeholders' expectations on corporate reporting. Therefore, reporting technologies must keep up with the development of technological changes.”
The corporate reporting environment
The report shows that as companies in China are experiencing greater organizational complexity, as well as a greater increase in demands on financial reporting, over 30% of Chinese respondents indicate that the main external challenges of the current reporting environment in China are satisfying differences in reporting standards and technological changes.
Challenges with the greatest impact on reporting effectiveness are adequacy of supporting IT infrastructure (48%) and volume and pace of big data (45%).
Data analytics and technology
Forty-two percent of Chinese respondents believe that the main priorities for reporting are managing the demands from an increasingly complex regulatory landscape.
In the meantime, 40% Chinese respondents indicate that it is also very important to upgrade IT and financial data analytics tools to create forward-looking insight and drive new levels of process efficiency.
To address these priorities, the vast majority of Chinese respondents plan to spend more on reporting technology: 97% expect to increase investment in corporate reporting technologies over the next two years, significantly above global levels (84%).
As part of this increase in investment, over 35% Chinese respondents expect to prioritize spending on big data technologies and cloud computing.
According to Chinese respondents, Chinese companies are prioritizing two aspects of the operating model to support reporting – centralized centers of excellence (87% of the respondents) and onshore captive share service centers (67% of the respondents). Thirty-two percent expect to migrate nonfinancial reporting fully over the next two years to share service centers, managed service or outsourcing; and 25% expect to fully migrate business analytics and forecasting, both of which are higher than the global average (about 15%).
“In response to the rapidly evolving business community, CFOs are considering ways to enable future reporting to deliver valuable information and insights in a more timely and effective manner. This requires practical actions by CFOs, such as actively respond to the external environmental challenges posed by technological changes, increase investment in reporting technologies and adopt appropriate operating models,” says Lau.