CFOs Hitting a Wall in Managing Data Security and Privacy in Financial Reporting’s Digital Era

Of the many financial-reporting challenges facing CFOs today, the main difficulties have to do with managing data security and privacy, according to a new survey by Big Four firm EY.

This is particularly true in South Korea (70% of respondents), India (69%), China (65%), Singapore (61%) and Hong Kong (60%). EY surveyed more than 1,000 CFOs and financial controllers of large organizations with revenue greater than US$500 million across 25 countries.

“There is a high level of uncertainty and inconsistent approaches among the finance community on how to approach the issues of data security and privacy,” observes Joon-Arn Chiang, EY Asia-Pacific Financial Accounting Advisory Services Leader.

“The pace at which the corporate world and companies are generating data is unprecedented and the pooling of massive data lakes leads to questions around the protection, uploading and use of the data.”

Part of the solution, he suggests, lies in “the use of advanced data analytics and integrated technologies as well as artificial intelligence, cloud computing and robotic process automation.”

However, this can cause a fresh set of problems. Globally, 65% of the finance executives surveyed say uncertainty about the risk of using new technologies, such as cloud computing, is affecting their reporting effectiveness.

No choice on the cloud

Nearly nine out of ten (87%) of those surveyed say their organization plans to increase investment in these reporting technologies over the next two years – despite concern about data security and compliance risks with regards to cloud computing technologies (50%).

Yet it seems that CFOs have little choice, despite their trepidations. In the future, says Kenneth Marshall, EY Americas Financial Accounting Advisory Services Leader, new technology releases may be delivered only through the cloud.

“The major vendors are moving in this direction,” he reports, “and it’s unlikely that upgrades to your current ledger systems are going to keep pace with the gold standard and the latest and greatest in financial technology. You could end up with service degradation in terms of your software provider.”

Marshall warns against ‘home-made’ automation and analytics solutions. “As companies are looking more and more at robotics and data analytics, those capabilities are getting increasingly built-in to the major vendors’ software,” he says. “You don’t want to necessarily invest in building those capabilities yourself and you could find that the robotics that you do build quickly become outdated.”

Pressures from the board

The EY study also highlights the pressures faced by CFOs from audit committees and supervisory boards, which are asking for automated alerts of any governance, risk and compliance issues (85%). They are also putting a much stronger focus on corporate culture and its impact on compliance and fraud prevention (82%).

As well, the executives surveyed say that audit committee members are asking them for more insight and information regarding compliance and control approaches for data protection and privacy laws (42%) and risk assessments of potential changes to the regulatory environment (also 42%).

“Data – be it financial or operational, internal or external – and how CFOs and their boards use it will be a key differentiating critical success factor for organizations going through transformation in the digital age,” Chiang concludes. “Cash has been king in the past; in the future, data will be king.”

 

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