Data security, data ownership and the use of cloud technology are stirring uncertainty among global and China CFOs
5 December 2017, Shanghai
- Managing data security and privacy seen as significant challenge by CFOs
- Lack of clarity over data ownership and governance has a significant impact on reporting effectiveness
- Traditional governance and board structures challenged by geopolitical risks and technology and data environment
Managing data security and privacy is the main challenge CFOs face in today’s corporate reporting environment for more than half of respondents (56%) to the latest report by EY Financial Accounting and Advisory Services (FAAS), Can innovative corporate reporting build trust in a volatile world? When looking at findings by country, CFOs in India (68%), China (65%) and the US (63%) are the most concerned about data security and privacy.
More than 1,000 CFOs or financial controllers of large organizations with revenue greater than US$500m across 25 countries participated in annual global survey. It found that the lack of clarity over data ownership and data governance has a significant impact on reporting effectiveness for 64% of global respondents (China: 75%).
Eighty-five percent globally (China: 94%) said that they found it either “very challenging” or “somewhat challenging” to actively manage data flows based upon different jurisdictions’ privacy laws. The same percentage of global respondents (China: 98%) also said that assessing the different security standards for data centers versus cloud computing was a key challenge to data protection, privacy and compliance. Interestingly, for 96% of China respondents (global: 86%), the top challenge to effective data governance is adjusting our approach to take into account the impact of new business ventures, acquisition, products, and technology.
The survey also found that 49% of global respondents (China: 55%) say concerns over security and compliance risks of the cloud are seen as a major barrier to technology transformation and the implementation of innovative new technologies. Forty-one percentage of global respondents also shared that lack of collaboration between finance and IT (China: 53%) were major barriers to implementing new technologies.
Lawrence Lau, EY Greater China Financial Accounting Advisory Services Leader says:
“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. 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. The use of advanced data analytics and integrated technologies as well as artificial intelligence, cloud computing and robotic process automation will be key to answering some of these questions. Even traditional storage medium is being challenged – with data being able to be stored even on a water drop.”
“While CFOs in China may have considered the issues around data security, ownership and data transformation, the status is constantly challenged with new operating models, acquisitions and mergers or even the introduction of new innovative products where the form and type of information is not traditional, like tracking the flow of blueprints in a 3D printing process. Every evolutionary change in data creation, storage or management is costly. Data governance policies and thinking needed to be scalable and malleable to future technologies not even commercialized today, to save costs in the long term.”
CFOs respond to technological, social and political pressures
CFOs are under increasing pressure to rethink traditional approaches to corporate governance. Forty-two percent of those surveyed (China: 51%) say their audit committees and boards are asking for more insights and information from corporate reporting on data protection and privacy, with the same percentage of respondents (China: 33%) also saying they are providing corporate reporting on the risks from regulatory change. To combat these changes, 85% of respondents globally say they are providing automated alerts to audit committees and boards about governance, risk and compliance issues, with this increasing to 94% of China respondents.
Lawrence says: “Insightful corporate reporting drawing on terabytes of data is a given. It is molding corporate processes to evolve beyond just compliance needs to be able to ask the right strategic and tactical questions that decision makers need on a daily basis to remain competitive and ahead of the curve.”
“The value of automated alerts to boards and audit committees will be further enhanced when the content moves beyond just governance and regulatory risks and encompasses operational and reputational matters, for example. While this may not be within the ambit of a traditional CFO, the digital CFO managing large volumes of data can easily sift through the terabytes and provide insight via delivering quick alerts on items that impact the value of the organization.”
The changing face of the audit committee
Against the heavily scrutinized environment, the oversight role of audit committees is also significantly changing, the report finds. Eighty-two percent of global respondents (China: 90%) say audit committees and boards are putting a much stronger focus on corporate culture and its impact on compliance and fraud prevention.
This is leading to the role and responsibilities of audit committees coming into focus. The survey finds that 56% of global respondents (China: 73%) say that committee members need to adapt procedures to audit data consolidated from different platforms, such as cloud data warehouses, while 64% (China: 76%) say developing new competencies is increasingly important in order to provide effective oversight.
Lawrence concludes: “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 digital age. Cash has been king in the past; in the future, data will be king.”
The full report can be viewed here.
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This news release has been issued by Ernst & Young Hua Ming LLP, a member of the global EY organization.
About the survey
Can innovative corporate reporting built trust in a volatile world? surveyed 1,020 CFOs or heads of reporting of large organizations to understand the challenges they face in corporate reporting. More than 40% of the organizations were in excess of US$5 billion a year in revenues, with 8% in excess of US$20 billion. Respondents were split across the Americas; Asia-Pacific; Europe, Middle East, India and Africa (EMEIA); and Japan, and covered 13 main industry sectors. The survey was supplemented by in-depth interviews with CFOs and heads of reporting organizations, as well as EY subject-matter professionals.