Friday, November 23, 2018

Automation of Accounting


Over one-third of respondents to a recent Consumer Technology Association (CTA) survey say they plan to automate accounting tasks. McKinsey & Co estimates that about 20 percent of the tasks in a typical recording and reporting cycle can be automated and nearly 50 percent of those tasks can be mostly automated. "CIOs could consider looking at the ways their accounting department collects, processes and reports financial data. Many firms have been automating the process of producing and submitting regulatory filings, for example."

Most of the regulatory bodies in the world have set the stage for automating their filings by having adopted XBRL (eXtensible Business Reporting Language). XBRL presents a tremendous opportunity for companies to fully automate their process of preparing and submitting regulatory reports. It can fit into any accounting system from SAP to EXCEL spreadsheets.

This opportunity is not available for Canadian companies in their filings since Canadian regulatory authorities are way behind the rest of the world in adopting XBRL. However, Many of those companies need to file with the SEC in the US, and the SEC has required the use of XBRL for years. The movement to inline XBRL is even better,  because it makes possible the automation of the whole filing, since with inline XBRL, the need for a separate text based document is eliminated.

All of which means that XBRL fits beautifully into the process of digital transformation.


Monday, November 19, 2018

Watch Where Your Data Goes

Many of us have linked our phones to our cars. Such linkages enable hands free usage, making them popular. These linkages work through the use of bluetooth, a powerful but famously insecure technology that enables wireless transmissions over short distances. When a linkage is established, it makes all the personal information on your phone available to your car. Something many of us don't always think about.

Such information would include contact details, call and text logs, and perhaps even full text messages.

This vulnerability was brought to our attention in February by exposure of the CarsBlues Hack and since then has been addressed by some of the car manufacturers, so that some 2019 models have installed preventative measures. But others haven't. So this means when you give up control of your car, such as by selling it or returning it after leasing, it means you should wipe out the information in your car system. This can be done by using the settings function for your car's system. There are usually two steps - delete the phone connection, then delete the associated data from the system. For most cars, this is a relatively simple operation.

The problem with personal data on cars is similar to the issues around the growth of IoT devices, where any number of devices are connected to the internet. When you discard these devices, its wise to delete the data from the devices and also any related internet sites. This is not always simple, but worth doing in any event.


Tuesday, November 13, 2018

Smart Contracts Have Weaknesses to Address

The most common and at this point the most useful application of blockchain is for smart contracts. An industry is growing around this application, including Ethereum, Eos and Tazius, among others.

Smart contracts are designed to automatically implement contracts that involve some routine procedure that can be programmed. Program code is developed and entered into the blockchain for processing. Once an implementation is initiated, it cannot be changed; all blockchain based contracts are immutable. Code can contain errors, so proper development techniques are crucial.

Smart contracts are encrypted and so the encryption keys pose a risk. They need to be fully protected. Most attacks on blockchain contracts so far have involved attacks on the keys.

Setup is therefore critical for smart contracts, and must often involve legal reviews and audit reviews before they are executed.

Some commentators have given a false impression that blockchain contracts are free of risks and do not require any reviews or such procedures. Because of the need for accurate code, strong encryption keys and effective access control, this is simply untrue.

Thursday, November 08, 2018

The Need for IT Oversight

IT Governance has been a major area of concern to Boards of Directors for many years. The problem stems from the fact that the members of the Board usually have limited understanding of IT, yet the Board has overall responsibility for firm governance and is accountable for financial stewardship and results. And IT is a major element of corporate activities.

Many Boards have approached this issue by appointing a member of IT management to the Board, which helps improve communications. Others have formed an IT Oversight Committee, that is closely tied into IT governance and reports regularly to the Board. Still others have formed a digital strategy think tank, which obviously offers insight into IT Strategy for the Board to consider.

There is a place for all of these groups in corporate governance. And several different ways to organize these IT groups, some better than others. The best approach is to make them high level committee, reporting directly and regularly to the Board. Members of the ITO Committee must be very knowledgable about IT and involved in it's management or governance. Functional management groups, such as AI Implementation, Data Management, etc. would need to channel into the ITO.

In this way, overall IT Governance is a network of top management and Board members where IT becomes an integral part of Firm Governance.

It is now all but impossible to avoid IT in firm governance. So, the issue is not to consider including it, but rather how to include the IT issues in a way that can optimize Board awareness and lead to decisions on IT strategy that are most likely to enable achievement of corporate objectives.


Tuesday, November 06, 2018

AI Implementation Levels

The most common approach to AI implementation is to approach it as an exercise in automation. Companies look to the processes in their organization and decide which ones can be automated, thus removing or reducing the human content and saving money.

While this approach can be useful, and perhaps even a way to start, Gartner, in their release "Building the AI Business Case", points out that it is a mistake to stop there. They argue that many organizations are missing the best of what AI has to offer. That the way to approach AI is to find ways in which human effort can be augmented. That involves looking at decisions that need to be made and considering how AI can help that rather than looking at processes that can be automated.

There are several levels of AI - Reactor, Categorizer, Responder, Learner and Creator.

The reactor level involves simply automating existing processes, eg. filling orders. It's the most basic level. The categorizer level , as the name implies, is AI that can identify categories of transactions and apply algorithms to enhance those decisions.

A good example of responders is driverless cars. That level of AI can identify and react to a number of particular situations. This is quite a sophisticated level of AI. Which raises the issue that one of the considerations in implementing AI is the risk appetite of the organization, or its risk appetite in particular interactions, some being more sensitive or critical than others.

Learner levels can learn from experience and then use that experience to augment future decisions. One example of a learner level application is medical diagnosis - obviously a critical application.

An organized approach to AI implementation is critical to gaining the benefits and also to avoiding unnecessary risks. The Gartner paper offers some useful guidance.

Friday, November 02, 2018

Intelligent Automation, a Path to Digital Transformation

Digitizing parts of an organization is a complex process, involving determining what processes are used in the business, and which of them would benefit from automation. And the complex interaction between humans and technology needs to be taken into account.

Many organizations are now automating these processes using smart bots that can monitor an activity and learn how the processes work and determine which ones should be automated. For example, they can follow the work of an insurance representative, track the interactions with customers and potential customers, including the reactions of the people in different scenarios and learn from the experiences. In other words, the bots use machine learning.

The idea is to reduce repetitive, manual tasks to leave more time for the more interesting and important relationship enhancing work. The human/technology interaction is referred to as orchestration and the objective is to optimize it.

For a more in-depth article on this subject, check out this link.