Every year we are all inundated with various pundits’ views of what’s in store for the new year. We are only 5 days into 2018 and already we have digested enough of this to give us festive indigestion.
So we thought we would try and take our own medicine, simplification and standardisation – as we do with processes, systems, policies and procedures…this is our attempt influenced by our own and our clients experiences from around the world.
Here’s what we think is in store for 2018. We have offered credits at the end for the sources of these nuggets of January inspiration, should you want to do any further reading.
In no specific order…
1) Data and Analytics
The ‘Big Data’ moniker has largely been simplified to just ‘data’ We will continue to see a big swing to focus on exploiting available data and creating actionable insight, for the right people at the right time. This is the era of analytics -the time for talk is over – Just Do It!
2) Investing in New Tech and Making Current Tech Work Harder
There are always new technologies that claim to be able to change the way we work, and certainly we will see a big influx of process specific Applications, Analytics, Robotics and AI taking centre stage this year, but its crucial to also ensure that we are ‘sweating the assets’ represented by our current IT investments. Hub and spoke application architectures making the most of core ERPs, process specific cloud apps and RPA as a rapid application integration technology will be key themes this year. ‘Data Lakes’ and ‘Oceans’ are great concepts, but be careful not to re-create the sediment and sludge of the ‘data warehouse’. Cloud-based SAAS models are gaining more traction as the business look to its own supply chain for ‘uberization’. But, as always, ‘the best automation is elimination’!
3) Expect disruption to continue with technology and digital
Keeping pace with innovation and disruption, both yours and your markets’, will be a challenge: Well-established multinational organisations are struggling to keep up with more agile, tech-driven competitors. Leaders need and must have crucial oversight on innovation. Technology innovation is only valuable where it drives business innovation. Be careful not to attempt managing this innovation with old risk management perspectives. Be aware of the ‘emperor’s new clothes’ syndrome and take care that your new ‘agile’ approach is genuinely driving the right outcomes.
4) Robotics, RPA and AI
Don’t confuse Robotic Process Automation (RPA) with industrial robotics. However, RPA is here to stay and is driving impressive time to value for many organizations. But remember, RPA is about ‘fixing the potholes on the road, not building the new highway’. As an application integration technology and elimination of ‘swivel chair’ tasks, RPA can achieve outstanding results, but remember also that ‘automation makes bad worse, faster’. Get your processes and data in shape first!
Often confused with RPA, but a different discipline, AI has been on the horizon for a long time now and we are now seeing its value in our daily lives. Exploiting AI does not require us all to hire armies of PhD data scientists, rather we can exploit AI enabled services that already exist. We will see more AI and specifically, Machine Learning, entering enterprise business processes this year. Low hanging fruit includes improving the quality of master data, identifying errors and exceptions and streamlining processes.
You can’t open a magazine or a web page without being bombarded with the transformational potential of Blockchain. It doesn’t take any special insight to realise we are at the ‘peak of inflated expectations’ (to coin the phrase from Gartner’s ‘Hype Cycle’) but we will enter a slow glide path into the ‘trough of disillusionment’ until we achieve the ‘plateau of productivity’ in a few years. There are still a lot of practical issues to resolve and many vested interests. With some notable exceptions in specific industries where ‘smart contracts’ particularly will make headway for some counterparty communities, it would be wise to wait and learn from the experiences of early adopters, from both a business and technology perspective. When presented with great opportunities to exploit Blockchain in your business, have razor sharp focus on the business problem to be solved before exploring the unique features of a potential enabling technology.
We are in a new era where we have to learn to live with cyber risk and refine boardroom discussions about cyber risk and security. This year will continue a laser focus on this topic, with new reports out in early January on major new chip technology exposures that will embolden further cyberattacks.
The WannaCry ransomware virus that attacked hundreds of well-known organisations worldwide in 2017 turned out to be a serious eye-opener for many organisations. The NHS, FedEx, Deutsche Bahn and Telefonica were just some of the big names that the virus hit, emphasising weaknesses in IT systems that contained considerable amounts of sensitive personal information. Executives are now aware, but this is just early days!
There remains a persistent gap between awareness and preparedness. Reports indicate that 62 per cent of businesses expect cyber risk to cause disruption within the next three years, yet nearly three-quarters reported poor cyber maturity.
7) Identity and Access Governance
As our landscape of systems and technology usage continues to expand, together with the change in working practices and the ‘gig economy’, challenges are multiplying. Whether as a result of data protection requirements, governance obligations, cyber threats or plain fraud, waste and error, many organizations are unable to assure the identity of those accessing, and the access itself, to critical systems and data. The issue is no longer just about ‘joiners, movers, delegation, and leavers’ in an organization, but beyond the four walls with outsourcers, contractors, consultants, suppliers, business partners and customers. Some of the biggest personal data thefts of recent years have been facilitated by this broader ecosystem of technology access. This remains a big challenge for the coming years.
8) Global Business Processes
We have learned that the wonderful interconnectedness of our business operations today, whilst driving operating efficiency and simplicity at one level, is also creating a ‘blind side’ for the business. Who really understands the end to end process cycles and nuances? How do we optimise, improve or transform something we don’t fully understand? The appointment of ‘Global Process Owners’ will accelerate this year, not just within Shared Services Organizations, who started the charge, but at executive levels across the business. These business leaders will take end to end accountability for performance, risk, operations and results leading to some further breaking down of traditional functional silos.
9) Regulatory compliance complexity and uncertainty
Organisations face a raft of new regulations in 2018, including:
• The General Data Protection Regulation (GDPR);
• The second Markets in Financial Instruments Directive, or MiFID II;
• Two new IFRS Standards;
• The Payment Services Directive II; and
• Extended rules for the Senior Managers and Certification Regime.
Existing compliance regimes, contrary to predictions a year ago, are tightening with the FCPA, for example, having a ‘teeth sharpening’ with global impact.
While compliance functions will shoulder most of the risk burden for new regulations, business operations and internal audit will remain key lines of defence and will need to work collaboratively to ensure that everything is on track for key deadlines.
Business leaders may also wonder how Brexit negotiations will unfold this year, which is likely to have further repercussions on the regulatory environment.
10) Enterprise Risk Management
There is a groundswell of opinion now that ‘risk focus’ is key. We are moving from a world which has been dominated by policy and control, driven in large part by the compliance regimes of the last decade, towards a broader, more holistic approach to understanding and managing risk and opportunity in the business. With the emergence of so many compliance, regulatory and industry requirements, duplication of risk management and controls effort has become commonplace. Now is the time to take a broader view and eliminate redundant or duplicated effort. Enterprise Risk Management (ERM) provides a stable framework for considering risk in all businesses, and recognising that risk is part of achieving any outcome. COSO have published a new ERM framework which should become the foundation of much of these efforts in the coming years.
Defining the future operating models, will force us to work hard to identify the skills we need to hire, develop and retain in an environment where expectations on employment are changing. What are the skills we need in business operations as we extend the reach of global processes and advanced technologies? What is the role and limitation of the ‘gig economy’ in that context? How do we get the level of deep end to end business process skills and knowledge into our business?
12) Company Culture & Tone at the Top
Recent events have reminded us that we have not cracked this issue. The ‘tone at the top’, what is said and left unsaid, the power and danger of unrestrained performance targets, the ‘tone at the middle’ and fear of failure, ignorance of broader implications of our actions, all require a continued focus on gaining consensus on what we really want, and ensuring we consistently drive towards it. The year ahead will require focused, yet flexible board agendas. Be sensitive to risks posed by the tone at the top and organizational culture.
13) Digital Transformation and the ‘Uberization’ of Business
There is too much talk about the technology side of this and not enough on business innovations. Amazon were the original poster child for the ‘death of distance’ in business, inventing a new business model which is still resonating in businesses across industries, around the world. Uber are the new poster child for both the shift the services and the ‘gig economy’. The focus for the coming year must be to focus on the ‘transformation’ element: How is our market changing, our customers, our supply chain? How can we create a deeper, more meaningful relationship with our customers? What products do we need to serve us for the future? Our customers may find our traditional products and method of engagement ‘clunky’. Customers are more and more looking for the value in the product usage, without the overhead of dealing with the product itself. The shift to services is happening in every industry. Just as Uber is not a taxi company (ignoring the legal nuances!) but is a flexible transportation service, how do we reshape our businesses for the future. Only then, do we need to worry about the ‘digital’ piece.
14) The Great Divide
A bit different to the others, but no less pertinent: The gap between rich and poor in the world is getting more acute by the day. The very digital platforms on which we depend as businesses, are shifting more economic power to fewer people. This has been accelerating for a decade or so, and some argue it is part of the natural ebb and flow of socioeconomic evolution. We need to find solutions to this problem fast. All of our businesses have a part to play, but even if we don’t feel philanthropic, this phenomenon is a genuine threat to everyone. When inequality becomes extreme, history tells us that social unrest follows. So we owe it to our children and future generations to make sure that, at least some of what we achieve in 2018, benefits a greater community than ever before.
With thanks and credit to CFO.com, KPMG, Deloitte, PwC, SharedServicesLink.com, Barclay Simpson, the FCPA Blog, IIA and apologies to anyone I have omitted!