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Identifies the skills and competencies that accountants need in order to contribute to the strategic success of their employer in a complex, global business environment.
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Kenneth Witt, CPA, CGMA AICPA Technical Manager, Management Accounting
Accounting Skills at the Crossroads: Strategic Management Accounting for Business and Career Success
Beta Alpha Psi Annual Meeting
August 9, 2014
2 2 2
Kenneth W. Witt, CPA, CGMA
Technical Manager, Management Accounting in the Business Industry and Government team at the AICPA.
Staff liaison to the Business & Industry Executive Committee which provides insight and guidance on professional issues and trends
Involved in thought leadership and professional development activities for the Chartered Global Management Accountant (CGMA) designation.
Managed the development of a portfolio of guidelines on strategy, risk and performance management topics
Launched the AICPA Sustainability Initiative
Created and manages the AICPA Business & Industry Economic Outlook Survey
Member of the task force for the COSO Internal Control over Financial Reporting – Guidance for Smaller Public Companies
BBA in accounting from the University of Iowa; Started career with Touche Ross & Co.
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Agenda
Complexity and Competencies
What is Management Accounting? What do Management Accountants Do?
Business Strategy Game – Kadgee Clothing
Management Accounting – Skills at the Crossroads
Fast Track to Leadership - Challenges, Opportunities, Action Plan
Complexity and Competencies
5 5 5
Complexity is increasing
AICPA Business and Industry Economic Outlook Survey Q2 2014
CPA decision makers (primarily CFOs, CEOs and Controllers)
Given the changing US and global economic and regulatory environment…
6 6 6
…how would you gauge the change in the level of general business complexity that you and your business have experienced over the past 3 years?
Significantly
more
complex
30%
Moderately
more
complex
38%
Slightly
more
complex
25%
No change
in
complexity
7%
Slightly less
complex
0%
More Complex = 93%
7 7 7
Significantly
more
complex
32%
Moderately
more
complex
40%
Slightly
more
complex
22%
No change
in
complexity
5%
Slightly less
complex
1%
Even More Complex = 96%
…looking ahead 3 years, how do you see the level of general business complexity changing?
8 8 8
And… The role of finance is changing
In addition to traditional financial accounting and reporting…
9 9 9
…what areas have become your focus?
39%
41%
43%
44%
46%
55%
58%
67%
0% 10% 20% 30% 40% 50% 60% 70%
Human Resources
Pricing and Cost Analysis
Tax Strategy and Planning
Legal and Compliance
Management/Governance
Acctg Information Systems
Strategic Business Planning
Risk Management and I/C
10 10 10
And the role is changing Not just for senior executives
For recent graduates and new finance professionals, how important are…
11 11 11
…business skills, people skills and leadership skills that you would not have expected or required in the past for the same role?
Somewhat important
22%
Not very important
2%
Very Important
= 76%
What is Management Accounting?
13 13 13
What do employers need?
Pathways Commission
Education
14 14 14
Management Accounting
Management accountants combine accounting and financial expertise with strategic insight to guide better business decisions.
Management accountants are business professionals at the heart of decision-making, who “connect the dots” and recognize how the different parts of the business need to come together to create value.
Management accounting is the practical science of value creation within organizations
in both the private and public sectors.
Their understanding and experience of business goes well beyond financial accounting
15 15 15
What do management accountants do?
Leverage their expertise to help businesses by:
developing business strategy
making sound investment choices
protecting corporate assets
supporting the management of risk
managing relationships – internal and external
communicating with key stakeholders
assuring high organizational integrity
17 17 17
Game Plan for a Successful Finance Team
Business strategy game
Kadgee Clothing –
Red is the new black
19 19 19
CGMA Business Game
Your Role
• You are the Senior Manager of Finance, reporting directly to the CFO
Major Stakeholders
• CEO
• Board of Directors
Company Info
• US-based clothing manufacturer, est. 1952 - 6 manufacturing facilities in US selling directly to key customers
• Well-designed, well-finished ladies and children’s clothing at medium to higher end of market – quality is key which is main reason for keeping manufacturing in US
• Firm grew well until the 1990’s – Margins slipped due to changes in retailing and global competition -Losses until 2002 - efficiency measures and introduction of new design center in US increased profitability
• Facing hostile competitive environment – considerable buyer power of large customers driven by lower cost and increasing quality of imports, especially from China
Kadgee Clothing Pre-read info
New Resource – Trigger 1 Email from Sales Director Dieter Kubiak
Second major customer withdraws contract
“Red is the New Black”
Business Scenario
• 2nd largest client withdraws its contract
• 34 lay offs already – more to come?
• Morale is low, quality is falling
Current Strategy
• Depending on small number of key contracts
• Responsive action to competition is to increase efficiency
• Price is main bargaining tool
Task
Prepare a presentation for the CFO to
present to the CEO prioritizing the 3
main challenges facing Kadgee
Clothing, and make appropriate
recommendations on how to proceed.
15 mins
Kadgee Clothing – possible issues and recommendations • Wage cuts / layoffs
• Factory closings
• Outsourcing / offshoring
• New product lines / new target markets
• Sell directly to public – online
• Other
What are the implications? Costs? Competitors? Potential Revenues? Risks?
25 25 25
The CGMA Exam Process - 2015
Trigger #1
New Resources
Tools
Task #1
Pre-Exam Research Case Study Examination
Response # 1
Role Simulated
Stakeholders
Company Information
Scenario
Trigger #2
New Resources
Tools
Task #2
Response # 2
Trigger #3
New Resources
Tools
Task #3
Response # 3
6 weeks prior exam 0-1 hour 1-2 hour 2-3 hour
Illustrative process only. Pre-read timing may change. Number of ‘triggers’ or tasks that are presented to students in the three hour exam may be between three and six and various length.
Management Accounting - Skills at the Crossroads
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28 28 28
Strategy and The Business Model
How do we make money?
Customer Value Profit Margin Processes
29 29 29
Building World Class Businesses: For the Long-term
World-Class Businesses focus on:
Clear Strategy
Satisfied Customers
Cost Leadership
Durable Supply Chain
Motivated Staff
Innovation
30 30 30
Managing Innovation and Risk
Finance as business partner throughout the innovation lifecycle
31 31 31
The role of finance throughout the innovation lifecycle
Leading innovation and managing risk Managing Innovation- 2013
CGMA
32 32 32
Big Data and Business Intelligence
From Insight to Impact: Unlocking the opportunities of big data
Focuses on finance role in linking decisions to data
Key questions:
What drives the business?
What do customers care about most?
33 33 33
What is Big Data? Levels
of
An
aly
sis
Scale and Complexity of Data
34 34 34
Managing Big Data
The three Vs
Volume
Velocity
Variety
SAS.com
Also
Variability
Complexity
35 35 35
Management Accountant and Big Data
Reduce Costs Increased Efficiency
Driver –Based Forecasting
Develop and Monitor KPIs
Increase Revs – Customer
Segmentation
Monitor External Risks
36 36 36
Data Quality – An obvious concern
37 37 37
Risk Management and Internal Control
Who is COSO?
38 38 38
COSO Internal Control – 2013 Update
Why the update?
Expectations for governance and oversight are greater
Globalization
Complexity
Technology
Expectations for fraud prevention and detection
2013 COSO CUBE
39 39 39
COSO Enterprise Risk Management -ERM
Aligning risk appetite and strategy
Enhancing risk response decisions – risk avoidance, reduction, sharing, and acceptance
Reducing operational surprises and losses
Identifying and managing multiple and cross-enterprise risks
Seizing opportunities
Improving deployment of capital
ERM Cube
40 40 40
Sustainability Accounting and Reporting
Triple Bottom Line
Economic viability
Social responsibility
Environmental responsibility
41 41 41
Integrated Reporting
Key Concepts of Integrated Reporting
The use of “capitals”
The creation of value
The definition of the organization’s business model
International Integrated Reporting Committee
42 42 42
Traditional Financial Statement Model
43 43 43
Integrated Reporting Model
International Integrated Reporting Committee
44 44 44
Redesigning with the whole lifecycle in mind – Levi Strauss & Co.
Paul Dillinger, Head of Global Product Innovation
SustainableBrands.com
45 45 45
Life Cycle of a Pair of Levi Jeans
46 46 46
Puma– Monetizing its Impacts
Environmental P&L by Supplier
47 47 47
How Emotional Intelligence Drives Performance
Daniel Goleman Hay McBer
Personal Competence
How we manage
ourselves
Social Competence
How we manage our relationships
49 49 49
How to develop EQ
Fast track to leadership
The challenges, opportunities and action plan
52 52 52
CFO of the Future will create strategic impact
53 53 53
The action plan
TWTCPA Case Competition
