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TITLE: Welcome Remarks by Dr Nurmazilah Dato’ Mahzan, Chief Executive Officer, Malaysian Institute of Accountants at the MIA International Accountants Conference 2019 - Trust and Sustainability in a Digital Economy

DATE: 22/10/2019

WELCOME REMARKS BY

DR NURMAZILAH DATO’ MAHZAN

CHIEF EXECUTIVE OFFICER

MALAYSIAN INSTITUTE OF ACCOUNTANTS

AT

MIA INTERNATIONAL ACCOUNTANTS CONFERENCE 2019

Trust and Sustainability in a Digital Economy

22 October 2019 (Tuesday), Kuala Lumpur

  • Tan Sri-Tan Sri, Datuk-Datuk
  • Invited speakers
  • Ladies and Gentlemen

Good Morning!

  1. Welcome to the MIA International Accountants Conference 2019, the flagship learning and professional development platform of the Malaysian Institute of Accountants, specially designed to upskill members and accountants.
  2. This year, I am delighted to report that we achieved a record number of of 3,300 delegates. Up until registration closed, we were still receiving applications. Thank you so much for your support.
  3. We really appreciate the overwhelming demand and interest in the Conference, which we hypothesize is directly correlated to the value of the content and services delivered.
  4. Every year, we strive to deliver more value to our delegates. The outcome we hope to achieve – as the regulator, developer and voice of the profession in Malaysia – is to make our members and delegates relevant, future-proof and sustainable.
  5. This year, our theme is Trust and Sustainability in a Digital Economy.
  6. We chose this theme because digital transformation, sustainability challenges and the trust deficit are among the critical areas where accountants can add value while heightening the relevance of the profession.
  7. As a member body of IFAC (the International Federation of Accountants), this theme is also aligned to the future direction of the profession as identified by IFAC.
  8. There are three integrated threads here.
  9. First, the digital economy clearly, the digital economy has grown from strength to strength. The UN Conference on Trade and Development (UNCTAD) has released its first-ever Digital Economy Report 2019 that maps the flow, data and funds in the world’s digital economy, in other words, value creation.
  10. There are some key statistics to note in the report. First with regards to the value, “depending on the definition, estimates of the size of the digital economy range from 4.5 to 15.5 per cent of world GDP.”
  11. The two titans of the world are dominant in digital as well. “The digital economy is highly concentrated in the United States and China, with the rest of the world, especially countries in Africa and Latin America, trailing considerably far behind.”
  12. However, in terms of share of GDP, the digital economy sector is the largest in Taiwan Province of China, Ireland and Malaysia. This is evidence that Malaysia’s policies and initiatives to strengthen the digital economy are bearing fruit.
  13. The digital economy has also created numerous jobs. “Global employment in the ICT sector increased from 34 million in 2010 to 39 million in 2015, with computer services accounting for the largest share (38 per cent). The share of the ICT sector in total employment rose over the same period, from 1.8 per cent to 2 per cent.”
  14. Innovation is unsurprisingly dominated by the AI superpowers – China and the US. “With regards to value added in the information and communications technology (ICT) sector, the United States and China together account for almost 40 per cent of the world total.”
  15. Specifically, the two account for 75% of all patents related to blockchain technologies, 50% of global spending on the Internet of Things (IoT), more than 75% of the cloud computing market and as much as 90% per cent of the market capitalisation value of the world’s 70 largest digital platform companies.
  16. Recognising this, and despite our relatively tiny size in terms of population and GDP, Malaysia is striving to catch up. The recent Budget 2020 was hailed by experts as a budget for the digital economy, containing many incentives for driving the digital economy and achieving digital competitiveness and digital transformation.
  17. I hope that many of you in this room will take cognisance of the incentives and apply them to your own organisation’s journey of digital transformation. Many organisations now in Malaysia have begun digital transformation, whether they are at the beginning, in the middle or the peak of the cycle.
  18. As accountants are business partners, decision-makers and financial stewards of our organisations, our expertise in costing, budgeting, processes and checklists is essential to ensuring the successful digital transformation of our organisations, which can have an expensive outlay.
  19. Over the last three years, MIA has emphasised the importance of getting started on digital transformation. For example, through last year’s MIAC 2018 with the theme of Riding the Digital Wave, Leading Transformation. We published the MIA Digital Technology Blueprint as a guide for digital transformation, which has been very well received by businesses, acknowledged by IFAC, and used as a reference globally and regionally by the accountancy profession.
  20. Now, we are shifting the focus to sustaining the success of digital transformation. While every organisation must embrace digitalisation, the sustainability of digital transformation is at high risk of failure. McKinsey in its October 2018 survey results on digital transformation found that digital transformation is even more difficult than ordinary change management, with a success rate below 30%. According to the McKinsey survey, only 16 percent of respondents said their organisations’ digital transformations successfully improved performance and equipped them to sustain changes in the long term. An additional 7 percent said that performance improved but that those improvements were not sustained.
  21. Tony Saldanha, former Procter & Gamble (P&G) Global Shared Services and IT Vice-President, and author of a 2019 book entitled Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead, who famously urged companies to “… disrupt before you are disrupted–be the next Netflix, not the next Blockbuster,” agreed that 70% of all digital transformations fail. This failure rate is very costly as the integration of digital technology into all aspects of a business is a $1.7 trillion industry.
  22. To overcome failure, discipline and consistency is key.
  23. Tony attributed the long-term digital transformation success to discipline – the consistent use of processes and checklists – to ensure the sustainability of the transformation. He was inspired by the airline industry’s use of processes and checklists to zerorise flight failure, and applied this to digital transformation exercises.
  24. His book also shares some key factors to avoid digital transformation failure. The ones most relevant to us today would probably be:
  25. Digital Reorganisation - taking digital technology from being just a function of the IT department and embedding the development and leadership of it into every function in the company. In short, digital culture change. Cases in point for the profession would be finance functions and SMPs. MIA has released the Competency Frameworks for Finance Functions and CFOs and Roadmaps for SMPs to help drive transformation including digital transformation.
  26. Another key success factor is Staying Current, driving digital learning and literacy into every level of the organisation. Tony Saldanha in his advice to boards, senior management and organisations said that: “Digital transformation is a people game”.
  27. Today’s Conference and MIA’s acclaimed initiatives – recognised by IFAC and other professional bodies and institutions - are strongly linked to driving digital literacy and upskilling for the profession. MIA believes that the most important success factor for transformation is people and upskilling – building the correct competencies and culture that support transformation and sustainable high performance.
  28. MIA’s upcoming Competency Framework for the profession maps the skills and roles expected for the accountancy profession, including digital literacy. It’s now at the Exposure Draft stage.
  29. Ladies and gentlemen. Another key thread this year which is new to the Conference, yet very relevant is sustainability.
  30. Sustainability is at the forefront of global issues now. Sustainability encompasses a wide spectrum of issues that affect ESG – environment, society and governance. The UN’s SDGs call for action on 17 sustainability matters that are of prime interest to the public, and therefore affects organisations and business as usual. Stakeholders around the world are calling for more accountability and behavioural change on sustainability issues.
  31. For the first time in the history of the Conference, we have specially aligned the content to fit the unique perspectives and roles of accountants and the profession in sustainability.
  32. IFAC is taking a strong stance on climate change, and MIA as an IFAC member organisation will align our initiatives with IFAC in order to support the transition to a low-carbon society to fight climate change. Specifically, accountants are ideally positioned to use our expertise and influence to support market-based policy initiatives and incentives, consistent and well-considered regulation, and more useful disclosure.
  33. Kevin Dancey, IFAC CEO, wrote in a recent editorial on sustainability and the profession, that “Professional accountants are becoming a more powerful force for sustainability. This is thanks in part to the shift to responsibly managing and reporting on all of an organisation’s resources, including its environmental resources—not just its finances.”
  34. In particular, accountants play a strong role by supporting better disclosure and accountability that can change organisational behaviour to become more sustainable. IFAC strongly supports the Paris Agreement, which provides a clear framework for international action for the reduction of greenhouse gas emissions (the main culprit in climate change) and calls for increased investment and innovation in climate action.
  35. As things stand, greenhouse gas emissions are increasing, and current national emissions reduction efforts will not keep global warming below the critical 2 degrees Celsius threshold.
  36. So how can the profession take action?
  37. To quote Kevin, built into the Paris Agreement is “a robust transparency and accounting system to provide clarity on action.”
  38. However, “there is little use in an agreement without assessment, and there can be no assessment without measurement and disclosure.”
  39. Therefore, “professional accountants come in, at the highest level (by) developing high-quality information and insights. We are essential to this fight.”
  40. So, in a nutshell, accountants can fight climate change by doing what we do best: assessing and monitoring, measuring and disclosing, communicating this information to influence better decisions and actions, and reporting and providing assurance for public trust.
  41. This is also why MIA is actively advocating for Integrated Reporting as a game changer in communications and building trust. Not only are we the national advocate for , but we are a certified trainer for by the International Integrated Reporting Council (IIRC) and we have recently released our third which has been acknowledged as much improved by our stakeholders.
  42. Ladies and Gentlemen, now I would like to touch on trust.
  43. Trust is a valuable asset for all institutions and organisations, and ongoing trust-building activities should be one of the most important strategic priorities for every organisation. Trust is one of the key ingredients of success in the digital economy.
  44. Accountants play a pivotal role in trust-building as preparers of information, auditors providing assurance on information, regulators enforcing governance, or those charged with governance.
  45. As IFAC’s Kevin Dancey said, “The profession is rooted in strong skills and backed by a code of ethics that had been revised and restructured to make it even more relevant in the global economy. Accountants are part of the solution to the public trust crisis.”
  46. According to the 19th Annual Edelman Trust Barometer Global Report published in 2019, the Malaysian government is currently at a "trusted" level, achieving a score of 60 points compared to "distrusted" with just 46 points last year – an increase of 14 points. The global trust average is at 47 points . However, there is still room for improvement and catchup with the world’s most trusted nations and governments.
  47. To improve competency, accountability and trust, it is important that these public institutions provide accurate and complete financial and non-financial information, in order to demonstrate accountability and stewardship and to reinforce their credibility. By utilising their expertise in stewardship and reporting to strengthen transparency and accountability, accountants can help to rebuild good governance and hence strengthen trust in public institutions to bridge the trust deficit.
  48. Today’s Conference weaves in the element of trust as a building block across all sessions. However, Plenary 2 on MACC Guidelines on Adequate Procedures puts the focus squarely on anti-corruption and how accountants can implement the guidelines to create a safe and trusted environment for good governance, which in turn builds trust.
  49. Ladies and Gentlemen, we have carefully designed our content today and tomorrow to impart knowledge and awareness of the skillsets the profession needs to be relevant in the Digital Economy, while upholding trust and advocating sustainability.
  50. We have assembled a line-up of speakers who are at the frontlines of change. Thank you very much to our speakers for making the time to be here to share your expertise, and to our sponsors, partners, collaborators and teams for enabling this Conference.
  51. While all the sessions are invaluable for professional development, I would like to draw your attention to the plenary session on Budget 2020 and incorporating insights on the new Shared Prosperity Vision 2030. This plenary will provide much-needed direction on how Malaysia is addressing sustainability issues aligned with the UN SDGs e.g. moving towards a higher value add economy through economic restructuring, investment in human capital and implementation of key economic growth areas.
  52. In addition to the sessions that look more deeply at digital transformation, I would also encourage delegates to attend the concurrent sessions on Sustainability Skillsets as well as Combating Climate Change, which will expound on the roles and responsibilities of accountants in driving sustainability as outlined by the UN SDGs and climate change action as exhorted by IFAC and MIA.
  53. Ladies and Gentlemen, in ending, I would like to assure delegates and members that MIA is committed to consistently delivering the best knowledge and content in upskilling to prepare the profession for perpetual disruption and change.
  54. Post-Conference, we will conduct a post-mortem and brainstorm on how we can make MIA Conference 2020 even better and more relevant.
  55. On behalf of MIA, I hope that you will make a date with us in October 2020 for the MIA Conference 2020. Until then, have a great time at MIAC 2019!

Thank you.