SF May 2023

Mike DePrisco: Change Agent

Exploring the Future of Controllership

Climate Risk Disclosures and Your Supply Chain

COSO

AND TRUST IN SUSTAINABILITY REPORTING

Contents /5.23

Accounting and finance professionals are in a position to increase confidence in sustainability information through the use of the COSO Internal Control—Integrated Framework.

28/ 36/ 44/ 52/

COSO AND TRUST IN SUSTAINABILITY REPORTING

COVER STORY The Internal Control—Integrated Framework provides an approach to internal controls that can be applied to an organization’s sustainability business activities and information.

BY ANUM ZAHRA, PH.D.; BRAD MONTERIO; AND PAUL JURAS, PH.D., CMA, CSCA, CPA

MIKE DEPRISCO: CHANGE AGENT

For IMA’s new president and CEO, the member is at the center of the organization’s story. He is committed to finding more ways for IMA to continually provide value to its members—while also growing its global influence and reputation as a thought leader in the industry.

BY LORI PARKS

EXPLORING THE FUTURE OF CONTROLLERSHIP

The expectations, role, and responsibilities of the controllership function continue to evolve. Controllers can follow a series of strategies and actions to meet the future demands.

BY BETH KAPLAN, CPA, CGMA; KATIE GLYNN, CPA; AND KATE GATES, CPA

CLIMATE RISK DISCLOSURES AND YOUR SUPPLY CHAIN

In anticipation of increased ESG-related regulation around the world, companies can start building out the processes they’ll need to gather data from suppliers and other points on their supply chain.

BY DUDLEY BRUNDIGE

BY KAUSHIK SAHA, CMA, ACMA

BY TRENT KRAMER,

BY SHARI LITTAN, J.D., CPA

BY LOUELLA MOORE, PH.D., CPA

READ STRATEGIC FINANCE ARTICLES FOR CPE CREDIT:

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PH.D., CMA, CPA, WITH DENNIS H. CHOOKASZIAN

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EDITOR-IN-CHIEF CHRISTOPHER DOWSETT, CAE cdowsett@imanet.org

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STAFF WRITER/EDITOR LORI PARKS lori.parks@imanet.org

SENIOR DESIGNER JAMIE BARKER jamie.barker@imanet.org

EDITORIAL ADVISORY BOARD

Bruce R. Neumann, Ph.D. Academic Editor

Ann Dzuranin, Ph.D., CPA Associate Academic Editor

William R. Koprowski, Ph.D., CMA, CFM, CFE, CIA Associate Academic Editor

For more information on the role of the Editorial Advisory Board and a complete list of reviewers, visit sfmag.link/reviewers

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Strategic Finance® (ISSN 1524-833X/USPS 327-160) Vol. 10 4, No. 11, May 202 3. Copyright © 202 3 by IMA. Published monthly by the Institute of Management Ac coun tants, 10 Paragon Drive, Suite 1, Montvale, NJ 07645. Phone: (201) 573-9000. Email: sfmag@imanet.org Periodicals postage paid at Montvale, N.J., and additional mailing offices.

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www.sfmag.link/sustainability

A monthly blog covering ESG strategy, reporting, and disclosure topics such as:

● Accountants’ role in sustainability initiatives

● Success stories of companies that prioritize sustainability/ESG

● Insights on decision-useful nonfinancial metrics and data

See the Whole Picture

BY GWEN VAN BERNE,

F

INANCIAL MARKETS AROUND

THE WORLD continue to shudder in response to the collapse of Silicon Valley Bank (SVB) and its bailout by the U.S. government. The ripple effects of SVB’s demise, including the downfall of Signature Bank, have been rapid and have sparked fear among investors and deposit holders of banks with less strong capital positions and balance sheets. In Europe, the once-solid, 166-year-old Credit Suisse failed, and national authorities and global regulators are constantly monitoring how their banks are coping.

Gwen van Berne, CMA, is director of finance and risk at Oikocredit and Chair of the IMA Global Board of Directors. She’s also a member of IMA’s Amsterdam Chapter. You can reach Gwen at gwen.vanberne @imanet.org or follow her on LinkedIn at bit.ly/3LVeRGM

These bank failures have prompted concerns that we’re witnessing a “contagion effect” that’s reverberating across multiple industries and markets. As CFO of a global financial institution, I’ve seen how the world of finance has only grown more complex and the financial markets now operate in increasingly interconnected ways. One of the lessons that’s most evident from what’s happening is the need for solid risk management, especially in the finance department. This requires keeping a pulse on the suitability of your financial business model, protecting assets, assessing risks from unexpected corners, and, perhaps most important, optimizing liquidity. Liquidity is key for every finance department—and so, it’s critical to understand what can jeopardize the availability of resources and what actions should be taken when those resources are threatened.

Information is critical, and that’s why as finance professionals we need to equip ourselves with data and knowledge from a variety

of sources—thought leadership, certification, and continuing education—to keep our thinking agile and creative. Managers, myself included, also need diverse, well-educated teams to cope with dynamic, fast-changing situations. That isn’t always easy. Turnover in many finance teams is high, and CFOs, distracted by the macroeconomic challenges for their business models, don’t always get around to investing heavily in their own people, even though they should. Encouraging staff and other team members to earn a certification like the CMA® (Certified Management Accountant) can help to ensure that an organization has people who not only provide useful, objective data but who also can look beyond the numbers, to see how what’s occurring might impact the entire value chain.

As a CFO, I always try to create my own dissenting voice. Yet strategic decision making requires multiple perspectives. For example, if we have to make investment decisions in other regions, it’s important to be able to hash out the issues with others who are from the area and who are familiar with the regional customs. We benefit not only because of others’ insights into the political and economic climate, but also by learning about how the culture works and how local market players can influence the choices we face.

Recognizing that our own experience is limited can be of great benefit to accounting and finance professionals because it forces us to seek the counsel of others. So, in the midst of trouble in the banking and finance world, I encourage you to connect with your IMA® peers. Discuss what’s happening and the ways you can learn from one another. That’s the advantage of being part of a truly global community. SF

CMA

«Recognizing that our own experience is limited can be of GREAT BENEFIT TO ACCOUNTING AND FINANCE PROFESSIONALS.»

NOTICE OF TERMINATION

The ICMA® Board of Regents has voted to expel several individuals from the CMA® (Certified Management Accountant) program for violation of ICMA policies. As a result, their IMA® memberships have also been terminated. The list of individuals can be found at sfmag.link/sGd5sy18

IASB SEEKS COMMENT ON FINANCIAL INSTRUMENTS DRAFT

The International Accounting Standards Board (IASB) published an exposure draft (bit.ly/4182VKt) proposing amendments to the classification and measurement requirements outlined in International Financial Reporting Standards (IFRS) 9, Financial Instruments. IFRS 9 specifies how a company should classify and measure financial assets and financial liabilities.

THE STATS

70%

For more, see “Climate Risk Disclosures and Your Supply Chain” on p. 52.

The proposed amendments are based on stakeholder feedback received by the IASB during its post-implementation review of IFRS 9, which began in 2021 and concluded in December 2022 (reviews of other aspects of IFRS 9 are expected to follow). The proposed amendments include:

1. Financial assets with environmental, social, and corporate governance and similar features: The proposed amendments clarify how the contractual cash flows on such loans should be assessed and seek to ensure that investors are provided with useful information about the timing, amount, and uncertainty of future cash flows.

2. Electronic payment systems: Stakeholders highlighted challenges related to applying IFRS 9 to the settlement of a financial asset or a financial liability via electronic cash transfers. The exposure draft proposes clarifications to how this should be accounted for.

“The recent post-implementation review of the requirements relating to classification and measurement in IFRS 9 indicated that this standard is performing as intended while also addressing some specific areas for enhancement,” said IASB Chair Andreas Barckow. “This exposure draft sets out our proposals in response to this feedback.”

The IASB is accepting comments ( bit.ly/3GLirns ) on the exposure draft through July 19, 2023, and has published a snapshot ( bit.ly/3A525SB ) with detailed information on the proposed amendments. —Lori Parks

IMA/

of a company’s emissions could be traceable to suppliers, but only 15% of organizations report having good visibility into second- or third-tier suppliers.

FASB PROPOSES STANDARDS UPDATE FOR CRYPTO ASSETS

The Financial Accounting Standards Board (FASB) published a proposed Accounting Standards Update (ASU) intended to improve the accounting for and disclosure of certain crypto assets.

“During the FASB’s recent agenda consultation process, stakeholders from all professional backgrounds identified digital assets as a top priority area for the Board to address,” said FASB Chair Richard R. Jones. “We responded to that feedback with the proposed ASU, which would provide investors greater transparency into the fair value of crypto assets held by entities, as well as additional disclosures about the types of crypto assets held and changes in those holdings.”

The amendments in the proposed ASU would improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The proposed amendments also would improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, restrictions, and changes in those holdings.

The amendments would apply to all entities holding crypto assets that meet certain criteria.

Stakeholders are asked to comment by June 6, 2023. The proposed ASU, including information on how to submit comments, is available at www.fasb.org —Nancy Fass

IMA/ NOTICE OF IMA’S 2023 ANNUAL MEETING OF MEMBERS

To all IMA® (Institute of Management Accountants) members: Notice is hereby given to all IMA members that the 2023 Annual Meeting of Members will be held on June 22, 2023. This will be your first opportunity to meet IMA’s new President and CEO Mike DePrisco. Two live virtual sessions will be hosted at 9 a.m. ET and 7 p.m. ET for the convenience of our global audience. Please note that attendance is limited to IMA members only. Visit imanet.org/AMOM23 for more information and to register to attend.

IMA members became CMAs between March 1 and March 31, 2023.

The names of all the new CMAs can be found on the Strategic Finance website at sfmagazine.com/issue /may-2023 .

For more information on CMA certification, visit www.imanet.org /cma-certification .

FROM CORNER OFFICE TO HOME OFFICE

Is work someplace we go or simply something we do? The pandemic forced professionals to reimagine what the office should be.

While work is what we do, there’s much debate about where work should or can take place. My professional work journey has taken me from a shared cubicle as a new employee to an office with a window…then, thanks to COVID-19, my kitchen table. Like many professionals, I worked from home during the pandemic.

Published during a time of great uncertainty and widespread remote work, Where is My Office? Reimagining the Workplace for the 21st Century by Chris Kane provides a history lesson and a road map to the future of workspace transformation. Through concrete examples, he illustrates the importance of flexibility, agility, and sustainability in office space and working arrangements. He calls on employers to consider how the workplace can be used to facilitate organizational change while being supportive and attractive to employees of all generations. Most importantly, Kane advocates for utilizing office space as a strategic tool that can provide a strategic advantage.

As finance professionals, we often consider offices as simply a necessary overhead cost to be managed. Smaller or shared spaces save money. Technological advances make remote work easier, giving rise to even greater savings, but having a building-centric mindset can backfire.

The chapter “Six Steps for Harnessing the Links between People and Place” demonstrates the benefits of developing a setting that encourages the behaviors that business enterprises want to foster, arguing that workspaces can drive value and increase, not hurt, the bottom line. Kane doesn’t present a one-size-fits-all model that has the potential of alienating a segment of the workforce. Instead, he encourages a holistic approach to achieve both efficiency and effectiveness.

As managers contemplate employees’ altered expectations after returning to the office, with some continuing remote work and others implementing various hybrid models, they should strive to answer the questions Kane poses in his five-step “Journey to Great Places” chapter. The analogy of a sea voyage, combined with examples from the author’s many years working in commercial real estate, illustrates the principles he has developed in the book. He provides persuasive ideas and practical solutions to creating a post-pandemic workplace that will work for employees, employers, and society as a whole. Kimberly Charron, Ph.D., CMA, CPA

TALENT RETENTION AND RECRUITMENT

FloQast released the results of its latest survey of accounting and finance professionals, Controller’s Guidebook: The Great Recalibration – The Role of Technology in Retaining and Recruiting Accountants. The survey examines what influences accountants to remain in their current role and what prompts them to explore a new one, and analyzes the impact technology has on both decisions. It found that:

53 %

of accountants aren’t entirely sure they will stay with their current company in the next year.

63 % of those might leave the industry entirely.

76 %

of accountants who strongly believe in their company say they’re likely to stay in their jobs.

43 %

say they’re extremely likely to ask about technology when interviewing for a new role.

The full report is available for download at bit.ly/3MLneZW .

VISIT STRATEGIC FINANCE ONLINE!

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THE ROLE OF ETHICS IN FRAUD PREVENTION

Accountants’ ethical professional practice is central to an effective approach to fraud risk management and prevention.

BY ROB TENNANT, PH.D.

ETHICS HAS A ROLE IN THE DISCUSSION OF INTERNAL CONTROLS AND FRAUD MANAGEMENT. The Association of Certified Fraud Examiners (ACFE) began a project in 2022 to map its fraud risk management best practices based on the 2013 Internal Control—Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), of which IMA® (Institute of Management Accountants) is a founding member. COSO was formed as a response to the corporate fraud and financial scandals of the 1970s and 1980s, and its first major project was the development of the Internal Control—Integrated Framework, which was released in 1992. It provided a common definition of internal controls and established a comprehensive framework for evaluating internal control systems.

In 2004, the COSO Enterprise Risk Management—Integrated Framework (ERM Framework) debuted, expanding the focus on internal controls to include ERM. Many organizations still use it to evaluate their risk management systems. In 2013, COSO released an updated version of the Internal Control—Integrated Framework (COSO 2013 Framework) to reflect changes in the business environment. This framework is still widely used for assessing the effectiveness of the design and operation of internal control over financial reporting, as required by the Sarbanes­Oxley Act of 2002 (bit.ly/42YNjdx).

The COSO 2013 Framework consists of five internal control components: control environment, risk assessment, control activities, information and communication, and monitoring activities. They comprise 17 foundational principles, the details of which can be found in the COSO 2013 Framework’s Executive Summary (bit.ly/3KtjxF8).

ETHICS AND FRAUD PREVENTION GO HAND IN HAND

The ACFE published Fraud Risk Management Guide in 2016 (bit.ly/3MbNVq4). Both the ACFE and IMA have an interest in promoting best practices related to internal controls, ethics, and fraud mitigation. The ACFE risk guide and the IMA Statement of Ethical Professional Practice (bit.ly/3U3iDnc) can be applied to the COSO 2013 Framework.

The first COSO 2013 Framework component,

ETHICS

control environment, aligns with the ACFE’s first fraud risk management principle that “The organization establishes and communicates a fraud risk management program that demonstrates the expectations of the board of directors and senior management and their commitment to high integrity and ethical values regarding managing fraud risk.”

This alignment is further supported and reinforced by the third standard of the IMA Statement, integrity, which consists of four duties:

1. Mitigate actual conflicts of interest and avoid apparent conflicts of interest.

2. Don’t engage in any conduct that would prejudice carrying out duties ethically.

3. Abstain from any activity that might discredit the profession.

4. Contribute to a positive ethical culture and place integrity above personal interests.

The second component of the COSO 2013 Framework, risk assessment, aligns with the ACFE’s second fraud risk management principle: “The organization performs comprehensive fraud risk assessments to identify specific fraud schemes and risks…and implement actions to mitigate residual fraud risks.”

The IMA Statement is useful in guiding accountants in fulfilling COSO’s second component through adherence to its first standard, competence, which means to maintain an appropriate level of professional expertise by enhancing knowledge and skills; perform duties

in accordance with relevant laws, regulations, and standards; and provide accurate, clear, concise, and timely decision support information and recommendations and help manage risk.

Control activities, the third component of the COSO 2013 Framework, is enhanced by the ACFE principle stating: “The organization selects, develops, and deploys preventive and detective fraud control activities to mitigate the risk of fraud events occurring or not being detected in a timely manner.” The IMA Statement’s guidance on competence corresponds to this principle.

The fourth COSO component is the importance of communicating quality information regarding internal control objectives and responsibilities. It also provides the guidance necessary for communicating internal control functions to external parties.

The final component of the COSO 2013 Framework is monitoring activities. This phase evaluates the effectiveness of an organization’s internal controls in mitigating fraud risk and meeting objectives. The output of this component is fed back into the first component, control environment, to inform the process going forward.

TOOLS TO PROMOTE ETHICS, FIGHT FRAUD

The ACFE risk management guide is a useful tool to focus the activities and expectations of the COSO 2013 Framework implementation on mitigating fraud. Mapping the IMA Statement to the ACFE guide creates an opportunity for

IMA ETHICS HELPLINE

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.business.att.com /collateral/access.html, then the above number.

The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

accountants and finance professionals to leverage their commitment to ethics toward achieving this goal.

The COSO 2013 Framework has been refined to provide a protocol to establish effective internal controls.

The primary focus of the ACFE is the mitigation of fraud. IMA focuses on encouraging and ensuring the ethical behavior of its members. Applying the Statement to the combined COSO 2013 Framework and the ACFE’s Fraud Risk Management Guide can inform accountants’ ethical decision making.

The accounting profession gains strength and influence when it acknowledges the synergies between the various accounting organizations and professional societies. Ensuring compliance and meeting legal obligations are the lowest level of ethical achievement and measurement, and following the Statement ’s ethical principles and standards isn’t always easy or straightforward. Accounting and finance professionals who commit to continuing professional education centered on ethics and fraud prevention position themselves to go beyond the foundational level of compliance, enabling them to become ethical beacons worthy of being emulated by new generations of accountants. SF

Rob Tennant, Ph.D., is an assistant professor of accounting at Texas A&M University-Central Texas and a member of IMA’s Committee on Ethics. You can reach him at rtennant@tamuct .edu

PARTNERSHIP TAXATION

BY

PARTNERSHIP TAXATION IS ONE OF THE MOST interesting and complex areas of tax accounting that managers in both industry and public practice come across. The partnership “entity” is designed to provide for great flexibility for sharing profits, losses, capital contributions and distributions, and management responsibility. Of course, this flexibility also provides taxpayers with opportunities for tax avoidance, especially in terms of shifting the tax burden between taxpayers. As a result, there are many rules designed to prevent abuse.

Contentious areas include whether a partnership in fact exists (Internal Revenue Code (IRC) §761) and, where a partnership does exist, whether a payment to a partner is made in his or her capacity as a partner or if it’s more like a payment to a third party (IRC §707).

While the check-thebox regulations of IRC §7701 minimize many of the issues about whether an entity was a partnership, there are still many instances in which it’s unclear whether a partnership has been established.

IS IT A PARTNERSHIP?

This tension is illustrated in Alexander C. Deitch; Jonathan D. Barry and Susan S. Barry (TC Memo 202286, 124 TCM 101). The case explores the nature of whether a partnership existed for tax purposes between a “lender” and two individual partners in an LLC and, as a result, whether or not a payment of “interest” was in fact a deductible interest payment to the two individual partners. Ultimately, the Tax Court determined that a partnership didn’t exist between the LLC and lender and that the “appreciation interest” in question was a deductible interest payment and not a payment in respect of equity.

In this case, two individuals formed a state law LLC, taxed as a partnership, in Georgia to operate a commercial rental property. In order to acquire and improve the property, they needed to obtain additional financing. To be able to borrow a larger

A Tax Court case demonstrates the complexities surrounding whether an entity is a partnership for tax purposes.

J. WILLIAM HARDEN, PH.D., CPA, CHFC, AND DAVID R. UPTON, PH.D.

percentage of the value of the property, the LLC obtained the loan through a lender’s “participating loan program.” Under this program, the lender received a base amount of annual interest along with “additional interest” that included a percentage of the net cash flow and a percentage of appreciation in the value of the real estate.

All of the documents related to the “loan” were characterized in a manner to treat the lender as just that—a lender rather than a partner. Some of the items related to the additional interest, particularly appreciation interest, had much more the appearance of an equity payment between partners in a partnership. For example, the lender would receive appreciation interest (50% of the gross proceeds) in the case of a sale or condemnation of the property.

The LLC rented the property to outside parties from 2008 to 2014, when the property was sold. During this period, the LLC made interest payments under the terms of the loan, which included principal repayment, interest, and additional interest (50% of net cash flow from the property). Upon sale of the property in 2014, the LLC reported a net gain (§1231) of slightly more than $2.6 million, which was split between the two individual owners.

Since the property was sold, the LLC also made a payment of slightly more than $1 million to the lender as appreciation interest, which the LLC deducted as a rental real estate expense. This, in turn, resulted in each

individual having half of this amount as a deduction, which effectively lowered their income by that amount.

While this type of payment to the lender appears to be more in the order of a special partnership allocation, the Tax Court noted that it isn’t possible to separate for analysis this feature of the loan from the other portions of the loan that did appear to reflect a true lender-borrower relationship. In fact, the parties to the trial had stipulated that the original note along with its modifications and security agreement were debt.

EIGHT FACTORS IN TAX LAW

The Tax Court examined the eight factors found in earlier tax law related to whether a partnership had been formed: (1) the agreement of the parties and their conduct in executing its terms; (2) the contributions, if any, that each party has made to the venture; (3) the parties’ control over income and capital and the right of each to make withdrawals;

(4) whether each party was a principal and coproprietor, sharing a mutual proprietary interest in the net profits and having an obligation to share losses, or whether one party was the agent or employee of the other, receiving for his services contingent compensation in the form of a percentage of income;

(5) whether business was conducted in the joint names of the parties;

(6) whether the parties filed federal partnership returns or otherwise represented to respondents or to

persons with whom they dealt that they were joint venturers; (7) whether separate books of account were maintained for the venture; and (8) whether the parties exercised mutual control over and assumed mutual responsibilities for the enterprise.

With respect to the first factor, the parties clearly labeled themselves in a way to appear as lender and borrower. The second factor is an interesting one: Had it not been stipulated that the base agreement was debt, the Internal Revenue Service (IRS) might have argued that the amounts from the lender were, in fact, equity contributions. In this case, however, because the base amount was agreed to have been a loan, it wasn’t possible for it to also be an equity interest.

With respect to the third factor, the “additional interest” did have the appearance of an equity investment with a preferred return. The fourth through eighth factors are all in line with a creditor relationship.

Note that the total income overall is effectively the same—it’s a matter of how the income is allocated between the individual partners and the lender. If the deduction were disallowed, the income from real estate operations would be higher, but it would be split between three

parties as partners. It’s understandable if this reallocation causes the individuals to have more ordinary income taxed as self-employment income. (But in real estate rentals, the individuals might be able to avoid having the income classified as self-employment income.) It would also be understandable if the reallocation would cause there to be more ordinary income and less capital gain, the latter being taxed at a more favorable rate.

What does seem clear is that in situations in which it appears to the IRS that income is shifted in a way that creates an inappropriate deduction to other taxpayers, it may attempt to reclassify the structure in a way to nullify the deduction. SF

J. William Harden, Ph.D., CPA, ChFC, is an associate professor of accounting at the Bryan School of Business and Economics at the University of North Carolina Greensboro. He can be reached at jwharden @uncg.edu.

David R. Upton, Ph.D., is an associate professor of accounting at the Bryan School of Business and Economics at the University of North Carolina Greensboro. He’s also a member of IMA’s Piedmont Triad NC Chapter. David can be reached at drupton @uncg.edu

© 2023 A.P. Curatola

THERE ARE MANY INSTANCES IN WHICH IT’S UNCLEAR WHETHER A PARTNERSHIP HAS BEEN ESTABLISHED.

THE SELF-EFFACING LEADER

The best finance leaders don’t need to be in the limelight at all times, but rather they should allow their team members to shine.

BY

GOOD LEADERS CREATE MORE LEADERS and work invisibly from behind the pack, letting others shine. They don’t revel in their own ability to overcome challenges but rather in their team’s ability to do so. They’re kingmakers—not just kings who may come and go. If they play their cards well, they can strengthen succession planning and ensure the long-term stability of the organization. An organization doesn’t put a person in a leadership position just to keep the trains running on time. Instead, leaders’ primary tasks include creating a leadership pipeline and building institutional capacity to expand the business over the long term.

A colleague once related to me the story of a senior manager in one of his previous organizations who never taught his direct reports much. His failure to pass along relevant knowledge ensured that employees never learned enough about any task or process to take ownership of it. Moreover, he ensured that he personally joined all meetings, big or small, even if a qualified team member was going to attend. At these meetings, he deliberately attempted to demonstrate his indispensability to peers and leadership by exposing his team members’ shortcomings.

After hearing this story, I pitied this manager. He wasn’t just mean—he also seemed to make himself and his team miserable due to his insecurity. This is a major pitfall for managers to avoid.

Successful organizations continually build for the future and focus on growth initiatives. Hiring and retaining more professionals with leadership ability are central elements of savvy leaders’ long-term strategic game plans.

STAY HUNGRY FOR KNOWLEDGE

One of the imperatives for becoming an effective leader is to have a wide and deep domain knowledge that enables intuitive decision making and big-picture strategic planning. To teach, one must know. It’s difficult to be a great leader on the strength of academic accomplishments, pro-

KAUSHIK SAHA, CMA, ACMA

fessional knowledge, or a charismatic personality alone. A leader must be someone who personnel of all levels of seniority look up to and have the utmost trust in, especially when under pressure. To command that kind of respect, leaders must be imbued with knowledge, wisdom, and empathy, not just charisma and the gift of gab.

In one of my previous organizations, I worked for a general manager who had many excellent qualities. He was methodical and meticulous to a fault. He knew all the right tools and workflow tricks: task managers, heat maps, memos, minutes of meetings, team lunches, PowerPoint presentations, and morning emails with wise quotes. Sadly, it was a telecommunications organization, and he knew almost nothing about the telecom industry during his tenure at that company.

We owe it to our organization to thoroughly know the domain in which it operates, its stakeholders, its internal and external environment, its risks, its past and present competitive landscape, and so on. It’s like being on a battlefield. How can you beat the enemy unless you know the battle terrain, your own people, and the opposition like the back of your hand? How can you lead the army, assign them fronts to defend, and thrust them into battle unless you know all the contours of those fronts yourself? While the stakes aren’t as high in business as they are in war, the analogy still pertains to corporate

leaders’ knowledge of the organization’s domain and industry vertical.

INSPIRE STAFF LOYALTY

People don’t leave jobs; rather, they leave their bosses. To love a job, a combination of three out of the following four things must be good: the brand’s reputation or prestige, the pay, the job profile and responsibilities, and the relationship with the boss. That last one is often the most crucial, since the boss has the power to make or break employees’ experience in the workplace.

How do good leaders teach? The best way to do so is to demonstrate leadership by example. It’s one thing to pontificate and another to perform tasks by hand and show personnel how to do their jobs successfully. At least in the initial period of training a new hire, it’s necessary to have patience with trainees until they’ve been given a fair chance to learn. It’s sometimes also useful as a subtle way of telling the employee not to take the leader for granted. Leaders who prove that they aren’t afraid to roll up their sleeves and do the job themselves are likely to earn the trust and respect of rank-and-file team members.

An important quality of a good leader is to know the strengths and weaknesses of each direct report. Every team member will have some things that he or she is good at (unless a horrible mistake has been committed during the recruitment and interviewing process)

SF ADVICE

IMA LEADERSHIP ACADEMY

The IMA® Leadership Academy supports the development and enhancement of our members’ leadership education and skills to aid in career advancement. From presentation of or participation in leadership courses offered in person or virtually to our community of experienced leaders through our mentoring program to IMA’s leadership recognition program where members can measure their development and earn digital badges, the IMA Leadership Academy can help you meet your leadership goals. For more information, please visit the Leadership Academy website at www .imanet.org/career-resources /leadership-development.

and others that he or she isn’t so good at. One team member may be a wizard at transaction processing, another may be a good liaison to collaborate with other teams, a third may be amazing in management information systems and data analysis, a fourth may be fantastic at project management and coordination, and yet another may work wonders in internal control and automation. Good, wise leaders recognize what each team member is good at and work to sharpen those strengths while filling in skills gaps.

Good leaders must also know what each team member’s weaknesses are and try to minimize them through training and upskilling. It’s necessary to create redundancies and backup capacities in the team for emergencies, high-stakes deadlines, or times when key team members are absent.

An accountant who aspires to be a leader in the future can’t be a one-trick pony. It’s necessary to be wellrounded. Contemporary business leaders need to build leadership pipelines by making time for mentorship; encouraging upskilling; passing along financial, operational, strategic, and management insights; and giving mentees credit for their accomplishments. SF

Kaushik Saha, CMA, ACMA, is an assistant vice president at Reliance Jio Infocomm Limited and a member of IMA’s Mumbai Chapter. You can reach him at saha_k@hotmail.com

REPORTING GUIDANCE CHANGES AHEAD

The FASB fields feedback and works to keep pace with agile software development and other dynamic forces.

BY SHARI LITTAN , J.D., CPA

THE FINANCIAL ACCOUNTING STANDARDS BOARD (FASB), which sets U.S. Generally Accepted Accounting Principles (GAAP), is revisiting existing guidance on accounting for software development costs. There are several reasons the board is undertaking this project.

First, there’s a concern that current accounting results in confusing information for investors. Additionally, there have been significant changes to the way companies develop software since the original guidance was issued.

Consider the diversity of software development projects today. In order to attract and retain clients, financial services companies are building and offering customers access to platforms that pull data from their transactional systems. These customer-facing applications are improved regularly with new features, such as access to external data from banks and investment funds.

Car and heavy equipment manufacturers are building systems that track end customer interactions from the date of purchase, through maintenance over ownership years, to the end customer’s next purchase along with trade-in or resale. The application may allow end customers to update their personal data, report service dates, or indicate interest in a new car. While these applications may be free to outside users, aspects of the systems may become fee-based for specific user groups (such as dealers) as new functionality capabilities are developed.

WATERFALL DEVELOPMENT MODEL

The current accounting guidance, for the most part, was developed based on a waterfall development model that assumes software development through a linear process that begins with planning and design, moves to coding and development, and reaches readiness for use. But while some development projects today still follow this method, processes have largely moved to an agile approach that sets shorter

sprints toward an eventual goal of delivering a product to users.

In each shorter sprint, the process and progress are reassessed. Information learned during one sprint informs the direction of the next sprints. While some development points appear directly related to an ultimate product, blunders along the way benefit an ultimate delivery. In short, these new agile methods don’t have a clear delineation between development phases.

NEW METHODS AND THEIR CHALLENGES

These newer methods of development create accounting challenges. Reporting teams must interpret the existing guidance to apply it to modernized processes. They also need to communicate with their technology teams so the appropriate data, including time allocation, is gathered to account for costs.

Today, there are two sets of guidelines for software development costs.

First, FASB Accounting Standards Codification

(ASC) Subtopic 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed, originally issued in the

mid-1980s, applies if an entity is developing software that it plans to market to external users. Like the waterfall approach, the entity accounts for the earliest parts of projects as research and development until a point called “technological feasibility” is reached. Then, it capitalizes the costs of bringing the developed prototype to market. But this guidance is inapplicable to many present-day Software as a Service (SaaS) arrangements for which the accounting depends on whether the customer takes possession or runs the underlying software. The key benefit of SaaS arrangements is that users don’t need the underlying infrastructure for the application.

The second set of guidance is ASC Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software, which applies if the entity isn’t planning to sell the software but use it for its own purposes. This accounting results in a similar outcome to an entity’s accounting for other fixed assets. Once the application costs are capitalized, the entity generally follows a depreciation method that’s similar to the accounting for

facilities, equipment, and vehicles.

NEW MODELS

During the FASB’s 2021 agenda consultation process, stakeholders urged the FASB to add an agenda project to address the issues. Some users find this accounting, which rests on assumptions about eventual use and separate phases of development, challenging to follow and understand.

After formally adding the project to its technical agenda in mid-2022, the FASB has been conducting research to consider a new model. Through feedback from various preparers and users, the FASB is now focusing on two alternative approaches:

1. Initial development cost model: As currently sketched, the initial development cost model would require the capitalization of all software development costs beginning when it becomes probable that a project will be completed and deliver functioning software.

2. Dual model: This proposal would require immediate expense of certain types of software costs, while other costs would follow the initial development cost model. The FASB is still considering the applicability of this model and the criteria that would differentiate between costs that are expensed vs. costs that are capitalized. One view of the dual model would segregate these expenditures based on whether the software will be commercialized. An alternative set of criteria would distinguish expenditures based on

whether the planned software is internal facing or external facing.

Some observe that the initial development cost model, while replacing “technological feasibility” with “probable,” appears close to the current model. Other critiques question whether the proposed improvements, particularly the dual model, would continue the complexity of characterizing software costs based on assumptions that, in practice, may be challenging to differentiate—and may change during agile development or an ongoing improvement process.

Some stakeholders have critiqued the FASB’s direction on the larger issue of intangibles. Research shows that 90% of market value today is intangible. The International Accounting Standards Board appears to be considering the topic of intangibles in a more holistic way than the FASB’s current direction. Along with research and development, expenditures such as employee training, advertising, and efficiency initiatives build value and result in future cash flows, but they aren’t capitalized due to practicalities in implementation, such as concerns around measurement and recoverability. Instead, financial reporting guidance creates constructs that balance conceptual doctrines with practical concerns as companies, markets, and economies transform. SF

Shari Littan, J.D., CPA, is director of corporate reporting research and thought leadership at IMA. She can be reached at shari.littan@imanet.org

SOME FIND THE CURRENT ACCOUNTING TREATMENTS, BASED ON EVENTUAL USE AND PHASES OF DEVELOPMENT, CHALLENGING TO FOLLOW.

GENDER-RESPONSIVE BUDGETING

Organizations can use gender-responsive budgeting to follow through with their diversity, equity, inclusion, and belonging efforts.

BY LOUELLA MOORE, PH.D., CPA

ORGANIZATIONAL MISSION STATEMENTS almost universally claim to embrace diversity, equity, inclusion, and belonging (DEI&B), but words aren’t enough. Women continue to experience lower labor force participation rates, receive less pay for the same job classifications, and have more difficulty progressing into top leadership positions than men do. Let’s look more closely at the problem, then consider how gender-responsive budgeting (GRB) can help organizations recognize and address inequities at the resource allocation stage.

THE GENDER GAP

A survey of more than 8,500 accounting and finance professionals conducted jointly by IMA® (Institute of Management Accountants), the International Federation of Accountants, and the California Society of CPAs found that 12% of female respondents left the profession due to negative experiences they perceived to be rooted in bias against people like them (bit .ly/3JzblTt). Many women in the global accounting profession don’t see the workplace as living up to organizations’ stated ideals of equity and inclusion (bit .ly/3LBE0di). Another report by McKinsey & Company indicated the COVID-19 crisis exacerbated gender gaps (bit.ly/3LAo4Ii).

The World Economic Forum’s Global Gender Gap Report 2022 argues that gender inequities are an emerging crisis, with parity levels having fallen for the last two years (bit.ly/3n0dAHO).

The overall gender metric is subdivided into four areas: (1) economic participation and opportunity, (2) educational attainment, (3) health and survival, and (4) political empowerment.

The global gender parity index in July 2022 was 68.1% closed, the worst rate since the survey began in 2006. The gap in educational attainment is 94.4% closed, and the health and survival gap is 95.8% closed. The biggest problem areas are economic participation (60.3%) and political empowerment (22%).

Only 10 countries have closed the overall gap by at least 80%: Iceland (90.8%), Finland (86.0%), Norway (84.5%),

New Zealand (84.1%), Sweden (82.2%), Rwanda (81.1%), Nicaragua (81.0%), Namibia (80.7%), Ireland (80.4%), and Germany (80.1%).

The United States (76.9%) and India (62.9%) saw very slight improvements over last year, while China (68.2%) stayed steady but improved its overall ranking in the index by five places.

GRB INITIATIVES

Some countries have decided that it isn’t enough to merely track gender discrepancies after the fact and have taken steps to ensure that gender impacts are addressed in the budgeting process. The Organisation for Economic Co-operation and Development (OECD) includes 38 nations in Europe, the Americas, and the Pacific (bit.ly/3TGI1iL).

Approximately half of OECD members have committed to some form of GRB

Although there are many variations in how GRB is implemented, the International Monetary Fund describes it as “an approach to budgeting that uses fiscal policy and administration to promote gender equality, and girls and women’s development” (bit.ly/42G5YuC).

Inequitable impacts should be addressed, but GRB doesn’t imply that there should be separate budgets by gender or other demographic designations.

GRB initiatives often begin at the national level with a constitutional or similar mandate, but that isn’t always the case. Mechanisms used to support GRB initiatives will necessarily reflect differences in legal and cultural

environments.

GRB programs have been adapted to economies as varied as those in Japan, South Korea, Mexico, Uganda, and other subSaharan African nations. It isn’t fully integrated into the budget process in Germany at the national level, but it has been used in the state of Berlin since 2003 (bit.ly/3JDlxKC), and Bologna, Italy, began a GRB initiative as early as 1997 (bit.ly/3nhwrhy). In other cases, GRB programs emphasize cooperation with nonprofit partners (bit.ly/3LIFouS).

HOW GRB WORKS

In robust GRB programs, fiscal officers undertake gender impact assessments before and after implementation of new spending initiatives (bit.ly/3nkkVSY). Assessing gender impact involves more than just comparing computational differences in amounts of money spent on men’s and women’s programs.

For example, many countries released stimulus dollars for infrastructure projects in the aftermath of economic problems related to COVID-19. Road-building projects—a common target for economic stimulus funds— historically have been viewed as gender-neutral. Yet road-building crews are more likely to be male. Further, in many countries, men are more likely to drive cars while women use public transportation.

A rigorous ex ante gender assessment would raise questions about putting more stimulus dollars into public transportation or childcare facilities to support women’s participation

in the workforce. Some gender budgeting programs require each major capital expenditure project to include an assessment of expected impact by gender. An ex post assessment is also needed to assess spending impact.

Some countries put most of their focus on operating or capital expenditure budgets, requiring each major agency or capital budgeting project to specify gender-based goals (bit.ly/3TxPgJD). Other countries emphasize the revenue side, looking at how different forms of taxation may have disparate impacts by gender or other demographic factors (bit .ly/3ZcwSHl).

GRB AND MANAGEMENT ACCOUNTANTS

GRB is a phenomenon that those charged with financial responsibilities will want to follow closely. A notable obstacle in creating impactful GRB programs is that many financial professionals haven’t been trained to recognize the indirect effects spending patterns have on DEI&B.

Successful gender budgeting efforts seem to need at least three factors:

(1) institutional support from the government or board, (2) a robust system of measurable performance metrics, and (3) willingness to go outside the accounting and finance area to partner with those who can provide background on the subtleties of gender impacts from spending programs (bit.ly/3FOJsFT).

Companies that sponsor health plans know that medical costs differ across

dimensions of age, race, and gender. Can financial professionals really afford to ignore organizational factors that influence these costs? Organizations can ask young mothers for input when an organization sets the hours for a new company-based gym—or ask if women prefer on-site childcare facilities over a gym.

It can be challenging to manage additional stakeholder input systems, but proactively addressing DEI&B issues in an organization can generate momentum that helps attract a more diverse employee and customer base. Though some may see GRB as threatening to entrenched interests, gender impacts aren’t a zerosum phenomenon.

The OECD estimates that ignoring gender inequities results in a loss of 7.5% of global gross domestic product (bit .ly/3TxPgJD). This hurts everyone. To ensure that an organization’s DEI&B commitments are more than just words, finance officers need to explicitly take into account differential impacts of budget choices by gender and other demographic variables. For finance teams willing to embrace a new mindset, GRB is an opportunity to enhance economic outcomes, improve organizational culture, and add to quality of life—not just for women, but for all members of society. SF

Louella Moore, Ph.D., CPA, is the Mosso Professor of Accounting at Washburn University and a member of IMA’s Kansas City Chapter. She can be reached at louella.moore @washburn.edu

RESILIENCY AND STRATEGIC RISK MANAGEMENT

Protecting strategic value includes a mix of metrics, cybersecurity, reputational risk management, and more.

BY MARK L. FRIGO, PH.D., CMA, CPA, WITH DENNIS H. CHOOKASZIAN

IN TODAY’S VOLATILE AND UNCERTAIN GLOBAL ECONOMY, all companies need a forward-looking and strategic view of how risk is assessed, monitored, and managed. According to continuing applied research at the DePaul Strategic Risk Management Lab, McKinsey & Company, and other organizations, strategic resiliency and strategic risk management skills can help organizations to both create value and protect value, taking a positive risk governance approach that seeks to manage threats as well as create value based on the opportunities of extreme risk events and scenarios.

The past decades have seen unexpected and extreme risk events, which can be referred to as “unthinkable risks” or black swans. Past examples include major weather-related events, such as the 2011 tsunami in Japan or Hurricane Katrina in 2005 in the United States, or financially related events, such as the 2007-2008 collapse of the credit markets. Recent severe risk events and scenarios include the global pandemic, supply chain disruptions, cybersecurity attacks, energy supply disruptions, international conflicts, and technological disruptors to business models. The recent banking crisis involving Silicon Valley Bank (SVB) and other banks demonstrates the need for developing resiliency and strategic risk management in all companies.

How can executive teams and boards consider the possibility of such extreme events and develop and support risk assessment and risk management processes, capabilities, and cultures to enable the creation of long-term sustainable value? A key requirement to address this question is having a disciplined focus on long-term sustainable value creation. CFOs, finance organizations, and boards can take a leadership role in establishing and supporting strategic resiliency and strategic risk management skills as core competencies focused on creating and protecting long-term value.

PART 1: LONG-TERM VALUE CREATION

According to the latest research from the Return Driven Strategy Initiative at DePaul University’s Strategic Risk Management Lab, short-termism can be a major barrier to long-term value creation. Long-term value creation requires a disciplined commitment to avoid excessive short-termism, which can result in creating risks in not investing in strong, dependable, and secure infrastructure and technology to avoid major operational breakdowns as recently seen at Southwest Airlines. Short-termism can also result in under-investing in cybersecurity capabilities, processes, and

FIGURE 1: THE RETURN DRIVEN STRATEGY FRAMEWORK

culture, which are important in protecting a company from cybersecurity threats.

MARK L. FRIGO: The Return Driven Strategy framework (see Figure 1) represents the strategic activities of high-performance companies and is used in strategic risk management. The most important part of the framework is to “ethically maximize wealth,” which means ethically creating long-term value and avoiding the pressures of excessive short-termism that can hinder long-term value creation. What advice would you give to board members in their role of strategy oversight to help focus the company on long-term value creation and avoid the pressures of excessive short-termism?

DENNIS H. CHOOKASZIAN: Public company boards generally have both

short-term- and long-term-oriented investors, and their objectives are often in conflict. There are some strategies that would be valuable for building the long-term value of the company, but the investment required may depress earnings in the short term and may put downward pressure on share price. The most important decision for a board to make is to determine whether they’re attempting to build the long-term value of the company or whether they’re focused on increasing short-term share price. Failure to discuss the issue creates a less effective decision-making environment because some directors may be focused on the long term and others may be focused on the short term. It’s critical for directors to reach an agreement regarding their focus and to have it clearly communicated in their company financial

filings and in discussions with employees so that all constituents have a clear understanding of the strategy.

FRIGO: From your perspective as a CEO, what advice would you offer to CFOs and finance organizations relating to the pressures of short-termism?

CHOOKASZIAN: Short-termism has increased substantially over the past decade, driven in part by activist shareholder funds. These pressures have caused some boards to react by taking actions that increase short-term share price at the expense of longterm value creation. Some boards have divested parts of their company, which might have important long-term value-creation possibilities, but the sum of the parts may have a greater value than the whole and the share price can in some situations be

Source: Mark L. Frigo and Joel Litman, Driven: Business Strategy, Human Actions and the Creation of Wealth, Strategy & Execution, 2008. Used with permission.

increased significantly by selling part of the company. CEOs face these pressures and must drive the company strategy. The most important action of a CEO should be to lead a board executive session discussion regarding long-term vs. short-term value creation. The CEO needs to remain open to either direction because both are valid approaches, depending on the circumstances. The CEO should lead this discussion every year to ensure a clear focus that’s supported by the board. It’s very important to have the strategy discussion and to state the company’s position before an activist becomes involved as a shareholder.

PART 2: CYBERSECURITY AND RESILIENCY

Cybersecurity risks have recently attracted a lot of attention. But many companies still treat cybersecurity risk primarily as a technology problem rather than a core strategic risk that’s closely interrelated with company strategy. This narrow view on cybersecurity risks can create vulnerabilities in the way cybersecurity risk is assessed, monitored,

and managed. A previous article in this series (“Strategic Management of Cybersecurity Risks,” Strategic Finance, January 2022, bit.ly/3M0shoX) described how a strategic risk assessment process can be used to assess and manage cybersecurity risks and to develop cybersecurity risk profiles and action plans that include read-

iness and preparedness as primary elements.

FRIGO: What are some key things boards need to know about the cybersecurity capabilities and processes of an organization to help them with their oversight of building cybersecurity capabilities to create and protect value? How should cybersecurity risk be integrated in enterprise risk management (ERM) processes in an organization?

CHOOKASZIAN: It’s important for a company to have a chief information security officer (CISO) that doesn’t report to the head of information technology. The CISO function is similar to the chief risk officer (CRO) function, and both need to be independent in the same manner that the chief internal auditor reports to the audit committee chairman. The CISO could report to the board or could report to the CEO or one of the CEO direct reports, depending on the structure of the company. In some situations, the CISO could report to the CRO. The CISO should provide frequent reports to the board on the state of cybersecurity protection of the company. It’s also useful for the

FIGURE 2: STRATEGIC LIFE-CYCLE FRAMEWORK

“Creating long-term sustainable value means having the right risk management capabilities, culture, and knowledge.”

—Mark L. Frigo

Source: Bartley J. Madden, Value Creation Principles, 2020. Used with permission.

board to have one member designated as the cybersecurity expert to increase the focus on the issue. The issues regarding cybersecurity are very technical, and most board members don’t have the technical background to understand the complexities. A board needs to rely on the independent CISO and, in some instances, to have an outside cybersecurity expert who provides a full assessment of the cybersecurity risks.

PART 3: RESILIENCY AND STRATEGIC RISK ASSESSMENT

Strategic resiliency means taking a forward-looking and strategic view of risk assessment and risk management consistent with the strategic risk assessment process. In step 1 of the strategic risk assessment process, we use Return Driven Strategy as a holistic framework for understanding the risks embedded in a business strategy. In the framework, a key foundation is referred to as “vigilance to forces of change,” which represents positive risk governance focused on creating and protecting value. The pyramid shape of the framework represents the Greek symbol for change in mathematics, delta, which forms the backdrop of the framework. Business environments are incredibly dynamic. Therefore, management must leverage opportunities and manage threats arising in pursuit of each of the interrelated tenets in the holistic framework. Major areas for vigilance include government, legal, and other regulatory change; demographic and cultural shifts; scientific and technological breakthroughs; industry; and competition.

FRIGO: How can CFOs, finance organizations, and board members ensure that a good resiliency-driven culture exists using a strategic risk assessment approach? How can companies evaluate and develop strategic resiliency and strategic risk management skills in an organization? Creating long-term sustainable value means having the right risk management capabilities, culture, and knowledge. What advice would you offer to boards and executive teams in developing risk management capa-

This article is part of the Creating Greater Long-Term Sustainable Value series in Strategic Finance launched by the October 2018 article “Creating Greater Long-Term Sustainable Value,” by Mark L. Frigo, with Dominic Barton, bit.ly/2RfcMwm.

bilities to help executive teams and boards to identify and understand the risks that could hinder long-term value creation?

CHOOKASZIAN: It’s critical for a board to establish a risk-oversight process that’s board driven. In recent years, many boards have created a separate risk management committee rather than assigning oversight to the audit committee. The separate committee has increased the focus on risk management. It’s also important to appoint a CRO that coordinates the ERM process in the organization. One of the most important tasks of the ERM process is to hold an annual “think the unthinkable” meeting where there is a robust discussion of emerging risks and low-probability but high-severity exposures. The most common cause of major disruptive events comes from areas that weren’t properly considered in the ERM process, and this type of discussion can focus on the “unthinkable” exposures. The recent pandemic is a very good example, and some companies were better prepared than others to deal with emerging events.

PART 4: REPUTATION AND RESILIENCY

FRIGO: Reputation risk is a key area to monitor and manage in creating and protecting value, which can be driven by extreme events and scenarios. What advice would you offer to executive teams and boards in assessing, monitoring, and managing reputation risk?

CHOOKASZIAN: Reputational risk is a much more important area for the board to focus on than it was in the past because of the viral expansion of social media. The reputation of a company can be attacked in many

ways that weren’t possible in the past, and each company needs a mechanism to monitor and evaluate its reputation. A company should have a social media expert or should hire an outside firm to broadly evaluate on a continuous basis any references or comments regarding the company in the broad array of social media outlets. The starting point for understanding the reputation of a company is for the board to have a clear strategic direction regarding the values and principles that the company is based on. If you don’t have a clear set of values and principles, you can’t build an enduring reputation. Once you have established your values and principles, a senior officer should be assigned the task of developing a strategy to enhance and monitor the reputation of the company. This is one of the most important responsibilities of the CEO, and the board needs to engage the CEO to ensure that there’s an active program in place to continuously improve the company reputation.

PART 5: SKILLS FOR BUSINESS LEADERS

FRIGO: You serve as an adjunct professor of strategic management at the University of Chicago Booth School of Business. What advice would you give to business schools in including strategic resiliency and strategic risk management in business school curricula? What advice would you give to CFOs and the finance organization in terms of developing their capabilities and knowledge in helping executive teams and boards to identify and understand black swans and unthinkable risks?

CHOOKASZIAN: Strategic resiliency and strategic risk management

should be an important part of any business school course on corporate governance. The curricula should include methods of developing a strategic plan based on the values and principles of the company and should be a board-driven process. It’s the responsibility of the CEO to develop the strategic plan for review and approval by the board. The CEO should be focused on the long-term strategy of the company and the potential risks that the company faces. The CEO should work with the CFO to develop mechanisms to evaluate and discuss the enhancement of the strategy and the determination of appropriate measures to mitigate risk. It’s critical for the CFO to build an organization that has a broad set of skills to build the strategy of the company and the monitoring processes to manage risk.

PART 6: STRATEGIC LIFE-CYCLE ANALYSIS

FRIGO: A previous article in this series (“Strategic Life-Cycle Analysis: The Role of the CFO,” Strategic Finance, October 2020, bit .ly/3TQIP4C) described applications of strategic life-cycle analysis (as shown in Figure 2) to analyze the long-term value-creating performance of companies during different phases of a competitive life cycle, reinvestment strategy based on the phase of the life cycle, and on investments in intangibles which drive much of the value creation in today’s economy (including research and development, technology, organization capital, and brand).

The article recommends CFOs use life-cycle reviews as a way to communicate the reinvestment strategy of the company to board members. Based on your experience as a board member, would this type of analysis be useful?

CHOOKASZIAN: The life-cycle review as described in your article with Bart Madden is a useful tool for a CFO to utilize in communicating the strategy of the company to board members. As they mature, companies evolve through four phases, and each requires a different governance struc-

ture and leadership characteristics for it to succeed. The four phases in the life-cycle in use are: start-up, growth, established, and mega.

Each phase has different leadership characteristics, and the role of the board adapts to the changes. The CFO has a very important role in defining the growth and investment requirements of the company and should provide the board with an understanding of where the company is positioned in the strategic life cycle. A company must continue to invest in innovation and growth to continue its development to an established company.

PART 7: LESSONS ON RESILIENCY FROM BANK FAILURES

FRIGO: The recent banking problems at SVB and other banks show the importance of developing resiliency

allows the organization to act quickly in the event of a liquidity crisis at one of its banking partners. It’s also important to regularly monitor the status of leverage ratios and bond ratings. If any deterioration is indicated by a change in rating or status, the company should consider a movement to a safer banking relationship.

FRIGO: Here are five takeaways for CFOs and finance organizations based on the discussion in this article:

1. Focus strategy on long-term value creation: Develop the strategic thinking skills of the finance organization and evaluate how well performance metrics support long-term value creation.

2. Develop and support cybersecurity capabilities as a top priority: Take a leadership role in supporting the development of cybersecurity capabilities of the company as a strategic asset.

3. Use a strategic risk assessment process as an integral part of ERM and for developing risk assessment briefings for the board.

4. Consider reputation risk as a key risk to monitor and manage: Take a leadership role in supporting reputation risk monitoring and management capabilities.

5. Develop strategic risk management skills in the finance organization: Take a leadership role in developing strategic risk management skills in the finance organization. SF

and strategic risk management at companies. Some companies were caught by surprise and unprepared to deal with the situation. What advice would you offer to CFOs and board members in adapting the lessons learned from the recent banking problems?

CHOOKASZIAN: The failure of SVB points out the need for all organizations to have at least two active banking relationships. This

Mark L. Frigo, Ph.D., CMA, CPA, is the cofounder of the Center for Strategy, Execution and Valuation and the Strategic Risk Management Lab in the Kellstadt Graduate School of Business at DePaul University and Ezerski Endowed Chair of Strategy and Leadership Emeritus in the Driehaus College of Business at DePaul. You can reach Mark at mfrigo@depaul.edu.

Dennis H. Chookaszian is the former chairman and CEO of CNA Insurance Companies. He is an adjunct professor of strategic management at the University of Chicago Booth School of Business. You can reach Dennis at dennis@chookaszian .com

“The CFO has a very important role in defining the growth and investment requirements of the company.”

—Dennis H. Chookaszian

AND TRUST IN COSO

SUSTAINABILITY REPORTING

Accounting and finance professionals are in a position to increase confidence in sustainability information through the use of the COSO Internal Control—Integrated Framework.

BY ANUM ZAHRA, PH.D.; BRAD MONTERIO; AND PAUL JURAS, PH.D., CMA, CSCA, CPA

ith the shifting of focus from value for shareholders to value for a broader set of stakeholders, including suppliers, employees, and customers, sustainability has emerged as a crucial indicator of organizational success. Internal stakeholders require trustworthy, decision-useful information to inform their strategy and operations. External stakeholders are trying to make well-informed decisions about whether to engage in business dealings with an organization. All demand strong corporate governance that aligns with an organization’s stated purpose and values, as well as management that strategizes around sustainable business risks and opportunities with the goal of enhancing value. These stakeholders need relevant, reliable information, and it’s up to the organizations reporting the data to imbue their disclosures with trust and quality (see Figure 1).

Organizations must imbue their disclosures with trust and quality.

FIGURE 1: WHO USES SUSTAINABLE BUSINESS INFORMATION?

New COSO Guidance

Effective internal controls can help organizations articulate its purpose, set its objectives and strategy, and grow on a sustained basis with confidence and integrity in all types of information.

In March 2023, COSO released Achieving Effective Internal Control over Sustainability Reporting (ICSR): Building Trust and Confidence through the COSO Internal Control—Integrated Framework, which provides interpretative guidance based on the COSO Internal Control—Integrated Framework. It demonstrates how internal controls have value beyond compliance and external financial reporting and are applicable to an organization’s sustainable business activities and information. The paper can be found at bit.ly/41fPXKf.

ing to some and paralyzing to others. (SASB merged with the International Integrated Reporting Council in 2021 to become the Value Reporting Foundation (VRF). Subsequently, in 2022, the International Financial Reporting Standards (IFRS) Foundation acquired the VRF, along with the Climate Disclosure Standards Board, as it organized the ISSB; see Figure 2).

Throughout it all, there remains a stalwart tool to build confidence in both financial and sustainability information: the Internal Control—Integrated Framework (ICIF) from the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

ICIF was the basis for a study published in 2017, Leveraging the COSO Internal Control—Integrated Framework to Improve Confidence in Sustainability Performance Data, which was slightly ahead of its time in looking at how organizations could build the trust needed in their sustainability reports (bit.ly/3nvDOT2). Fast-forward to 2023, and we see a rapid increase in voluntary reporting of environmental, social, and governance (ESG) disclosures in company reports. While one might applaud the efforts of organizations to report this information, the rapidly evolving regulatory and standard-setting landscape has made it difficult to draw conclusions about the quality and consistency of reported data. One can’t simply look to the compliance process to ensure the integrity and reliability of the data and reports. Finally, internal assurance (provided by the internal audit function) and trust in sustainability reporting must exist before external assurance can be provided.

The CFO and members of the accounting and finance team are well-versed in designing and implementing governance and oversight structures that are effective and appropriate for the organization. To this end, organizations must have an effective system of internal control to efficiently address sustainability-related issues, including operations, compliance, and reporting. But many accounting and finance professionals may not feel they’re prepared to apply the knowledge and experience they have from internal control over financial reporting (ICFR) to sustainability information. To help improve the quality, timeliness, and reliability of sustainability-related information, COSO released new supplemental guidance, Achieving Effective Internal Control over Sustainability Reporting (ICSR): Building Trust and Confidence through the COSO Internal Control—Integrated Framework, in March 2023. ICSR was introduced in the guidance as a companion to ICFR.

Trustworthy Data and the Role of the COSO ICIF

Until now, organizations have faced an overlapping, seemingly competitive collection of frameworks, standards, best practices, and tools with which they can build trust and confidence in sustainability reporting. From the voluntary standards like those from the Global Reporting Initiative (GRI), the Integrated Reporting Framework (IRF), and the Sustainability Accounting Standards Board (SASB) to those of the Task Force on Climate-Related Financial Disclosures (TCFD) and the new International Sustainability Standards Board (ISSB), the choices have been overwhelm-

With the advent of the Sarbanes-Oxley Act of 2002 (SOX) requirements in the United States more than 20 years ago, there was a general perception that ICIF only applied to financial reporting and to publicly traded companies. But all businesses, including those in the commercial, not-for-profit, and public sectors, require effective internal control to achieve their goals, manage risk, adapt, and succeed in all aspects of their organization and operations. ICIF can be used effectively to build confidence across the comprehensive data set.

FIGURE 2: ORGANIZATION OF THE IFRS FOUNDATION, IASB, AND ISSB

ICIF applies to all sizes and types of organizations and their financial and sustainability information.

ICIF can also drive the appropriate tone at the top and organizational culture. Simply put, ICIF applies to all sizes and types of organizations and their financial and sustainability information. Updated in 2013, ICIF presents a set of five components and 17 principles that businesses may use to design effective internal control over sustainability operations and reporting (see Table 1). Through use of this framework, the CFO and accounting and finance team provide leadership to ensure the relevance and integrity of sustainability data and the translation of it into meaningful decision-useful information. Accomplishing these objectives means an organization must commit to establishing the proper control environment and utilizing its knowledge to begin developing ICSR.

To have effective ICSR, risk and materiality assessments are crucial to the process. ICSR must build trust that’s ultimately equivalent to that of financial reporting and transactions. Organizations should address IT general controls, operations, and compliance objectives; the consequent risks produced; and the actions necessary to ensure effective internal control in these areas. ICIF is intended for virtually any field, function, or activity. The 17 principles should be tailored to an organization’s specific requirements, resources, industry, and maturity level.

It should be implemented immediately rather than waiting for new regulations or legislation (see Dudley Brundige’s “Climate Risk Disclosures and Your Supply Chain” on p. 52 for more on solutions that organizations can explore now). The U.S. Securities & Exchange Commis-

International Financial Reporting Standards (IFRS) Foundation

International Accounting Standards Board (IASB) International Sustainability Standards Board (ISSB)

Value Repor ting Foundation (VRF) Climate Disclosure Standards Board (CDSB)

International Integrated Repor ting Council (IIRC) Sustainability Accounting Standards Board (SASB)

sion (SEC) is expected to release its final rule for climate disclosures (bit.ly/3ztqeC1) as early as the second quarter of 2023; the ISSB is expected to release its final S1, General Requirements for Disclosure of Sustainability-related Financial Information (bit.ly/3RJBkK2), and S2, Climate-related Disclosures (bit.ly/3yoLfxX), standards in the second quarter as well. As the supplemental guidance from COSO suggests, organizations interviewed indicated that they began the process of designing effective controls over sustainability information by starting with their financial controls as a model.

One of the most important advantages of ICSR is that it promotes sustainable business practices, which are crucial for long-term success. By utilizing the principles in ICIF for sustainability reporting, organizations can ensure that their sustainability performance is reported accurately and

transparently to stakeholders. For these and other reasons, the CFO function can’t and shouldn’t implement ICSR in a silo. Collaboration is essential for identifying the optimal organizational structures, roles, and duties to obtain the desired results and effective internal control.

Organizations may consider establishing a cross-functional working group of experts from across the business (e.g., corporate social responsibility, integrated reporting, legal, marketing, operations, public relations, human resources, and finance and accounting) to achieve ICSR. Effective internal controls are beneficial beyond compliance or required external disclosures to improve communication, roles and accountabilities, and governance.

Organizations should utilize their internal audit function to provide not only internal assurance independent of management but also strategic insight and advice on how to

TABLE 1: ICIF COMPONENTS AND PRINCIPLES

design effective controls as well as meaningful performance metrics for the business.

Internal and external sustainability and ESG reporting shouldn’t be an “annual and manual” effort. Instead, they should be continuous, efficient, and automated. Also, organizations should comprehend that sustainability reporting

is a dynamic field that will evolve significantly in the coming years. Continuous monitoring activities are essential for assessing progress and determining whether to make adjustments and improvements.

To remain aware of new advances in sustainability reporting, organizations must educate themselves on new

ADDITIONAL IMA RESOURCES

Reports

● Kristine M. Brands and Shari Helaine Littan, CFO as Value Creator: Finance Function Partnering for the Integration of Sustainability in Business, June 2020, bit.ly/3zJGnDN

● Kristine M. Brands, Shari Helaine Littan, Brad J. Monterio, and Cornelis T. van der Lugt, CFO as Value Creator: Finance Function Leadership in the Integrated Enterprise, June 2020, bit.ly/3zJGnDN

● Robert H. Herz, Brad J. Monterio, and Jeffrey C. Thomson, Leveraging the COSO Internal Control—Integrated Framework to Improve Confidence in Sustainability Performance Data, September 2017, bit.ly/3GySMya

● IMA, Statement of Position on Sustainable Business Information and Management, bit.ly/3mhPbh9

● Shari Helaine Littan, Arnaud Brohé, Kevin Fertig, Christine Khong, and Jaxie Friedman, Management Accountants’ Role in Sustainable Business Strategy: A Guide to Reducing a Carbon Footprint, February 2022, bit.ly/40XOWqz

● Liv A. Watson, Tanuj Agarwal, Deborah Leipziger, Urmish Mehta, Dermot Murray, and David Wray, A Digital Transformation Brief: Business Reporting in the Fourth Industrial Revolution, May 2020, bit.ly/3nW4c8B

Count Me In Podcasts

● Ep. 36: WBCSD and IMA - Enhancing the Quality and Value of Corporate Sustainable Business Information (with Mario Abela and Shari Littan), December 19, 2019, bit.ly/41jHLc3

● Ep. 92: Liv Watson and David Wray - Digital Transformation: Business Reporting in the Fourth Industrial Revolution, October 12, 2020, bit.ly/3zJVNYy

● Ep. 102: Liv Watson and David Wray: Non-Financial Standards Digitizing Transformation and Sustainability Reporting, December 14, 2020, bit.ly/3y1UbIh

● Ep. 158: Dawn Emling and Tjeerd Krumpelman with Shari Littan - Management Perspective on Sustainable Business Information and Reporting, December 16, 2021, bit.ly/3ZYZXGy

● Ep. 166: Liv Watson and David Wray - Digitizing Sustainability Information: It Takes a Village, January 24, 2022, bit.ly/3o3PZX7

● Ep. 191: New IMA Insight: A Guide to Reducing a Carbon Footprint, July 18, 2022, bit.ly/3nSN9Em

Certificate

● IMA Sustainability Business Practices Certificate™, bit.ly/3GUQfP9

ICIF

controls to ensure that accuracy and reliability. The supplemental guidance released by COSO in March 2023 provides guidance for designing, implementing, and evaluating internal controls, which are essential for ensuring the accuracy and dependability of ESG reporting.

To evaluate a company’s impact on the environment, society, and economy, stakeholders need timely and accurate information on its sustainability performance. Therefore, companies must ensure that their ESG reporting is accurate, trustworthy, and transparent. Integration of the finance and sustainability teams is required for effective ESG reporting. The ICIF approach to internal controls can assist organizations in integrating their sustainability and finance teams, resulting in improved data quality for internal and external sustainability reporting. By collaborating, sustainability and finance teams can ensure that sustainability risks and opportunities are identified, evaluated, and reported accurately.

Much of sustainability reporting is principles-based. In a principles-based environment, what’s reported is a matter of judgment to a certain degree. Such subjectivity creates an opportunity to be second-guessed and creates the risk that superiors wanting to meet targets and make the results look good exert pressure on those responsible for reporting and disclosure to make questionable or flat-out unethical decisions and misleading disclosures. This likely leads to what’s predicted to be one of the new frontiers of fraud: ESG fraud (as we saw with the Volkswagen environmental fraud; see Curtis C. Verschoor, “The Volkswagen Problem,” Strategic Finance, February 2016, bit.ly/407lAF2).

Members of IMA® (Institute of Management Accountants) are bound by the IMA Statement of Ethical Professional Practice, and they—and management accountants in general—can lend their voices to sustainability reporting decisions. They can think through available alternatives, agree on an approach, come up with a position that the CFO thinks is reasonable, and apply it consistently. While it may not be possible to avoid uncertainty when faced with gray areas or tough decisions, accounting and finance professionals can work toward providing data that aligns with ethical standards and principles. SF

themes; use seminars, recent publications, and certificate programs; and cooperate with sustainability specialists and learn from them. Additional COSO resources, such as enterprise risk management and ESG, cloud computing, and others, can help.

The Opportunity for Management Accountants

In recent years, the significance of ESG issues for companies, investors, and other stakeholders has increased, necessitating ESG reporting that provides accurate, relevant, and timely information on a company’s sustainability performance. Organizations must implement robust internal

Anum Zahra, Ph.D., is a graduate research assistant in the Faculty of Business and Law, Taylor’s University in Malaysia and a member of IMA’s Dubai Chapter. He can be reached at anum.zahra@sd.taylors .edu.my.

Brad Monterio is global executive vice president, member competency and learning, for The Institute of Internal Auditors and a member of the IMA Sustainable Business Management Global Task Force. He can be reached at brad.monterio@theiia.org

Paul E. Juras, Ph.D., CMA, CSCA, CPA, is the Vander Wolk Professor of Management Accounting and Operational Performance at Babson College and a member of IMA’s Charlotte Chapter and the IMA Sustainable Business Management Global Task Force. He can be reached at pjuras@babson.edu

The

approach to internal controls can assist organizations in integrating their sustainability and finance teams.

MIKE DEPRISCO: CHANGE AGENT

A commitment to creating value for members is among the core goals of IMA’s new president and CEO.

BY LORI PARKS

elping people achieve their goals and improve their lives through education has defined the career of Mike DePrisco, who took the helm of IMA® (Institute of Management Accountants) as president and CEO in April 2023. From his college days as an aspiring teacher through more than 30 years of experience building relationships in higher education administration and association management, Mike believes in the power of learning to transform the trajectory of someone’s professional journey.

For Mike, members “are at the center of the IMA story,” and he aims to strengthen that commitment by providing them with what they need to be successful, all while growing IMA’s global influence and reputation as a thought leader in the finance and accounting profession.

City Kid

A self-described city kid, Mike grew up in a middle-class neighborhood in Philadelphia, Pa. The younger of two children, he was fortunate to live close to his extended Italian-American family—aunts, uncles, cousins, and grandparents. That urban experience taught Mike some early lessons.

“My first job, when I was 10, was as a neighborhood paperboy,” he recalls. “I used a pushcart to transport the papers, which I delivered every day after school. I learned to be pretty entrepreneurial, because when it came time to collect payment, people had very creative ways to avoid answering the door.” The experiences instilled in him the values of responsibility and accountability. “It was hard work—and it definitely wasn’t easy money.”

This strong work ethic was also reinforced during Mike’s early childhood and teenage years, during which he spent 12 years attending Catholic school, including four years at an all-boys high school. In high school, he worked several part-time jobs, took college-track courses, and excelled in a range of academic subjects, including English, history, and math. He also enjoyed music, playing as a drummer in the school’s jazz band and orchestra.

That education prepared him well to attend college, the first person in his family to move away from home to do so. He enrolled in West Chester University (WCU). While it was less than an hour from where he grew up, Mike says it “might as well have been halfway across the country.” It was the first time Mike had spent any significant time out of the city—aside from summer family vacations at the beach in New Jersey— and living on campus was a life-changing experience.

“College was eye-opening,” he says. “WCU was coed, which alone was different than any other school I’d attended, and it exposed me to diversity too. I met and made friends with people from all over the area, with backgrounds that were very different from mine.” Mike took advantage of many opportunities at college: He joined a fraternity and got involved in a variety of extracurricular activities and student clubs.

In college, Mike discovered he wanted a career that would allow him to help others and make a difference in people’s

lives. He pursued a degree in education, with the goal of becoming a high school teacher (he also considered becoming a musician). While completing his bachelor’s courses and student teaching assignment, Mike found that being a classroom teacher wasn’t for him. He shifted his focus to higher education and enrolled in graduate school at WCU to earn his master’s in counseling and higher education administration.

Even as a graduate student, Mike continued to be engaged and active in student life: He served as a graduate assistant for the new student orientation program and a peer mentor, and in other service organizations. He also worked and lived full-time in a college dormitory, providing oversight and support to about 500 residential students.

Success as a College Administrator

After earning his master’s degree and working in his first professional role as residence hall director at WCU, Mike

Mike believes in the power of learning to transform the trajectory of someone’s professional journey.

MORE ABOUT MIKE

✚ His wife, Tina, is his college sweetheart; they’ve been married 29 years.

✚ Mike and Tina have three kids: two out of college and one a freshman at Penn State University.

✚ He was a drummer in a rock band and has eclectic taste in music.

✚ His first job was as a paperboy delivering the Philadelphia Bulletin.

✚ He loves to fish and boat.

✚ He grew up vacationing in Ocean City, N.J.

✚ He’s a diehard Philadelphia sports fan (Eagles, Phillies, Flyers, 76ers).

✚ He’s traveled to 40 countries.

✚ Favorite places he’s visited include Tokyo; Capri, Italy; and Istanbul.

✚ Mike is a proud foodie.

took on new leadership positions within higher education, first as the director of student housing and then as dean of student affairs at The Art Institute of Philadelphia, an applied arts, design, and culinary college serving about 2,500 students.

In 2001, Mike was promoted to the role of vice president of student affairs at Education Management Corporation (EDMC), the parent company of The Art Institutes and one of the largest providers of for-profit post-secondary education in North America. Mike spent five years in that role, which led him to serving as college president for three different campuses within the Art Institutes system of schools over a period of seven years.

Mike’s work in higher education enabled him to make excellent use of his administrative, people, and management skills. He worked with his teams to develop and execute strategic plans aligned with the mission and purpose of the institutions he served. And he provided enterprise leadership to the executive teams responsible for the enrollment, financials, retention, institutional accreditation, career services, and student affairs of each college.

Mike reflects fondly on this time: “I discovered what I truly enjoy: inspiring people, building a culture, and helping to identify and achieve successful outcomes. I definitely learned how to be a leader—and how to stay cool under pressure.”

Yet in 2013, after spending almost 20 years in higher education, Mike began searching for his next adventure and an opportunity to continue to pursue his passion for making an impact in a purpose-driven organization.

Optimizing Member Benefits

One opportunity presented itself through a colleague who worked at the Project Management Institute (PMI), a U.S.-based professional organization with about 700,000 members in 217 countries and territories around the world, as well as more than 300 volunteer-run chapters. Most notably, it offers what has become the standard certification for project management, the PMP (Project Management Professional), along with a variety of other certifications, standards, and educational offerings.

Mike spent a decade at PMI, from 2013 to 2023, helping to grow the organization to 1.4 million active PMP holders worldwide and gaining experience that dovetails perfectly with many of the roles and responsibilities he assumes as IMA’s new staff leader.

His first role at PMI was vice president of academic and educational programs, where Mike provided executive oversight and overall leadership, planning, and supervision of PMI’s academic markets. He partnered with global academic institutions through research and programming to elevate the importance of the project management profession and helped to create a pipeline of new professionals to enter the field.

He spent nearly three years in this role before moving up to vice president of global membership and chapters, where he provided executive leadership to the global membership and chapter organization, interfacing with thousands of volunteers and members around the globe, as well as more than 50 staff members in five regional offices. His responsibilities included member acquisition and retention, product development and management, event planning and execution, and talent identification and development.

Mike was next promoted to PMI’s vice president of global experience and solutions, where he was head of all product development and management, digital delivery, customer experience, content, member services, and events. He explains, “Our membership was changing. We had a younger audience, and we needed to find new ways of engagement. And so, we undertook a multiyear transformation, where we set about trying to better understand what was happening in the market and to develop products that better aligned with those needs.”

PMI was two years into this transformation when COVID-19 hit, which spurred some of the growth that had already been happening. “We were ready for it,” Mike says. “We were able to pivot and begin quickly offering virtual events, digital products and services, and even online, proctored testing.”

After more than two years of success in this role, Mike was promoted to chief operating officer (COO) and shortly thereafter was asked by PMI’s board of directors to serve as interim president and CEO after the prior CEO’s departure

(he returned to the role of COO once a new president and CEO was named).

In this interim role, where he served for 16 months, Mike’s chief goal was to create an environment of creativity, curiosity, and agility to help PMI achieve its growth strategy. He did this by championing PMI’s values and culture with employees and key stakeholders while also leading operations planning and strategy. Among his top responsibilities were to provide strategic leadership, influence, and advocacy with the goal of increasing PMI’s impact on the world. Mike valued the experience, noting that, “It was my privilege to serve as PMI’s primary spokesperson, engaging with members, partners, and the global volunteer community at large to further PMI’s objectives.” Throughout his time at PMI, Mike had the opportunity to travel to and work with many of the

Doublingdown on IMA’s member-first mentality, he plans to focus on creating member value at all times.

MIKE’S PROFESSIONAL DEVELOPMENT ADVICE

Professional development is a lifelong journey and requires expending time, effort, and, often, money. Check out these suggestions from Mike on how to make the most of your investment in your future:

1. Read. Spend time every day reading and staying informed about what’s happening in your industry. Blog posts, podcasts, business journals, books, and newspapers are good sources.

2. Pursue education and certifications on topics that interest you or are directly relevant to the work you do. Seek out advice from your manager on where you should focus your time.

3. Find a mentor—a colleague, manager, or acquaintance who’s invested in helping you develop and improve your skills.

4. Get comfortable being uncomfortable. Push yourself to try something new. We learn and grow when we lean into uncomfortable situations, whether it’s taking on a new job or assignment, changing your career, learning a new skill, enrolling in school, and more.

5. Become involved in a professional association, like IMA, where you can learn from and network with individuals who share common career or professional interests. These organizations often offer free education courses and resources for members.

6. Dedicate time to giving back to your community and/or a cause you care about. It will open up opportunities for new learning to occur.

7. Make time for hobbies and experiences that bring you enjoyment, e.g., traveling, painting, writing, cooking, or playing an instrument. Maintaining balance in your life is an important ingredient for career success.

markets where IMA also operates, including China, India, Southeast Asia, Europe, and the Middle East. Further reflecting on his experience at PMI, Mike says, “I truly see my strengths as trying to give members what they

need and to find new ways of doing that by meeting members where they are and providing what they require in their professional lives. I also like to be an agent of change and to help reimagine ways to do things better than before.”

SEND MIKE YOUR FEEDBACK

As part of his commitment to IMA’s member-first philosophy, Mike is soliciting insights to help IMA better meet member needs. During the first 90 days of his tenure as CEO and president, Mike is asking IMA staff, the Global Board of Directors, and other key stakeholders the following three questions:

What are we great at?

Where do we have gaps to fill?

What’s getting in the way?

Mike invites IMA members to give their feedback on these questions as well. If you’d like to share your insights, email Mike at mike@imanet.org with your thoughts and ideas.

A Member-First Mindset

That spirit of being an agent of change is one of the things that Mike is most excited about for his role at IMA. Though Mike knew about IMA only in broad strokes before he applied for the position of president and CEO,

he grew more impressed after doing more in-depth research.

“Management accountants are uniquely positioned to enable success by identifying and unlocking business value across the enterprise,” he says. “That’s why the goals, values, and mission of IMA are so important.”

Looking at IMA from a newcomer’s perspective, Mike observes many strengths—and opportunities. “One of IMA’s

greatest strengths is our 100-year history,” he observes. “It shows our level of commitment to the profession and the continued engagement of our members. We also have the benefit of working on a global stage and of offering a highly respected certification that is esteemed around the world. Finally, we have our thought leadership—our research, publications, courses, and advocacy role within the profession— which gives us a strong foundation to build on.”

On the opportunity side of the equation, Mike notes several areas he’s eager to dig into. First, he wants to double-down on IMA’s member-first mentality—to focus, at all times, on creating member value. “We need to look at everything from the lens of ‘How does this create value for the member?’ And if it doesn’t add value or is something that members want or need, then we should be asking ourselves if we should be doing it.”

Mike is also committed to exploring ways to enhance IMA offerings for students and younger professionals. He’s interested in creating new “on-ramps” that prepare students to earn their CMA® (Certified Management Accountant), for example. He views this as part of IMA’s commitment to the career life cycle of members.

To maintain and grow the reputation of the CMA, Mike wants to ensure that IMA keeps the certification relevant now and for the future. “I want to talk to CFOs and organizations to find out what they need from their people, both now and also five and 10 years from now.” He’s eager to see what the latest job analysis survey conducted earlier this year by ICMA® (Institute of Certified Management Accountants, which oversees the CMA exam) will reveal about the

ways the CMA is serving the needs of organizations and individuals.

Examples of IMA’s commitment to meeting member needs are the recently launched, well-received certificate programs on business sustainability and diversity, equity, and inclusion. Related to that, Mike aims to focus on members’ digital experience with IMA, to use digital capabilities to make IMA’s products and services more “easy and convenient.” That might include, for example, exploring additional certificate programs that could focus on specialized and complementary knowledge to help members expand their professional skill set. He’s also interested in finding new ways to grow IMA’s CSCA® (Certified in Strategy and Competitive Analysis) program, the eligibility for which was recently expanded from exclusively CMAs to holders of any of more than 50 other certifications.

To implement some of these programs, Mike notes that IMA doesn’t need to go it alone. He’s interested in exploring partnerships with other organizations and peers in the profession so that IMA can provide a spectrum of offerings to its members. “We can collaborate to help unlock more value and relevance,” he notes.

Finally, he wants IMA to continue to be a “a global organization with a region-first mindset.” That requires being attentive to what members all over the world need and knowing what’s happening locally. “We need to know our members’ specific pain points and what tools these members need to be successful. It shouldn’t be a one-size-fits-all approach.”

Inspiring Others

Mike embodies the attributes of a servant leader, someone who inspires other individuals to become successful. When he looks back on his career thus far, Mike is most proud of the impact he’s made on people: through mentorship, through leadership, and through implementing projects, programs, and products that helped people excel in their careers or gain more satisfaction from their job.

He's also grateful for his own professional journey. “I wasn’t expected to go to college when I was a kid, and I will always appreciate the opportunity I had to do so. I’m glad and proud that I’ve been able to give that same opportunity to my three kids as well.” He’s also continued to challenge himself by engaging in lifelong learning, most notably earning his Certificate in Company Direction from the Institute of Directors, which covers key areas of governance, finance, strategy, and leadership. He’s also pursued executive education at Columbia Business School, in the field of digital business strategy, and the Wharton School.

“I couldn’t be more thrilled for the opportunities that are in store for IMA. And I’m looking forward to working with our global members and the Global Board of Directors as we seek to scale up our influence within the profession and make a difference for our members,” he says. SF

Lori Parks is a staff writer/editor at IMA. You can reach her at lori .parks@imanet.org

Mike is also committed to exploring ways to enhance IMA offerings for students and younger professionals.

EXPLORING THE

CONTROLLERSHIP FUTURE OF

Find the right path to transformation to realize the full value from the evolving role of the controllership function.

BY BETH KAPLAN, CPA, CGMA; KATIE GLYNN, CPA; AND KATE GATES, CPA

he pandemic exacerbated existing gaps between traditional controllership offerings and strategic business needs. Despite challenging circumstances and market uncertainty, controllers were met with increased demand for elevated strategic insights, real-time data, analytic tool integration, and more efficient and agile operations. This increased demand, driven largely by marketplace disruption and organizational strategic realignment, prompted considerable investment in people, processes, data, and technology to adapt with the shifting expectations of controllers.

In fall 2021, IMA® (Institute of Management Accountants) and Deloitte & Touche LLP’s Center for Controllership™ conducted research that aimed to assess how prepared the controllership function is to meet future business demands and provide maturity benchmarks for leaders to consider. This involved a global survey of more than 1,300 finance and accounting analysts, managers, directors, controllers, and CFOs. To measure the maturity levels within the controllership function, the survey was structured along Deloitte’s Controllership in the Green™ (CiG) framework, which focuses on the core areas of controllership to drive maximum value and help controllers meet the increasing

future demands of the function and role (see Figure 1).

Following the survey, a series of interviews were conducted with experienced finance and accounting leaders to provide further context.

Controllership of the Future

Combining the survey findings with thought leadership, the IMA and Deloitte report, Stepping into the Future of Controllership (bit.ly/3Mxgyyq), provided deeper insights into the current state of controllership and the evolving expectations for the role of the controller. It covered a broad range of insights (see Figure 2), including:

1. Increasing expectations of controllers. Transformation journeys are underway, but controllers and finance professionals who participated in our survey report they aren’t yet able to maximize their role as strategic business partners—even as the need to do so continues to increase.

2. Preparing to meet future demands. The controllership role has a mix of strategic and tactical responsibilities. The challenge that most controllers face is striking a balance between both roles when real-world circumstances tip the scales in favor of strategic activities. Prioritizing the new demand for tactical responsibilities and reducing the focus on traditional core tasks might increase risk, com-

FIGURE 1: MEASURING MATURITY LEVELS WITHIN THE CONTROLLERSHIP FUNCTION

Deloitte’s Controllership in the Green™ framework served as the basis to measure maturity levels within the controllership function.

Controllership in the Green™ (CiG) and keeping it there

Deloitte’s CiG framework serves as a benchmark of where controllers want to be—in the green. The CiG framework informed the core domains and enablers for the current and ideal future state of controllership. These core domain areas include:

Financial Close

And CiG’s key enablers that are designed to effect change and add value are:

What is the data saying?

Heightened uncer tainty has given rise to greater demand for real-time information and insights, stimulating the accelerated adoption of emerging technology

Effective business par tnering requires multidisciplinary, cross-functional team collaboration, stronger business acumen, and ensuring controllers have a seat at the table.

Based on current maturity levels, responding controllers feel they’re only somewhat prepared to meet the demands of the controllership function over the next three to five years.

Note: See Stepping into the Future of Controllership (bit.ly/3Mxgyyq) for more.

FIGURE 2: INSIGHTS ON THE CONTROLLERSHIP TRANSFORMATION JOURNEY

Most controllership functions repor t they have begun the transformation journey but have not optimized the ability to serve as strategic business par tners.

2 1 3

Most controllership functions repor t that they struggle balancing the traditional roles of controllers with the recent demand of tactical responsibilities and need for more strategic and effective business par tnering.

The CiG framework provides core domains that can be leveraged to assess the controller ’s ability to meet future demand and key enablers to address gaps.

Lack of time, financial resources, resource capacity, and exper tise were identified as the most common themes that lead to roadblocks to successful transformation.

4 5

The future of controllership is a present-day reality—actioning gaps in each domain area can better prepare controllers for a “future” that’s already here.

promise assurance, or weaken the control environment. Effective business partnering requires controllers to have both strategic and tactical roles. This is achieved through multidisciplinary, cross-functional team collaboration; stronger business acumen; and ensuring controllers have a seat at the table.

3. Defining controllership. Within the controllership function, most professionals feel only moderately prepared to meet the demands of transformation, at best, without a clear vision of a future state. The core domains and key enablers of controllership, from the CiG framework, were leveraged in design of the survey and provide a structure for users to identify gaps and focus resources on areas that will yield the largest impact to meet demands of the function.

4. Roadblocks to transformation. The top four barriers to successful transformation initiatives are a lack of time to devote to transformation, limited financial resources, limited resource capacity, and a lack of expertise to progress initiatives.

5. The future of controllership is now a present-day reality. The COVID-19 pandemic exacerbated gaps that already existed between controllership offerings and business needs. This disruption accelerated the need for critical skills, tools, and resources.

Given this context, there’s a series of strategies and actions that controllership functions can consider across each CiG domain area to better prepare for the future that’s already here (see Figure 3):

1. Utilize enabling technology solutions. Invest in new technology solutions to reimagine data and analytics.

Enhanced planning and scenario modeling can drive agility, resilience, and more informed strategic planning for an organization.

2. Redefine the finance data model. Use transformation to redefine finance data and define a common information model. Develop agile forecasts with scenario planning to include a mix of drivers, internal and external information, and flexibility for unstructured and asynchronous data that supports both transactional processes and reporting requirements in finance.

3. Leverage enablers to address gaps in the weakest domains. Bolster governance and compliance, and prioritize financial close processes efficiency. Controllership teams can prioritize and improve the financial close by leveraging technology enablement with structured improvement programs that prioritize specific areas of the close for automation and reengineering. Cloud-based systems can also enable centralized data management, which could be transformational for close processes.

4. Prioritize initiatives for new delivery models. Leverage new delivery models and utilize automation tools to free up resources. Many controllership functions that have progressed along their transformation journeys have redefined their organizational structure to break down historical silos and introduce delivery models that leverage alternative talent models and process standardization.

5. Adapt to the evolving workforce. Keep the benefits from the remote workforce and explore alternative workforce models. The remote work model provides organizations with access to global talent pools, specialized resources, and alternative staffing models that may have

Source: Stepping into the Future of Controllership, bit.ly/3Mxgyyq

FIGURE 3: FIVE ACTIONS TO ADDRESS MATURITY GAPS

1 2 3 4 5

been previously inaccessible. In addition, the talent strategy may adapt to a remote or hybrid environment by tapping into a dispersed workforce’s cost efficiencies, unhindered by location or timetables.

The report’s findings reveal that the current state of controllership is characterized by a broad recognition of the impetus for transformation, acceptance of the need to evolve, and commencement of transformation journeys. Consider these insights and actions to provide a starting point as organizations come out of hibernation and ask, “What’s next?”

Bridging the Gaps

The CiG framework serves as a benchmark of where controllers want to be—reflecting financial health, business growth, and sustainability in this era of technological advancement (see Figure 4). The framework was the first time many participants had seen the controllership function outlined and defined by core domains and key enablers.

While most controllership functions have begun a transformation journey by strengthening core competencies and abilities through key enablers, there’s a long road ahead to the destination. Users can employ the CiG framework to measure where their controllership function is today compared to where they want to be in the future, diving into each domain area and enabler for the controllership function. Let’s look at a few areas where controllers might have maturity gaps and explore strategies that leverage the framework to focus efforts and move into the future.

Technology enablement. The CiG enabler with the largest maturity gap in the survey was technology enablement. Emerging technologies such as automation and cloud enterprise resource planning (ERP) management tools have had a positive impact for controllers, such as automating and accelerating close timelines and improving task management to name a few. While technology enablement is a key enabler in the changing role of the controller, technology requires

strong and uniform data to drive meaningful insights.

The Common Information Model (CIM) is a CiG domain that creates a harmonized data structure that’s aligned with technological capabilities to unlock intelligent and real-time reporting and establish a single source of truth. A strong CIM supports the ability to automate processes effectively as it drives common master data and a uniform transaction repository. Therefore, additional technology enablement solutions such as purpose-built automation or bots don’t trip over bad data and are more effective to the task at hand.

A CIM also provides the ability to unlock analytics and reporting on the common architecture, which can improve efficiency, enable self-service, and wield power in getting the platform of a core system right. A defined CIM coupled with technology enablement solutions can be leveraged to help address gaps in the other key domains of controllership and enable the controllership function to meet current and future demands.

Corporate structure. More than two-thirds of survey respondents stated they didn’t feel prepared to meet the future demands of controllers. Questions arose around the design of controllership functions to meet current demand, what successful corporate structures look like, and how financial planning and analysis (FP&A) plays a role in the controllership function.

Deloitte’s “Four faces of the CFO” framework (bit .ly/3Q9tJoM) defines the CFO’s four different but interrelated roles: strategist, catalyst, steward, and operator (also see Seth Elliott’s “How CFOs Can Better Manage Strategy Execution,” Strategic Finance, February 2023, bit.ly/3JcQ9lZ). Historically, the chief accounting officer (CAO)—and, by extension, the controllership function—performed the steward and operator roles as part of the CFO agenda. The CFO’s responsibility as a steward is to ensure that the organization’s books and records are correct and that the organization is reporting to stakeholders in accordance with accounting principles.

The controller’s role to support the CFO’s steward responsibility is universally applicable, though priorities may differ

Invest in technology solutions and data and analytics

Redefine the financial data model

Leverage enablers to address gaps in the weakest controllership domains

Prioritize transformation initiatives to redefine traditional delivery models

Adapt with the evolving workforce

Source: Stepping into the Future of Controllership, bit.ly/3Mxgyyq

by company size and industry. As an operator, the controller is responsible for operating an efficient and effective organization (consistent with other CFO direct reports). Accounting is the lifeblood of an organization and the language in which an organization’s performance is communicated. As such, the CAO/controller will always be critical to executing the CFO’s agenda successfully (see Figure 5).

The distribution of time a CFO focuses on each of the four faces varies by organization. If a CFO prioritizes more time as a strategist or catalyst and less time as a steward, the expectation of the controller’s role will shift. In this example, the CAO will typically take more responsibility as a steward and the CFO will require more support from the controllership function in other strategic areas to satisfy the strategist or catalyst role.

To achieve an evolved controllership function, there is an increased need for controllers to understand how actuals impact future plans and to provide perspective and optionality for organizations to consider based on historical outcomes and financial results. As Deloitte & Touche LLP Principal and Controllership Strategy Offering Leader Temano Shurland notes, “CFOs are looking for controllers to have an understanding of the financial statements and operations to help them achieve their plans and goals for the future.”

Adapting the controllership function to fit the organization. The controllership role varies based on factors such as organizational footprint, market involvement, revenue size, and lines of business. In general, greater complexity drives the need for more oversight and greater expansion of the controllership function. The controllership structure isn’t always linear; it can be embedded into different lines of business and is further impacted by complexity that requires greater financial oversight. With that said, there’s no singular controllership definition or organizational structure that fits every organization.

Blurring the lines of controllership and FP&A. Financial analysis is an important area in controllership. Over the past five years, we have seen a blending of the traditional FP&A function with controllership in the corporate structure. This is primarily driven by the failure of the historical view of financial statements’ ability to predict future activity or react to data in a time-efficient manner.

The controllership function has needed to take advantage of future-looking information to help the organization grow, adapt to change, and adjust course as needed. The siloed system traditionally found with the FP&A function and controllership, operating as fully separate functions, is breaking down, and it’s becoming more common to see a merger between the two.

FIGURE 4: DELOITTE’S CONTROLLERSHIP IN THE GREEN TM FRAMEWORK

FIGURE 5: SUPPORTING THE CFO

The controller ’s role has evolved from historically being expected to provide traditional accounting information to now being expected to provide traditional and strategic insight to the CFO.

Traditional controller role

Four faces of the CFO

1 2 3 4

The Strategist Take a seat at the strategy planning table and help influence the future direction of the company

Controller

The Catalyst Stimulate and drive the timely execution of change in the finance function or the enterprise

The Operator Operate an efficient and effective finance organization providing a variety of services to the business

The Steward Protect the vital assets of the company, ensure compliance with financial regulations, close the books correctly, and communicate value

Evolved (traditional and strategic) controller role

Four faces of the CFO

1 2 3 4

The Strategist Take a seat at the strategy planning table and help influence the future direction of the company

Controller

The Catalyst Stimulate and drive the timely execution of change in the finance function or the enterprise

The Operator Operate an efficient and effective finance organization providing a variety of services to the business

The Steward Protect the vital assets of the company, ensure compliance with financial regulations, close the books correctly, and communicate value

Copyright © 2023 Deloitte Development LLC. All rights reserved.

Profitability analysis is a good example of a historical FP&A responsibility now having more involvement from controllership. In this scenario, controllership is getting more granular and uniform data as it can attain a CIM or single source of truth for data.

With enhanced data leveraging the CIM and transactional information, the controllership function can create more value in driving profitability analysis down to even the most detailed levels of product or service categories to determine which products drive higher margins or should be emphasized.

Skills for a successful controllership function. Are you ready for the controllership of the future? What skills do you and your team need to meet the demands of the role? There’s increased demand for the controllership function to serve as a strategic business partner, and the controller’s skills must evolve to meet this demand.

Traditionally, controllers (and those who report to them) require a standard accounting and reporting background

to be successful. As the role has evolved, controllership teams are now expected to have technology and data analytic skills as well as understand underlying data structures and new automation tools that are more frequently being owned by controllership. These “tech-savvy” skills aren’t always prevalent within a controllership function, requiring a need to close the gap between traditional accounting skills and the technology and analytic skills required to meet the business demands of a controllership of the future.

With the power of these combined skills and sufficient middle management, the team under controllers may be self-sufficient. The controllership function can be positioned to bridge skills gaps and meet increasing business expectations with the right amount of technology training, access to different tools, and designated business system “superusers” (see Figure 6).

Controllers can consider the following actions to close the technology and analytic skills gaps. In the first wave of

Has a traditional accounting and repor ting background

FIGURE 6: EVOLUTION OF THE CONTROLLER

Has a traditional accounting and repor ting background with data and analytic skills to repor t on historicals

Copyright © 2023 Deloitte Development LLC. All rights reserved.

bridging the skills gaps, address the current system landscape by ensuring that there are training programs for onboarding new employees or upskilling existing employees with the tools and systems that they will most commonly use. Identify and designate system-specific “superusers” within the controllership function who have a deep knowledge of the system and oversee knowledge management. From there, incorporate cross-knowledge rotational programs and create formal dedicated trainings for new positions.

In the second wave of the transformation journey, implement a robust change management program that identifies users impacted from system replacements and enhancements. Ensure that these individuals have trainings to effectively use technology to combat gaps in system use knowledge or inefficiencies in technology capabilities.

The Time for Change Is Now

In order for controllers to realize the value in their role—and the wider role the controllership function plays in the organization—they will need to find a clear pathway on their transformation journey.

This means addressing the skills gap and leveraging enablers to address gaps in the weakest controllership domains. It means understanding the role technology plays (and will continue to play) in their role and investing in technology solutions and other solutions that redefine the finance data model.

Finally, it means understanding the changing role of controllership, how the function operates against the broader evolving organizational landscape, and prioritizing

Has a traditional accounting and repor ting background with data and analytic skills to repor t on historicals and provide projections and trends

Has traditional accounting and repor ting knowledge with data and analytic skills to repor t on historicals and provide projections and trends, is tech-savvy, and has deep ERP knowledge

transformation initiatives that redefine delivery models and adapt with a new workforce.

The onus is on controllers, CFOs, and VPs of finance—as well as directors, managers, and analysts—to take action today that propels their function’s transformation journey forward. Elevating controllership into this new paradigm can present the undeniable value of the function’s role and drive a more resilient, efficient, and agile controllership into the future. SF

The authors would like to thank the following Deloitte & Touche LLP professionals—Kyle Cheney, Deloitte partner and controllership strategy offering leader (kcheney@deloitte.com), and Temano Shurland, Deloitte principal and controllership strategy offering leader (tshurland@deloitte.com)—for their contributions.

Beth Kaplan, CPA, CGMA, is a managing director with Deloitte & Touche LLP and also serves as the center director for Deloitte’s Center for Controllership. She can be reached at bkaplan@deloitte.com

Katie Glynn, CPA, is partner with Deloitte & Touche LLP, holding various leadership roles, including leader of the Deloitte Intercompany Center of Excellence and the eminence lead for the Deloitte Center for Controllership. She can be reached at kaglynn@deloitte.com

Kate Gates, CPA, is a consultant with Deloitte & Touche LLP and serves as the IMA sponsorship lead with Deloitte’s Center for Controllership. She can be reached at kgates@deloitte.com

AND YOUR

CLIMATE RISK DISCLOSURES SUPPLY CHAIN

With increased ESG regulation on the horizon, companies need to be proactive in obtaining information from their business partners.

BY DUDLEY BRUNDIGE

he Global Policy Institute in August 2022 estimated that annual investment in “green” technology could hit as high as $5 trillion by 2025 (bit.ly/3GdU8Ow). This is a big deal. It wouldn’t be just the largest reallocation of capital in history, but also possibly a major boost for the economy—not to mention the impact such investment would have on reversing or mitigating the human impact on the environment and climate. The year 2025 isn’t far away, and the push for green solutions that began decades ago is still accelerating.

There are two main reasons for this. First is the everexpanding list of studies that point to a dire climate situation, one that will arrive sooner than expected if we don’t take action. A 2022 report from the Intergovernmental Panel on Climate Change found that limiting global warming to just 1.5°C (2.7°F) would require greenhouse gas emissions worldwide to be slashed by 43% by 2030, alongside a one-third reduction in methane (bit.ly/3K7k5AC). That temperature limit is reportedly the tipping point after which there’s a much greater likelihood of worsening floods, droughts, wildfires, and even collapses of entire ecosystems.

The second reason—and the one that gets far less attention than the headlines and chyrons announcing impending climate disasters and increasingly frequent extreme weather events—is the recent increase in worldwide regulations not just around emissions and energy usage, but around the reporting of companies’ efforts toward sustainability.

Regulating ESG Reporting

While there are many global regulations and policies aimed at directly reducing emissions, such as the European Union (EU) climate laws that set the goal of cutting emissions by 55% by 2030 (bit.ly/3UlLTGh), regulations addressing environmental, social, and governance (ESG) reporting have only recently entered mainstream conversation. These regulations generally set parameters around what businesses need to disclose, and when, about their ESG efforts.

The biggest step in this direction thus far has been the EU’s Corporate Sustainability Reporting Directive (CSRD), which went into effect in January 2023 (bit.ly/3zuwytm). The CSRD set the standards that EU companies need to follow when it comes to reporting their environmental and climate impact, and it also applies to any company that has a significant presence in the EU, “including U.S.-based companies with as little as one subsidiary or branch in the European Union” (bit.ly/3UyYFRz). The CSRD is likely a watershed moment for ESG regulations worldwide as other countries, regions, and even individual states ready their own regulations.

In anticipation of other disclosure laws being passed around the world, the International Sustainability Standards Board was formed in November 2021 with the intention to “deliver a comprehensive global baseline of sustainabilityrelated disclosure standards” (bit.ly/40VtzFV). Not long after,

in 2022 the U.S. Securities & Exchange Commission (SEC) suggested its own set of climate disclosure rules for the United States, which would impact many companies based in the country or doing business within it, similar to the CSRD overseas (bit.ly/3K1TqVM).

Yet the SEC proposal hasn’t been finalized or approved. Later in the year, the U.S. Supreme Court’s ruling that the U.S. Environmental Protection Agency only has certain powers when it comes to curbing emissions cast a shadow over the SEC’s plans. Additionally, despite widespread positive sentiment among U.S. citizens for taking action to prevent climate change, ideas differ on how to achieve carbon neutrality—and in some cases ESG regulations have come under fire as a result. ESG detractors and proponents of “anti-ESG” measures try to paint such regulations as purely political affairs, and one of the most ambitious state-level proposals, the Climate Corporate Accountability Act in California, failed to pass the second round of voting needed to become law.

It might take some time to sort out the finer details of how these laws will be shaped in the U.S., but the likelihood is high that some form of ESG reporting regulations will be put into place sooner rather than later. U.S. businesses will need to begin collecting, analyzing, and reporting their emissions and sustainability data before long and probably need to start doing so immediately if they’re planning on doing more business in the EU or other regions that are gearing up to adopt their own such regulations.

Now is the time for businesses to begin preparing for regulatory changes. Especially since the processes needed to collect and report ESG data require coordination with multiple departments and even other companies like partners and suppliers, it will be a complex task to get them up and running—it’s best not to wait until the last minute to do so.

Scope(s) of Regulations

ESG regulations, such as the CSRD and the SEC’s proposed rules, usually require what’s known as “double materiality,” i.e., the impacts a company’s activities will have on the climate, ecology, society, and so on, as well as the risks the company faces from a changing climate.

Since one of the most prominent factors in a company’s own impact on climate and beyond is its greenhouse gas emissions output, much of this reporting will focus on quantifying and clarifying those numbers (see Kenton Swift, “Accounting for Greenhouse Gas Emissions,” Management Accounting Quarterly, Winter 2019, bit.ly/39TxKgJ). Emissions are broken down into three categories, called “scopes,” and all three need to be measured and accounted for when reporting:

■ Scope 1: direct emissions, such as those occurring when a company’s vehicle runs or large equipment operates.

■ Scope 2: indirect emissions created as a result of purchasing energy (i.e., emissions created by the energy producer).

■ Scope 3: all other indirect emissions not covered in

SCOPE 3 CATEGORIES

Purchased goods and services

Capital goods

Fuel- and energy-related activities (not included in Scope 1 and Scope

Upstream transportation and distribution

Waste generated in operations

Business travel

Employee commute

Upstream leased assets

Downstream transportation and distribution

Processing of sold products

Use of sold products

End-of-life treatment of sold products

Downstream leased assets

Franchises

Investments

Scope 2; the vast majority of this scope can be traced back to a company’s value chain. (See “Scope 3 Categories” for examples of the various types of Scope 3 emissions.)

Scopes 1 and 2 are much easier to measure and track because there’s a high level of control and/or visibility into the sources of those emissions. Scope 3 is the one poised to create the most headaches. The activities of all suppliers done on behalf of a company would need to be disclosed under a company’s Scope 3 emissions. While businesses up to now have been self-reporting (if they’re reporting at all) their Scope 3 emissions, any new regulations will include specific standards and requirements for disclosure that many organizations simply aren’t currently equipped to meet.

The other reason Scope 3 emissions reporting looms so large is that in addition to being the hardest to track and report on, it’s also the largest category of emissions—by a

large margin. As much as two-thirds of a company’s ESG footprint can be tied to its supply chain.

Reporting on Scope 3 Emissions

The most pressing task then is for companies today to prepare to collect, analyze, and report on emissions tomorrow. Since Scopes 1 and 2 are already close to a company and thus easier to measure (though to be clear, that isn’t to say you can ignore them), we’ll focus on Scope 3. Following are some recommendations for preparing your supply chain for ESG disclosure regulations.

As with many key business activities, properly getting things done requires cross-departmental collaboration. Procurement teams will be handling much of the supplier-side interfacing, technology teams will need to put in place the

Source: Management Accountants’ Role in Sustainable Business Strategy: A Guide to Reducing a Carbon Footprint, IMA, bit.ly/3GhCoSA

RED FLAGS OF SUPPLIER RISK

1. Supplier is in a volatile industry. Certain industries carry more risk than others, especially when it comes to new, unproven technologies; suppliers who fall into these buckets should be assessed carefully.

2. Supplier is in (or bordering) a country with high risks of war or geopolitical volatility. A few years ago, Ukraine would have been seen as a relatively low-risk region to find suppliers. Now, with the war there still raging, risks of supply disruptions are high; neighboring countries are also at risk of such disruptions.

3. Supplier has poor communication practices. Reporting ESG figures and preparing disclosures will require careful and detailed coordination between companies and their suppliers. If certain suppliers are regularly difficult to get a hold of for other activities, there’s plenty of reason to think that trend will continue.

4. Supplier is in a region with an increased risk of extreme weather events. As the climate continues to change, extreme weather events such as floods and hurricanes are becoming more frequent and more severe. Suppliers located in areas more susceptible to these events are riskier than others.

5. Supplier has no stated commitment to sustainability or climate initiatives. While a mention of a commitment to green practices on a company’s website doesn’t necessarily mean it’s doing its part and will properly report ESG figures (some could be accused of simply paying lip service or greenwashing), failing to clear even that low bar doesn’t bode well for the company’s potential for meeting stringent reporting requirements.

6. Supplier has a history of noncompliance with legal or regulatory requirements. If the supplier has flouted regulations on other topics in the past, that’s a likely sign it won’t care too much about regulations moving forward—leaving the companies it works with potentially open to fines due to its actions.

7. Supplier isn’t transparent about its sourcing strategies. Collaboration and communication are key to successful partnerships; if a supplier is opaque regarding its sourcing, there could be significant risks right under the surface that are unable to be accounted for.

8. Supplier is in an industry with high emissions. High-emissions industries require higher levels of monitoring to capture and report all emissions. It’s easier to miss some aspect of the full emissions picture when there’s so much going on—or to simply have emissions levels above acceptable ranges.

needed solutions, risk management departments will need to assess and guide activity, and finance professionals will be in charge of transitioning reporting of the data.

1. Assess supplier risk.

The first step in addressing ESG-related supplier risks is to get a handle on your current suppliers’ ESG programs and emissions. (It’s helpful to think of this as another risk category, as the potential for your suppliers’ activities to bring fines to your company is something that must be prepared for like any other risk.) That means data collection. Bring

your suppliers onto a platform that can collect all relevant emissions data from each and then display that data to you in an actionable way. In many cases, that means setting a threshold for reporting and then having suppliers who aren’t meeting these ESG requirements marked for further action.

From there, businesses have the choice of working with those suppliers to address the areas in which they’re falling short; replacing that supplier with a new, more ESG-friendly supplier (many of the same third-party management platforms used to collect this data from current suppliers can also assess such risk in potential suppliers

or even help locate new options); or simply plan on paying fines for suppliers not meeting regulations. For most companies, that last option simply won’t be on the table. Why pay fines when you could address the problem that they’re put in place to solve—and likely do so at a cost lower than the fine itself?

It’s also impossible to overstate the importance of being proactive in putting this and the following steps in place. ESG regulations and sustainability monitoring organizations seek continuous impact, not one-off or low-impact programs that serve as bandages over the omission of a robust and effective ESG program. Getting these tracking and reporting processes going—and involving the suppliers—can be a complex and relatively time-consuming process. The longer you wait to put these items in place, the more likely you’ll be to come up short of some of the reporting requirements when they’re due.

2. Prioritize and build in flexibility.

As already mentioned, any new ESG regulations are just another category of risk, and whatever risk management processes you use in other areas should be utilized here as well. Just like in other risk categories, prioritization is important. Make a plan for assessing each and every supplier under contract, then start with the ones most critical to your day-to-day operations and work your way down the list. With each supplier, bring them onto whatever data management platform you’ll be using, then work with them closely to assess their emissions and ESG risks. It might turn out that they need help collecting or finding a way to share that data, but it could also reveal that they’re simply unable (or unwilling) to reduce these risks or provide the information you need.

This is a case for flexibility and redundancy in suppliers, making it easier to shift a small percentage of supply from a risky company to a less risky one—or even to switch over entirely. In some cases, you should renegotiate contracts when the time comes to ensure that ESG regulations and data collection are being handled properly on both ends.

Again, being proactive here is particularly helpful. Preparing today for the possibility of changing suppliers down the road—keeping a short list of options and flagging companies that might need to be replaced in the coming months or years—will serve to lessen the impact on core everyday activities that changing a supplier will have.

3. Enable data visibility.

Gaining that visibility into the commitments and risks associated with your suppliers is crucial. You need to know their emissions output and sustainability efforts in order to take the correct course of action and gather what you need for reporting.

But that’s sometimes easier said than done. A Deloitte survey (bit.ly/3KcL6Cu) found that fewer than 75% of organizations feel like they have good visibility into their most critical suppliers (and much less for other suppliers; only 15% said they have good visibility into second- or third-tier suppliers).

One of the keys to enabling transparency and visibility in important ESG data collection is to make it as simple as possible for suppliers to self-report that information. On their own, suppliers don’t have an overwhelming amount of incentive to provide that information. If doing so is difficult to achieve or not strictly required, the chances that you never get a hold of that information increases and so too does the possibility of regulatory fines for missing ESG information.

Building those requirements for reporting into systems and contracts from the point of onboarding in third-party workflow tools is the most effective way to get suppliers used to the act of providing that information as part of their normal business activities. This goes a long way to cutting off ESG risks before they can even make it to your company when bringing on new suppliers.

What about current suppliers who aren’t already reporting this data? Here too is where you can lean on those supplier management solutions to bridge that gap, as many allow for workflows and features that guide suppliers through the process of reporting the needed info—and no more than what’s needed—quickly and easily.

4. Review country-specific regulations and proposals.

No matter where you do business, your company is beholden to the laws and regulations of the countries in which your suppliers and, in some cases, your customers reside. Sometimes, like with the EU’s CSRD, those rules are already laid out (or already in effect). In many others, proposals are in various stages of readiness. And the number of these proposals and laws is only going to steadily increase in the coming years.

It’s up to your company to track the applicable regulations anywhere you’re currently doing or plan to do business. There’s bound to be plenty of overlap in what’s required in different regions, but there could also be specific regulations or corner cases that are unique to one country. For example, the German Supply Chain Due Diligence Act went into effect on January 1, 2023; any companies that fit its criteria probably also need to stay within the regulations set by the CSRD.

Specific industries too could have different regulations: The Sustainability Accounting Standards Board (SASB) identifies different standards guidance for 77 unique industries within the 11 sectors in Table 2 (bit.ly/3GhQAuR). These industry-specific standards will likely also change from country to country, which means that there’s more for companies to track in any region in which they conduct business.

The unique geographic and industry details of your suppliers might also require you to assess their risk with regard to geopolitical tensions, which can fluctuate over time and from region to region. Some countries that have been reliably low-risk for decades are finding themselves in unstable situations, with war and social upheaval hitting various places around the globe. Just last year, seismic geopolitical events in Sri Lanka, Peru, and even usually stable Japan made many redo the calculus on suppliers in these areas.

The same holds true for the increased rate of extreme weather events being caused by global climate change (the kind of increase that ESG regulations in part are aimed to

help slow down). If your suppliers are in countries experiencing geopolitical or weather-related uncertainty, or even just bordering countries that are, those risks should be assessed as well.

5. Prepare your disclosures properly.

As with any regulation, the devil is in the details—you can’t just glance at the highlights of an ESG law and expect to be compliant based on that. You need to know every applicable regulation inside and out; it’s the fine details that sometimes trip up businesses and open them up to fines and penalties.

Review any disclosure documentation that already exists within your third-party risk management system and identify what’s missing and what needs to be addressed. Build a disclosure plan that outlines a clear path from where you are currently and what needs to be done or acquired in order to ensure compliance.

Prepare the disclosure documents in the specific format requested by the regulation—some may require how the information is presented or that specific items must be included. This likely includes financial statements and their accompanying notes, board meeting notes, and so on.

It’s important to be as accurate as possible in these disclosures. Be sure to review the documentation with all relevant stakeholders and get their input and approval before calling anything final. Only after you’ve done all you can to ensure the accuracy and completeness of the information should you submit the documentation to the appropriate regulatory body for review. Note deadlines for providing that information and respond in a timely fashion to any queries the regulatory body may have about your disclosures.

Ready for Regulation

Increased and specific ESG regulations are coming—and soon. In some regions, they’re already in effect. Ignoring them simply isn’t an option; doing so will close off areas of the world to your business or introduce the possibility for major fines.

The supply chain is a key player in meeting ESG disclosure requirements, with as much as 70% of a company’s emissions being traceable to suppliers (as Scope 3 emissions). Making sure suppliers can easily provide key information on their emissions and ESG initiatives is important, and both transparency and flexibility will be key in getting their cooperation to do so.

While the specifics for many upcoming regulations, like those in the U.S., will still need to be hammered out, debated, and finalized in their respective regions and industries, there’s a lot we know already. The technological capabilities for collecting, analyzing, and reporting any needed data will remain largely the same. That means companies shouldn’t wait to start building out those processes.

In fact, being proactive is very much encouraged because the systems can be complex. While certain supplier management platforms can help navigate much of that complexity, the sooner current suppliers are brought up to speed and onboarding processes for new suppliers have data collection workflows built into them, the easier it will be when the regulations do go into effect. And this proactivity will serve as a competitive advantage against other companies that scramble at the last minute to put data collection and reporting capabilities into place. SF

Dudley Brundige is the CFO of Certa. You can reach him at dudley @getcerta.com

TABLE 2: SASB INDUSTRY SECTORS

TEXT TO COLUMNS WITH TEXTSPLIT

Microsoft added a new TEXTSPLIT function to Excel in 2022. At first glance, it’s an easy way to perform the Text to Columns function with a formula. But a deeper dive reveals that the arguments available in TEXTSPLIT also offer additional functionality.

column and row delimiter. In Figure 2, the entire data set is enclosed in cell A3. Each month is separated by a colon, and each row ends with a linefeed character (to create a line break within the cell). Someone could have typed this data in Excel by using Alt+Enter after each row to insert the linefeed, or they could have typed it in Word and included a carriage return at the end of each row. Linefeeds appear in Excel as CHAR(10), and carriage returns are CHAR(13). You could experiment with:

=TEXTSPLIT(A3,":",CHAR(10))

=TEXTSPLIT(A3,":",CHAR(13))

=TEXTSPLIT(A3,":",{CHAR(10), CHAR(13)})

There are a couple of oddities in Figure 2 that can be controlled with the optional TEXTSPLIT arguments.

BY BILL JELEN

USING TEXTSPLIT

The syntax is =TEXTSPLIT(text,col_ delimiter,[row_delimiter],[ignore_ empty],[match_mode],[pad_with] ). In its simplest use, you pass the function some text and specify the delimiter. Figure 1 has several values separated by a pipe character (| ). Using =TEXTSPLIT(A3,"|") breaks the 13 values from cell A3 into a horizontal row of 13 values.

Instead of breaking text into new columns, you can specify a row delimiter and break text into new rows. If you had a paragraph of sentences in A3, for example, =TEXTSPLIT(A3,, ".") would generate a vertical array of the sentences.

A paragraph might contain sentences that end with a variety of punctuation. If you want to handle text that could contain periods, question marks, and exclamation marks, enclose the three row delimiters in curly braces:

=TEXTSPLIT(A3,,{".", "?","!"})

It’s also possible to specify both a

Notice that Hank only has data through Q2. When Excel sees that the longest row contains 17 values, it defaults to making all rows have 17 values. Excel can’t make up the missing Hank values, so it fills those cells with #N/A. This will cause problems later. Control this with the optional Pad With argument. Specify a 0 to replace missing values with zero. Specify “” to fill empty cells with blanks.

Also note that Ed’s August value is missing. In the original data, Ed shows 629::869. By default, Excel will assume the consecutive delimiters mean there should be a value there. That’s correct in this case, but there are situations where consecutive delimiters shouldn’t create a new value, like if you were separating each word into a new cell and accidentally added two spaces between a pair of words. Setting the optional Ignore Empty argument to True avoids an empty cell being returned.

Finally, there’s the optional Match Mode argument. If you have a delimiter that’s alphabetic, such as A, a, Z, or z, you can specify if the delimiter is case-sensitive: Use a 0 for the delimiter to be case-sensitive and 1 for it to be case-insensitive.

HOW TO SKIP CERTAIN COLUMNS

Step 3 of the Text to Columns wizard lets you select “Do Not Import” to skip certain columns. What if you wanted only the Names and Quarter totals from Figure 2? Microsoft introduced these new functions along with TEXTSPLIT:

■ TAKE keeps only the first or last row(s) or column(s) from an array.

■ DROP removes the first or last row(s) or column(s) from an array.

■ CHOOSEROWS keeps a specific list of rows.

■ CHOOSECOLS keeps a specific list of columns.

Which one to use depends on the shape of the data. Since the current example requires you to keep the columns 1, 5, 9, 13, and 17, which aren’t at the beginning or end, you can’t use TAKE or DROP. One option is to specify the column number at the end of CHOOSECOLS:

=CHOOSECOLS(TEXTSPLIT(A3,":", CHAR(10),,,0),1,5,9,13,17)

Since there’s a pattern in the numbers (1, 5, 9, 13, 17), you can use SEQUENCE to start at 1 and increment by 4 columns: =SEQUENCE(5,,1,4)

Instead of typing the column numbers, you could use:

=CHOOSECOLS(TEXTSPLIT(A3, ":",CHAR(10),,,0),SEQUENCE(5,,1,4)).

One problem with TEXTSPLIT is that all values end up as text in the resulting array. If you have only numbers in the result, you can add “+0” after the TEXTJOIN to convert all numbers to values. This would be trickier with a mix of text and values, as in this example. SF

Bill Jelen is the host of MrExcel.com and the author of 67 books about Excel. He helped create IMA’s Excel courses on data analytics (bit.ly/2Ru2nvY) and the IMA Excel 365: Tips in Ten series of microlearning courses (bit.ly/2qDKYXV). Send questions for future articles to IMA@MrExcel.com

TEXTJOIN is great for extracting certain values from imperfect data sets.

Figure 1

Figure 2

AI FROM CRADLE TO SDG ACHIEVEMENT

BY FATEMA EL-WAKEEL, CMA, AND MONOMITA NANDY, PH.D.

AI’s journey to achieving sustainability is a complex and ongoing process.

Artificial intelligence has the potential to transform an organization’s strategic and operational activities to generate value. But organizations must generate the most efficient AI algorithms for a particular problem to make it sustainable. How can AI be applied to the attainment of the United Nations Sustainable Development Goals (SDGs)?

AI aims to simulate human intelligence and perform tasks that would typically require human intelligence to complete. AI mimics humans, and AI has been categorized by type according to its capabilities and its functionalities.

■ Capabilities refer to the general abilities or skills that an AI system possesses. These abilities are usually related to cognitive functions such as thinking, learning, and problem solving. The capabilities of an AI system determine what tasks it can perform and how well it can perform them.

■ Functionalities refer to the tasks or applications that an AI system can perform. These tasks are usually related to a particular field, such as natural language processing, image recognition, or autonomous driving. The functionalities of an AI system determine the specific ways in which it can be used.

There are three types of capabilities. Narrow AI is designed to perform a specific task. These AI systems are built to accomplish a particular job and don’t have the ability to perform tasks beyond that. For example, Siri and Alexa are designed to perform specific tasks like scheduling appointments or providing weather updates. General AI is designed to perform any intellectual task that a human can do. These AI systems can learn and adapt to new situations and can perform tasks that they haven’t been specifically designed for. Super AI is more intelligent than humans. These AI systems would be capable of

performing tasks that are beyond human intelligence, such as solving complex mathematical problems or making predictions about the future.

There are four types of functionalities. Reactive AI doesn’t have the ability to learn from past experiences. This type of functionality relies on the current input to make decisions and doesn’t store any memory. These systems are commonly used in gaming, where the AI must react to the user’s actions quickly. It can’t plan or make predictions about the future based on previous data. Examples of this are IBM’s Deep Blue chess-playing computer and Google’s AlphaGo.

Limited memory AI is an extension of reactive AI, with the added ability to learn from previous experiences. It can store limited data from past experience that’s used to make present decisions, for example, self-driving cars avoiding obstacles or recognizing traffic signs based on past experience. But limited memory AI has no ability to plan or make predictions.

Theory of Mind AI can understand emotions and think like humans. It can recognize human emotions, such as anger or happiness, and can adapt its behavior accordingly.

Self-aware AI has a level of consciousness. It’s aware of its own existence and can understand the impact of its actions on the world around it.

CHALLENGES IN USING AI

One of the biggest challenges of using AI is the development of an AI strategy. Many organizations have an incomplete or unclear understanding of AI in how it can apply to their business strategies and operational activities. Thus, they make poor decisions in selecting the right AI tools for their specific needs. Additionally, companies struggle to define clear goals and objectives related to their AI initiatives, which can lead to poor outcomes or a failed project.

Organizations must invest time and resources to develop a robust AI strategy to clearly define goals and objectives, assess potential risks and chal-

lenges, and select the appropriate tools and technologies that align with their business needs. AI systems are only as good as the data they’re trained on, and, if the data is biased, the AI system will be biased as well. This can have serious implications, such as social and economic inequalities or discrimination against certain groups of people.

To address bias in AI, organizations must train AI systems on unbiased and diverse data sets. This may include implementing algorithmic transparency and accountability measures, such as monitoring the performance of AI systems and conducting regular audits. To have sustainable AI, organizations must consider sustainability challenges when they adopt AI. AI systems consume significant energy, and the processing power required to run these systems can have a significant impact on the environment. Additionally, the manufacture and disposal of AI hardware can contribute to environmental waste.

To promote sustainable AI, organizations must take steps to reduce the energy consumption of their AI systems by optimizing algorithms and hardware designs. Additionally, organizations must consider the environmental impact of the entire AI life cycle, from the manufacturing of hardware to the disposal of end-of-life products. Orphaned analytics occurs when an AI system is developed and trained for a specific task but then fails to integrate with the rest of the organization’s analytical infrastructure. This leads to wasted resources and poor outcomes, as the insights generated by the AI system aren’t effectively utilized by the organization.

To avoid orphaned analytics, organizations must ensure that their AI systems are developed with the broader analytics infrastructure in mind. This includes integrating AI tools and technologies with existing data sources and analytics platforms and providing clear channels for communication between AI developers and other stakeholders.

AI MODELS CAN BE SUSTAINABLE

Ethically, AI adoption should follow regulatory requirements that reflect the expectations of society. Evidence from the academic community and discussion between policy makers and businesses suggest the need to develop AI strategies to make it sustainable. Higher adaptability of AI is possible when strategies focus on sustainable AI and its application for achievement of sustainability goals. Moreover, when any business adopts the regional or national AI strategy for future opportunities of sustainable development of the company, it needs to carefully avoid bias in modeling, data training, and data usage to enhance trust among its stakeholders and generate value by introducing an inclusive AI.

AI can access and process costly data at high speed for business. Efficient data visualization reduces repetition of similar algorithms, diagnostic analytical tools reduce information asymmetry and unethical training of data—and, thus, reduce the carbon footprint. A prescriptive analytical tool enhances trust among users of an agile AI ecosystem and can make it highly sustainable and ready for achieving their SDGs. Remember that an organization’s business strategy should focus on sustainable AI and that regulators should allow businesses to use only sustainable AI for SDG attainment. SF

Fatema El-Wakeel, CMA, is a data strategy and emerging technology academic at the University of Cambridge and a Unilever practitioner. She’s also a member of the IMA Global Board of Directors and IMA’s Technology Solutions and Practices Committee. You can reach her on LinkedIn at bit.ly/43wsyGu.

Monomita Nandy, Ph.D., is associate professor in accounting and finance at Brunel University London. She can be reached at monomita.nandy@brunel.ac.uk

Finding My Niche

BY TRENT

W

HEN I WAS FIRST INTRODUCED TO accounting in high school, I was drawn in by the subject’s logical nature. Little did I know at the time how complex it could be. That first exposure inspired me to major in professional accountancy and business administration in college. After graduation, I began my professional career as a staff accountant. I became a CPA (Certified Public Accountant) and, later, a CMA® (Certified Management Accountant).

on your strengths while also shoring up your weaknesses.

Indeed, I’ve learned that setting your career trajectory around your top strengths (the strategic, analytical, and achiever themes show up in my top five) can lead to a long and prosperous career. In my own career, earning the CSCA® (Certified in Strategy and Competitive Analysis) certification has further enhanced these capabilities. My advice is to find the right fit by learning more about yourself and taking steps in that direction.

Trent Kramer, CMA, CSCA, CPA, is a finance manager at Jostens. He’s also a member of IMA’s Minneapolis Chapter. You can reach Trent at tpkramer@ole .augie.edu

Accounting to me has been like putting a puzzle together—something I enjoy very much. There are so many different career avenues within this profession. It offers the opportunity to generalize or find your own specialized niche. As my own career progressed, for example, I grew interested in financial planning and analysis (FP&A). Predicting future financial results is a never-ending game of precision. Pursuing FP&A meant taking on additional responsibilities despite already having a full-time workload—but I’m glad I sought out the opportunities.

Throughout my career, I’ve also found it helpful to take personality assessments like StrengthsFinder, Myers-Briggs, DiSC, and others. As accounting and finance professionals, we’re constantly evaluating the financials of the organizations that we serve. So why not develop a keen introspective awareness of ourselves as well? I like the idea of focusing

I’m so grateful for all the benefits I’ve enjoyed as an IMA® member. Whether it’s learning from self-study courses, weekly webinars, or intriguing podcasts and articles, keeping up to date on best practices and emerging trends is key.

One way I’ve kept current with the profession is being engaged with my local IMA chapter in Minneapolis, Minn. My first introduction to the chapter was being awarded a complimentary dinner after passing the CMA exam. A simple invitation from our chapter president at the time led to my attending an event where I didn’t know anyone else who was there. Since then, I’ve rarely missed a chapter event.

Recently, I even became chapter president. I’m incredibly grateful for the board members who have served with me. Our chapter has highly engaged members focused on their own professional growth, and we propel our organizations forward through this commitment to professional development. Learning is a lifelong process—and IMA is there to help you along your journey. SF

KRAMER, CMA, CSCA, CPA

«I like the idea of FOCUSING ON YOUR STRENGTHS while also shoring up YOUR WEAKNESSES.»

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