By Raef Lawson, Ph.D., CMA, CSCA, CPA, CFA, Vice President of Research and Professor-in-Residence, IMA (Institute of Management Accountants)
Long-term changes in the finance and accounting profession generally follow an evolutionary pace: technology development and adoption advances, cultural and social changes bring new issues to the forefront, and new skills become more relevant as older ones fade in importance. But the seismic shifts of 2020 – the COVID-19 pandemic, the movement for racial justice, the rapid acceleration of ESG – have amounted to something close to a revolution in our profession. In this brief, I examine what I see as the six most important trends of 2021, driven by the upheavals of last year, and what they mean for how we work, how we learn, and how we manage our organizations in years to come.
Automation will accelerate
Often during unprecedented crises, already-available technologies see their adoption rates skyrocket. This is undoubtedly true of automation via artificial intelligence, machine learning, and cloud computing in the finance function. The technology existed and automation of routine, repetitive tasks was already in progress before 2020. But the main driver of that trend – the need for finance and accounting professionals to focus more on analysis, forecasting, and strategic decision making rather than old-style bookkeeping – was turbo-charged by the pandemic, especially by the destabilizing of supply chains. Organizations needed, more than ever before, finance staff to look at the bigger picture and keep abreast of a volatile situation, hence the rapid growth of investment by finance leaders in cloud computing to automate closings and audits after Q1 2020. It may take a major event to finally push companies over the edge on technological transformation, but once that line is crossed, there is no going back. Therefore, automation will continue to accelerate in 2021 and beyond.
Remote working will become the norm for finance teams
As with automation, the technology that enables remote work existed before COVID-19, but for various reasons, was not fully adopted or embraced by senior leaders. With the pandemic forcing organizations’ staff to go remote, that has all changed. As early as June 2020, more than half of CFOs indicated in a PwC survey that they would be making remote work a permanent option once the pandemic ended. While these leaders previously worried about the digital infrastructure and consequences for company cohesion and culture triggered by remote work, the pandemic helped them leap over those hurdles, and now many professionals appreciate the benefits that remote work brings in terms of flexibility and productivity without commutes. Leaders may also appreciate the increased productivity of staff and, in time, the need for less physical space to accommodate staff. Unlike automation, remote work will probably become less prevalent in 2021 as the pandemic recedes and some employees return to offices. But as a long-term trend, and expectations among staff, it is here to stay.
Environmental, Social and Governance (ESG) reporting will become more important
2020 was already set to be a watershed year for ESG, with concerns over climate change and social issues being more and more on investors’ minds. The pandemic, which highlighted companies’ vulnerability when it comes to employee health and safety, and the social justice protests of last summer have both broadened the range of pressing ESG issues and sharply heightened investor pressure. As a new U.S. administration begins implementing its agenda in 2021, the pressure will come on the regulatory front as well. The role of finance teams will be to work cross-functionally across the organization to integrate financial with non-financial reporting, the subject of an IMA® report from last year. More broadly, finance professionals who have not done so will be increasingly expected by investors, senior leaders, and the public to think differently about their companies’ value, reframing it in terms of wider stakeholder benefit rather than just financial performance.
Finance professionals will be held accountable for Enterprise Risk Management (ERM)
COVID-19 was the ultimate “black swan” event – a crisis that came out of nowhere. While by definition, such a crisis cannot be entirely anticipated, the pandemic taught organizations the need and value of having all manner of contingency plans in place, especially as it concerns global supply chains. When it comes to Enterprise Risk Management (ERM), the finance team has a most crucial role to play, having as it does unique insight into supply chains and financials, and being able to estimate the impact of different scenarios. As the economy recovers in 2021, finance teams will be held more to account on ERM planning. Thankfully, they have a vital tool: the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Enterprise Risk Management Framework. The COSO Framework is invaluable because it looks not toward crisis management but crisis prevention, emphasizing Governance and Culture, Strategy and Objective Setting, Performance, Review and Revision, and Information, Communications and Reporting. Having a preventative mindset and this tool will help finance professionals better prepare their organizations for future setbacks in a world that is both interconnected and more unstable in important ways.
Diversity, Equity and Inclusion (DE&I) will be more of a competitive differentiator
IMA has always believed that Diversity, Equity, and Inclusion (DE&I), when it comes to race and gender are, first and foremost, the morally correct values for companies to pursue. But with enhanced public and investor activism since the social justice protests of 2020, in 2021, DE&I will become not just an ethical imperative but a differentiator in the market as companies disclose information that can make or break their reputations. To address this, finance teams need to pay attention to the role diversity plays in not just recruitment but in their cultures as companies and departments. It is essential to have an environment in which women, people of color, LGBTQ individuals, and other oppressed groups, are not only present but welcomed, so as to better retain diverse staff. And building links with diverse academic institutions to ensure a continuous pipeline of diverse finance talent will be important as well.
There will be greater demand for upskilling and continuing education for professionals
The five trends mentioned above will require finance professionals to be attuned to the bigger picture when it comes to technology, risk, ESG, and the social and cultural changes taking place in the world. This leads to the sixth trend, another long-standing development that will only become more prevalent in 2021: the growth in demand for upskilling. IMA has always advocated lifelong learning as a way for finance and accounting professionals to stay relevant in a changing world. The CMA® (Certified Management Accountant) certification is regularly updated to reflect the ever-changing demand for skills, such as by encompassing technology and analytics, so that CMAs can retain a competitive edge in the job market. Companies, too, need to foster lifelong learning and upskilling for their finance staff if they are to successfully address the challenges of 2021 and beyond – and harness the opportunities.