In a rapidly evolving accounting landscape, how can professionals demonstrate their skills and experience to stand out? Certifications! In this episode, veteran accounting educator and President of HOCK International, Brian Hock outlines the immense value of professional certifications for career-long growth and development. Learn how certifications like the CMA provide a standardized body of knowledge to showcase specialized expertise. Discover how the right certifications position you for success as technology and demands transform. Gain perspective on certifications as a strategic investment in your future, increasing opportunities and earning potential over the length of your career. Brian draws on extensive experience preparing accounting students and professionals for certifications to offer advice on overcoming barriers like cost or study time. He provides encouragement that passing rigorous exams like the CMA, while requiring dedication, is very achievable with the right preparation and planning.If you're looking to get strategic and maximize your career potential in accounting, this episode is a must-listen! You’ll come away motivated to pursue professional certifications and equipped with insights to choose the right certifications for your goals.

In today's episode, host Adam Larson is joined by the esteemed authors of the 2023 Curt Verschoor Ethics Feature of the Year titled "The Value of Civility" - Amanda Marcy and Doug Parker. Get ready as they delve deep into the importance of civility in the workplace and its connection to professional ethics and ethical standards.Did you know that even seemingly inconsequential or inconsiderate words can violate workplace norms? In this fascinating conversation, Amanda and Doug shed light on various aspects of civility, including its impact on workplace morale, productivity, and employee commitment. They also explore the role of leaders in promoting a culture of civility and providing guidelines for employee conduct.Through insightful discussions and real-world examples, you'll gain a profound understanding of how civility not only enhances workplace harmony but also influences ethical decision-making. So whether you're a leader aiming to foster a respectful environment or an employee dealing with an uncivil boss, this episode will equip you with the tools to navigate challenging situations. Tune in today!

The future of accounting is here, and it's automated! In the latest episode of Count Me In, we unravel the world of accounting automation, AI, and the exciting changes that technology is bringing to the industry. From enhanced efficiency and productivity to the ethics and potential challenges of integrating artificial intelligence, this episode covers it all. Our expert guest, Jesse Rubenfeld, CEO and Founder of FinOptimal, will discuss the way accounting is being transformed, the new skills professionals need to master, and the fascinating possibilities that full automation offers. Tune in, level up, and discover what the future of accounting holds!Connect with our presenter:www.finoptimal.comhttps://www.linkedin.com/in/jesserubenfeld/Full Episode Transcript:Adam:            Welcome, listeners, to Count Me In. Your go-to destination for insights into the future of finance and accounting. Today, we have a special guest with us, Jesse Rubenfeld, CEO and founder of FinOptimal. He is an expert in accounting automation and AI. We delve into a conversation that may redefine how you perceive your profession. How is automation shaping the accounting landscape? What are the new skills that financial professionals must adopt? And what does the full automation mean for traditional jobs in the field? Sit back and join us in this exciting journey, as we explore the transformation of accounting in the age of automation. **** Well, Jesse, we're really excited to have you on the Count Me In podcast, and today we're going to be talking about automation and accounting. And to start off, maybe, at a high level, we can talk a little bit about how has automation really impacted the accounting and finance industry, and what benefits has it really brought to it? Jesse:              Well, I think it's really been a benefit to the profession, that's the headline. It's taken it from a place where there was a lot of manual block and tackle. To an elevated role where the accountant, the finance professional, can be a thought partner and spend most of their time analyzing and adding value to the message that they provide to management, to the CFO, to investors, to whoever it is. Because they're spending less time managing spreadsheets, or uploading things, or doing data entry, and more time being smart. Adam:            Yes, they have more time to focus on other things. Maybe we can talk about what are the specific kinds of automation, that are really impacting those operations. You mentioned some things that are taking us off of spreadsheets. But are there other things that are really impacting it? Jesse:              Well, in this situation I like to differentiate between accounting practice automation and accounting automation. Accounting practice automation involves task management workflow. Facilitating review and approval of work papers, tracking time spent on clients. It benefits the accounting firms, but it doesn't, drastically, increase capacity. And it's only beneficial for internal accounting teams, at a certain size. Now contrast that with accounting automation, which involves calculating and recording journal entries, reconciling transactions, generating reporting. This benefits accounting firms and their clients directly. It increases capacity for firms, and it increases speed and accuracy so the clients aren't sitting around waiting for answers.  Internal accounting teams can benefit from this early on. One person can benefit from this. One person can do the job of five, whereas it's unlikely they'd use accounting practice automation in a one-person finance team. We also like to distinguish between automation and automation assisted. Automation assisted means it's faster than fully manual, but it's still manual at lots of parts. Whereas automated means one event triggers all of the subsequent actions, automatically. And I like to illustrate this with a side-by-side example. Okay, let's say you're using HubSpot, the CRM, and QuickBooks Online. You close a sale, you have to invoice for the deal and then you have to account for it correctly. And deals, sometimes, have different payment terms. "I'm going to pay all up front, I'm going to pay monthly." And they have different agreement lengths; annual, quarterly, month to month. An automation-assisted process looks like this; a deal is marked closed, one. Accounting gets an email, they fill out the details in a spreadsheet that contains a revenue waterfall schedule. They make sure the formulas are correct and then they copy down through all of the columns, et cetera. And then once a month they go book an entry in QBO. Whereas automated, fully automated, means the deal is marked closed, one, in HubSpot. Data flows from the CRM to QBO automatically. The invoice is sent, automatically, and the invoice is coded in a way that the revenue can, automatically, be recognized in the appropriate periods. That's what we're doing for our clients, full automation. Does that make sense? Adam:            Yes, that makes a lot of sense. And, so, as you're describing those two things, the full automation is almost eliminating traditional jobs that have been in the finance function. So when you were talking about this full automation. There are new skill sets that are involved that are needed for it, and you've seen lots of articles. But maybe we can talk a little bit about that. What are some new skills that accountants are going to need, going into the future? Because full automation is on its way, in a lot of the functions. Jesse:              Totally. Again, the headline here is it's elevating the high performers of yesterday. So that today they can do more, better what they're already doing. In terms of new skills, it comes down to more systems and data analysis. SQL, for example, in our case, Python, if you really want to go crazy. I long ago went crazy. But I think that in the past, somebody who could do the higher level work of managing, of communicating financial pictures to important stakeholders like the CFO, the CEO, investors, they would do that, but they'd spend a lot of time preparing for those things. It would be a major event to get ready for a board meeting. And the amount of time that it took to do that right, was a barrier to entry of competitors for their job. Whereas now they don't have to spend that time preparing for it. Meaning they can use automation to do a much better job, of keeping things ready for the board meeting in real time, all the time. But it also means that it's not as hard for someone to come along with the same skills and replace them. Because they no longer have the luxury of designing their own really convoluted, excessively complicated process, that another skilled accountant can't come in and replace. So it's a double-edged sword. But, overall, it's making everybody more productive and therefore is good for business and the accountant. Adam:            Yes, it is good for business because it helps your bottom line, it helps get things done more efficiently. But I can imagine that changing from no automation or some automation to full automation, probably, has its challenges. And maybe you can talk a little bit about what some of those challenges are, and what are some of the opportunities that come as a result of that. Jesse:              Sure, first of all, when I talk about automation, in response to your previous question. I think, there's a caveat that you can't hope, even with Chat GPT, in my opinion,                        and the AI that's out there, to fully automate any given business's accounting. You absolutely need a person in the loop, if nothing else, to review and approve things before money goes out the door. It's about control. Having said that, you want to automate as much as you can and there are challenges associated with that. At the top of the list is, carefully, considering what you're automating before you do it. This is one of the biggest pitfalls. People just buy some software, and they're knee-deep in the implementation before they realize, "Is this what we want? Is this what we want the process to look like?"  Sometimes software companies are selling to someone, the decision maker is not the user. And I think the way to avoid that is to consider, at once, the people, the process, and the technology that drive those two together, that work together to get the result. The challenge is about; it's not about, "How do I fully automate this? It's about what do I not automate? Where do the people fit into the process that is optimally automated, and what software products are going to help us get there? And sometimes what services are going to help us get there?" Because we do both for our clients. Adam:            Yes, so it sounds like when you're implementing something like this. It can't just be the decision makers making the decision. You need a wide range of a team to make sure that you have the people who are going to be doing the work in there. Looking at this thing, saying, "Hey, this is going to help me." Or "No, this is not going to help me." Because, otherwise, you're going to go into that example that you just stated. Jesse:              Absolutely. When we're pitching our software, or our services, for that matter, we like it, I mean, sometimes we'll get a high-level intro to the CEO. Someone who's definitely not the user and they'll like the idea, but we don't want them to buy it. We want them to have another call with us and their users. If it's an accounting firm, we want the members of their CAS practice, that are actually going to use our software to do their clients books. So that they see what we're doing and say, "Wow, this technology is going to help me improve realization fivefold.  We want the VP of finance who's actually going to have to use our product or consume our services to understand, "Wow, that's going to save me something, so I want that. How do I get that?" As opposed to selling to the decision maker and hoping it works out down the road? It's almost like we want to start the implementation in the discovery, in the sales process. We want the sales process to inform the user not, necessarily, the decision maker. We want the CAS practice operators to go to the partner and say, "Please buy this." Adam:            Yes, and it sounds like organizations and companies can make a better decision. The more practitioners, the more people they have in that decision-making process, at least for the review. Obviously, one person has to make the final decision to say yes. But you need more voices in that input. Jesse:              Of course, you're looking for consensus. You're looking for the users who are going to train other users.Who are going to advocate for you online, where they hang out and learn about cool products and discuss them. And it's about getting buy-in from the stakeholders that are using your products and services, first. Adam:            So you mentioned Chap GPT, and you can't talk about automation without talking about artificial intelligence, machine learning, those are huge. It's all over the news, people are talking about it. I just recorded a podcast the other day, talking about it. I'm going to be recording one in a few weeks, talking about the ethics of it. So there are so many things involved in it. What role do you think artificial intelligence, AI and machine learning, are going to play in the automation of accounting and financial operations? And, obviously, there's going to be benefits, but what are those benefits going to be? Jesse:              I think it's going to be a strong partner. I don't ever see it replacing an accountant, altogether. Meaning we have no person in the accounting function it's entirely an AI because every business is different and it's generative, but it's not creative. And I think it's going to be about I've got a problem that I haven't dealt with before.                         Where previously I would have to do seven or eight Google searches. Now I can have a conversation with an AI, get an answer that's kind of close but not great and say, "No, that's not what I meant." And it's going to be different and better gathering data from the Internet. But it's the future and therefore hard to predict. It's going to be useful, that's for sure. But I don't think any accountants need to worry about their jobs. Adam:            Huh, that's good. Obviously you have the science fiction that's out there, that shows the AI is taking over and they're making all the decisions for us. And I hope that we never get to that future, that science fiction has predicted. But when it comes to things like ethics, and fraud, and stuff like that, obviously, you can put different elements into the AI, and the machine learning, and the automation, to eliminate those steps. But do you think people are going to be able to find ways around that, and find ways to still do fraud in the midst of the automation and the internal controls that are put into place? Jesse:              I have no doubt. When the cat is away the mice will play. Adam:            Yes, and it's hard to say how that's going to happen. Jesse:              I just think it's a cat and mouse game. There are always going to be people who want to operate outside of the law. And the tools to detect it are going to get better, and the tools for perpetrating it are going to get better. Expensive software doesn't solve for bad people and bad processes, though.  Adam:            That's true. So talking about data, obviously, data is a huge part of this. You mentioned that that's a skill set that people are going to have. And then also, obviously, quality control, you've mentioned there's going to have to be somebody there who's going to have to check things as it goes through. But in the context of automation, and accounting, and the operations, what steps are going to be taken to ensure that there is going to be accurate and reliable results? What steps are we going to have to take to make sure that that happens?Jesse:              I think you need to implement your system with agility, iteratively. I think the first time you try whatever system you just implemented, it's not going to be exactly right. It should be a big step in the right direction. But you're going to have to do a lot of testing. And you don't want to have the expectation that, "I'm going to implement a really expensive large general ledger. Have some consultants come in for two weeks. They're going to get it right and then they're going to go away, and my life will be better." I think that's the naive way to do it. It's got to be, "All right, we're going to take a step and then we're going to take another step. We might have to take one step back, after two steps forward." In terms of accounting data, quality control, reconciliations will always be a part of the process. It's just that the time that it takes to do them will shrink. I think the laborious parts, the real rote elements of accounting work, are going to continue to get smaller, but they'll still need to be done. Otherwise, how can an auditor give an opinion, that statements are materially free of fraud. It doesn't go all the way.  Adam:            Yes, you have to have those internal controls in place. Outside of the system, you have to have those things in place to make sure everybody stays accountable. Jesse:              Totally, 100%.  Adam:            Yes. Jesse:              And at the end of the day, the people are at the top of those systems. I just don't see us; you can detect abnormalities with systems. You can flag things. But I don't think the IRS ever figures out a way to, automatically, correctly, identify everyone who's cheating on their taxes. It's going to flag some stuff. It's going to get better at flagging some things. But the flagging need to be tuned, so that the people who are making decisions can use that information to make better decisions. The people are always going to be at the top. Adam:            Yes, so let's say you're somebody in the accounts receivable or accounts payable department, and your job has been to send the invoices out and organize those things. And your company is saying, "Hey, we're bringing in this system that's going to send the invoice, automatically." What would you say to that person who's been sending those invoices out? What would you say to that person, today? Jesse:              I'm going to save you a ton of time and you can learn how to do payables, and be twice as effective with your time. I think the accountant who fears automation is truly in trouble. They may stave off the automation of that invoice process for now. But eventually someone's going to come along that makes it painfully clear that you should have done this a long time ago, and you're going to get fired. It's much better to embrace the automation and say, "Wow, I'm buying back half of my week that I can now spend..." in my case, it was learning to code. That's what I love to do. But it could also be learning more about a different area of the finance function than you were exposed to before. People who are ambitious are going to find a way forward.But automation is not going to replace accountants. Accountants who use automation will replace accountants who don't use automation. So embrace it, learn the new skills, elevate your game. Adam:            So it's almost like if you're sitting in there and you're listening to this podcast, and you're like, "Hey, my company doesn't do that." You can be the one to bring the idea say, "Hey, I have this new idea to save us a bunch of time and we can do this X, Y and Z." You can bring that idea forward and help elevate your company, and then it'll elevate you probably in your organization. Jesse:              Yes, and I think what you just said is a role now in companies called finance transformation. And, by the way, if you think that you're good at that, please look me up because we want you to join us. Adam:            Definitely. Well, look in the show notes, today, and we'll have a way to contact Jesse either through LinkedIn or some other way. So look at those show notes for today's episode. So we've covered a lot of great things during this conversation, and if you're a finance and accounting professional listening to this conversation. What ways do you recommend that they can stay up-to-date to the latest technologies, the tools? What resources are out there that they can help them stay on top of this? Because, obviously, like you said, the accountant who understands and knows how to work automation is, probably, going to replace the accountant who does not embrace that. So how can accountants stay up to date and then start embracing it, themselves? Jesse:              I mean, first and foremost, if you're an accountant and you want to keep your job, for God's sake, listen to Count Me In, it's an obvious win. There are a lot of podcasts that touch on automation and I think it's to, a large extent, about keeping your ear to the ground and finding out about new things. But there's also Slack channels like Off the Ledger, join CFO groups, follow people on LinkedIn. Follow me, Jesse Rubenfeld and you'll hear about a lot of exciting stuff.  Adam:            That's great. Well, and, obviously, there are magazines out there. Don't sit there and sit in the dark and think that if you sit in the dark nothing's going to happen. But keep your ears to the ground and pay attention because, otherwise, it's just going to pass you by. You need to jump on the train and don't let the train pass you. Jesse:              And, hopefully, it's something that's exciting. Wow, we can prepare these invoices, automatically, and send them out. So many cool things are happening in the industry. So many cool software companies are coming up with new things that are making your lives better, as accountants. Elevating the profession, giving you back time to take your career in the direction you want to take it in. And the more you can embrace that energy, the more it gives you optimism rather than fear of, "I'm going to be replaced." Adam:            I agree, 100%. Well, Jesse, thank you so much for coming on the podcast. It's been an absolute pleasure talking with you, and I think the information that you provided will really help our audience to really look forward to the future and be better. Jesse:              Thank you so much. Announcer:    This has been Count Me In, IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard, and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

Dive into the fast-paced and exciting world of artificial intelligence with our podcast series! Join our expert guests, Dr. Mfon Akpan and Dr. Scott Dell, as they unravel the mysteries of AI, explore the cutting-edge developments in language models like ChatGPT, and discuss the massive impact of these technologies on industries like accounting. From the thrilling acceleration of AI adaptation to ethical concerns and security implications, this podcast explores it all. Tune in to stay at the forefront of one of the hottest topics in technology today!Connect with our speakers:Dr. Mfon Akpan - https://www.linkedin.com/in/drmfonakpan/Dr. Scott Dell -  https://www.linkedin.com/in/drscottcpa/SF Magazine Article by our speakersFull Episode Transcript:Adam:            Welcome to Count Me In. I'm your host, Adam Larson, and today we're diving deep into the world of AI. A subject that has been making waves across industries. Transforming the way we work, communicate, and think. With me are our esteemed guests; Dr. Mfon Akpan, Assistant Professor of Accounting at Methodist University. And Dr. Scott Dell, Assistant Professor of Accounting at Francis Marion University. They bring a wealth of knowledge and insights into AI's history, its current impact, and what's on the horizon.  We'll discuss everything from AI's phenomenal growth; to its applications, ethics, security concerns, and much more. So buckle up and let's embark on this fascinating journey into the digital revolution. Adam:            Mfon and Scott, thank you so much for coming on the podcast. We're really excited we're going to be talking about AI and ChatGPT, and all that comes underneath that. And we're really excited to have this because this is a very hot topic, and people are talking about it. You see articles about it every day. You see updates, you see leaders writing letters saying, "Let's stop all AI for six months." Et cetera. Maybe we could just start at a high level. What is AI? What are these chat bots? What are these things doing for us? Scott:              Amazing tool, and thank you for having us. It's a pleasure to be here and to share. I'll kick things off, Mfon, if it's all right. This artificial intelligence has been around for over 60 years. So you say, "Wait a minute, why is it so new?" Well, what's new is the capabilities because of the computing power we now have. And the tool is amazing; it is changing life as we know it. We haven't seen the likes of this since the printing press. It's an environment that can really do things, change work, augment work, replace work, but makes things better. Your thoughts, Mfon? Mfon:             Yes, and I think some of the excitement around it is that we haven't seen this type of growth, in a platform as well. So you think about it was released, November 30th 2022. Five days, the platform got a million users. So you think about in 2010, it took Instagram two and a half months to get to a million users. So there's a lot of excitement, and then there's a lot of acceleration and speed around the platform, as well. Scott:              As a follow up to that, 100 million users mark was reached in two months. Compared to TikTok, I think, it was nine months to get that far, that fast. So it has been an amazing adaptation of the technology. Adam:            So maybe we can talk a little bit about how does it work. And, then, from there, maybe, talk about what benefits it may have for the accounting profession as a whole. Mfon:             Well, it's a language model, so it has an interface. So you're able to go to the platform, you go to the website, and you're able to ask it questions, or you can copy and paste information and ask it to do things. So from the profession side, if you're asking it to solve problems. You can ask it to solve a problem, or you can have it write an email, write a letter, it can produce content for you. Scott:              And as Mfon mentioned, it is an LLM, one of those three-letter acronyms, a large language model. But what it does is it projects words. So it looks at the previous word and it says, "Mm, what would the next logical word be?"                          Which, sometimes, if you've ever played the game of telephone, as a kid, sometimes, you get to the end of that line and nothing resembles how it started out. And that sometimes happens, as well, with the ChatGPT and GPT-4 environment. Because it is projecting with probabilities, "Yep, I think this is the next word." And sometimes it's dead wrong. It's called hallucinating, it's the actual technical term. Mfon:             It does hallucinate. But what's so fascinating when you use it, it is projecting. But I guess it feels like you get the impression that it's thinking, even though it's not thinking. So you can ask it questions and it will give you answers, so there's that interaction. But it is projecting and it does, sometimes, hallucinate, or make up answers, give you false information.  Scott:              And the fear I really have, in the hands of professionals, we can, probably, take a look and say, "Oh, this isn't quite right. This is illogical." But for a novice, and for newbies like our students, they will look at this and say, "The English is so good. It just flows so, logically, it must be right." And it's not, although, often enough it is right. So there's a balance. Adam:            Yes, so talking about people using it. Obviously corporations, people within corporations, within organizations, are using it. Within the accounting profession are using it, and people are having to create policies. There are new workarounds coming out there. People are saying, "Okay, you can use this, but you can use it for that." I saw one example, where somebody put in a fake balance sheet and said, "Analyze this for me." And it gave a really interesting analysis. Then, you have to worry, "Oh, am I putting somebody's data into this thing?" And you have to worry about those things. And, so, how can this tool be used for management accounting? In the accounting space, obviously, without giving away too much personal data? Scott:              Security consciousness is we need to be there. I mean, you're hearing about the deepfakes. I just heard about a scandal in Hong Kong, a banker that sent millions of dollars, based on what sounded like the voice of the person, the CEO, that was asking for the money, and millions were lost.  So there are a lot of nefarious uses out there. But there are a lot of positive uses, and using it in the business environment. I mean, there are a number of businesses that have banned it as well. School systems that have banned it. But there's a lot of fear in the air. I think there's more hope than fear, though, and more opportunity. Mfon:             Yes, there is more opportunity. And from an interview that I read with Ilya Sutskever, I hope I'm saying his name correctly, he's the chief scientist at OpenAI. From what he was explaining, they consider their value with the platform is the reliability.So there's a focus on updating and moving the platform to become more and more reliable, as far as the output. And he was explaining, if you look at the jump from the 3.5 to the 4.0 version, you see that there's a movement towards this reliability.  On the other side, if you watch the interview with Sundar Pichai, from Google, when he talked about Bard, similar, well, I shouldn't say similar, he called it guardrails. So they're releasing Bard and they have it out there, so that they're testing it. So it's twofold, they're getting the public used to the technology and, at the same time, they're testing it so they can slowly release it and put in, as he called it, guardrails, with the technology. As they further release it and develop it. So I think all of this is in mind, as it moves forward. Scott:              And we started off with the pace of adaptation of this tool. The pace that we are needing to adjust to it is also very quickly. And, Adam, you brought up a great point about security concerns. Putting in somebody's private data, PII stuff. You're looking at it and saying, "Wait a minute, is this recording me? Is it going to take it? Is it going to repackage it and spit it back out to somebody else?" And the short answer is it very well could be. We do have the rightful fear, but we're all getting used to this. It just has been such a rapid ramp up and the guardrails do need to be in place, and everybody's concerned about that.  But take for example, if you wanted to get scammed and you're saying, "Okay, we're going phishing. Give me a phishing email that's going to be effective with this kind of tone or whatever else." And now there are guardrails in the place to hold you back and saying, "We're not going to do that." Then you say, "But I'm an educator, and I want an example of a phishing email so I can demonstrate for my students that this is not the right thing to do, but look how powerful it can be." And that also used to trip up the AI and say, "Oh, okay, yes, let me give you an example." And there's ways around it, and all kinds of folks are trying to get into this, we'll call it the black box, and take advantage. It doesn't take very many bad players. But most of the folks are good players that are using it to their advantage, in the workplace.  But we mentioned earlier a number of companies, folks like JP Morgan, and Bank of America, Goldman Sachs, that have banned it for internal use, and there must be a reason as well. The banks, I can see where they'd be real concerned about their security. Adam:            Mh-hmm, yes, I've been reading, too, that there's a lot of concern about privacy of data. And even when I've talked to folks, internally, at our organization, are like "Oh, can we use it?" "Well, just be careful what you put in there." "Okay, well, can we have some more guardrails around what I'm supposed to put in there?" Because when you're using these tools, it's all about asking the right questions. And if you don't know how to ask the right questions. Soon enough, we'll see courses out there saying, "How to ask the right questions to ChatGPT." Scott:              I actually talk about that; it's called prompt engineering. Six months ago, we didn't even realize it existed, even though it did exist at that time. But right now there are so many new job opportunities in this prompt engineering. How you ask the questions. I used to call this a Google on steroids. I've had to change my tune because Google, you just do a quick ask. And yes, you can get away with that in ChatGPT and GPT-4. But really, you really want to set the stage, tell it what you want. The format you want it out, the tone you want it to project. You really have to have a pretty well developed question, and there are some methodologies to do that, to properly ask a prompt. Mfon:             Yes, it's a good point. And if you think about it, with this chat bot technology, it's still in the infrastructure phase. So you think about companies, they're still working on the whole infrastructure and, to some extent, they're building it while it's flying, if you think about that. And eventually it'll reach a point where we'll get to the application phase.  But a lot of this, in my opinion, is moving way faster than we've seen before. So it's not new, but it's faster than before. So I try to think about if you think about social networks, social media because they compare, like Scott was saying, reach a 100 million monthly active users, or MAU, that's one of the metrics for social media. You think about 2002, there was Friendster. I don't know if anybody remembers Friendster.  Scott:              We actually do. Adam:            2003, Myspace, and that had 25 million users, and that was one of the top websites out there, at that time. And, then, Facebook comes along, Twitter, and then now you've got TikTok, a billion monthly active users. And, I think, Facebook is at 1.9, or something like that, billion monthly. So if you look at it in that way, it's still moving. But this isn't happening from 2002 to the 2020s. This is happening, really, if you look at it, in months. We've seen a lot of exponential growth. Scott:              Yes, the modern AI, as we know it, as we see it, is still in its infancy. And there's been discussion something about AGI, and you're talking about Artificial General Intelligence. Which is the level of where it's going to be in, who knows, six months, two years, five years, 10 years. I mean, GPT-2 was released back in 2019, then we had GPT-3 in 2021. So it has been ramping up. But, well, just wait till this stuff hits adolescents. We think our kids are off the guardrails, let's watch out for ChatGPT, and GPT-4, and GPT-5 eventually to come. Even though they put the brakes a little bit, they're slowing that down. Mfon:             Or another platform or that'll rise up. Adam:            Yes, I was just going to say that. You mentioned Myspace and then it was taken over by Facebook. Chat GPT is the big one now. I mean, I remember Myspace, I had a Myspace page, and then Facebook, I was like, "What's Facebook? What's this new thing?" And everybody gets the Facebook page. And, then, you forget about Myspace because it's no longer the relevant platform. And, then, you talk to kids, nowadays, you say Facebook. They're like, "What's Facebook? I'm using…" whatever the platform they're using. So there's always a newer platform that's going to come along.  And I think the other thing to remember, too, is ChatGPT, like you said, it's in a beta. It's not even fully out, but yet people are using it like it's fully there. And you have to remember those guardrails and, maybe, we can talk a little bit. How can companies use this within their organization, in a safe way? Because, obviously, you don't want to do too major stuff, but you can also utilize it for helping in some ways, too. Scott:              Well, as previously mentioned, we started saying you got to be careful and we need to educate. The same way we need to educate, "Don't click on that attachment on that email." Because it might open something up that's going to do something and cause a ransomware to be loaded, or whatever it might be. We need to educate and train our folks to say, "Well, how do we properly and effectively use this stuff?" Because you can go off the deep end and can go any direction.  And I mentioned, earlier, that as a professional, you can use this stuff and you can acknowledge, "Okay, wait a minute, this is nonsense, or this is really good." It can augment what you're doing. If you know what you're doing, that's the best use to let it help you do what you do best, and you can ask it those questions. You can complement where you're going. If you're new and you're trying to figure out how to use this stuff, you, again, need to have that back- Mfon:             Yes, to piggyback on that, I think, at this moment, and you have to be careful to say, at this moment, with this March 23rd version of GPT-4. If you're a practitioner, you're using it, it can make you better if you have that skill set. So it has the possibility to make you more efficient. Now, if you're not in the profession. So if you're not an accountant and you're looking to use it to do accounting, it can have the opposite effect. But what is happening, if they continue, with their focus on reliability, that gap is going to get narrower. It's going to get smaller, but it's not going to disappear.  Scott:              And you were asking about effective use of this, as a professional. The idea that you need to understand the field, to be able to ask the right questions. To be an effective learner, you have to be an effective questioner. To be an effective questioner will help you go far in any direction you want. If you're just going to trust blindly, it's not going to be effective for you. Mfon:             And from a business side, we're going to see more companies partnering with OpenAI. So Chegg has partnered with ChatGPT to create CheggMate. Bloomberg has created their Bloomberg GPT. So we'll see more and more of these applications or partnerships, with GPT and other platforms. Again, moving from that infrastructure phase to more of an application phase. Adam:            Yes, there seems to be an infinite waitlist for those who are trying to partner with them. If you try to say, "I want some sort of partnership, I'll work with it."  They say, "Well, we've got you on a list and we'll get back to you when we can." They're not even giving a time period now, which is really interesting. Scott:              Although you hear about the majors-Adam:            The majors, of course. Scott:              You hear about the Metas of the world. You hear about the Alphabets of the world, the Microsofts of the world, the OpenAIs of the world. But there are hundreds of other artificial intelligent applications out there. From music generators, to video generators, to rewriting, and tools, that there's a lot of NVC, there's a lot of venture capital money that's going towards these. It feels like the .com boom. If you were in 1998 and you had the .com in your name, toys.com or china.com, people threw money at you. Now you've got .ai, people are throwing money at you. Some of them are going to stick and some of them are pretty powerful. I've used a variety of these tools, and they're impressive and they can do some amazing things. Adam:            I mean, just thinking of the example of that picture of the Pope, in that white puffy jacket, that went around, and everybody thought was real. And then they're like, "Wait, that was created by AI." And it fooled so many people. News outlets were reporting on it, that it was this great picture. Scott:              That's right. Adam:            So I want to circle back to what you were saying, Scott, about novices and people just learning. And to be a great learner, you have to be a great questioner. And, so, this makes me think about accounting education and people in schools. And I know that ChatGPT had created another tool for professors to use, to check in against plagiarism and stuff like that.                         But how can this be used in an accounting education? Because the people, the kids, that are coming up, they're more tech savvy than folks who are older, and they're going to continue to be more and more savvy. But how can we best use this as we train up the next generation? Scott:              Well, I'll tell you, this is not only changing the world of work, it's also changing the world of education. We need to change as educators. We need to level up. We keep talking about critical thinking. That critical thinking is a powerful environment that we need to help our students take advantage of. But it's even more important now with the use of these AI tools. Because when they ask a question, well, students, and I hate to stereotype any student, but they don't have the bandwidth nor the base of knowledge that the experts and the professionals have. So they're going to take a look at some of this technology and trust it a little more blindly than you or I would, probably, like.  So they are exposed to it, they are using it. I've surveyed three classes recently. One over three quarters were using it. Another about half, a little over a half we're using it. And a third under a quarter we're using it. Which means they're using it. The key is, are faculty using it? Are the educators using it? And when we do, we realize they're going to take home exam and they're going to play with it, look at it, and say, "Oh, great, I get the answer." But I will share, I've done two exams, I call them "You're the auditor exams." And I actually ask a question, multiple choice. I give it the AI answer that ChatGPT generated, and then I give it three alternatives. So this is the new multiple choice format. So what was the result? Randomly, these two exams, it was about 52% that ChatGPT was right. So 20 out of 39 right, 19 out of 39 wrong.  I told my students, "You want to get a 50 on this exam, just circle A for every one of these answers and you're halfway there. But if you want to get a better grade. You're probably going to want to really do the problem, do the question, and evaluate for yourself." But they have access to the post of ChatGPT. We need to embrace that, and use that, and apply that to teach them how the rights and the wrongs, the ethical use of this tool. Mfon:             Definitely it is a challenge because you think about we're training students to go into the workforce. Definitely the workforce wants more efficient and productive workers, and this tool can definitely provide that or facilitate that. So you want to expose students to it because, eventually, the workforce is going to demand it, for greater output. So that's the big challenge. And I think the other challenge educators have been facing, is it's been changing so much. And we're getting a little breather right now, between the 4.0 and the GPT-5. Because you think about it, we had the rollout of the 3.5, then the 3.5 Plus, then the 4.0. And really, there was a big jump between the very first rollout in November 30th, the 3.5, to the 4.0, today, and we have to maneuver and adjust. So we can, at least, set some sort of baseline, right now, to catch up. Adam:            I'm in the field of education, adult education, as well, and it's interesting when I talk to colleagues. I was talking to a colleague of mine and he said, "Well, yes, I was doing a three-day seminar for the internal organization and I used ChatGPT to create my beginning starting point, and then I adjusted it from there."                         So, like you said, Scott, educators need to really jump on this. Because it could be people who are professionals can utilize it to say, "Hey, I'm going to create an outline using ChatGPT if I can put all this material in there." But then if all of us, professionals, start to do that, are we losing the ability to create these things on our own. Scott:              Well, two factors, one is in the career space. Mfon brought a great point on employers are expecting you to have this skill.  Adam:            Yes. Scott:              I saw a survey that over 90% of employers want to see that as a tool you've used, experienced, and have some knowledge of, even more so than blockchain these days. But the other side is being able to apply, and as you were just talking about, the tools, you can use it for so many things. You can use it to summarize; "Here is my LinkedIn URL, give me a summary of who I'm going to be talking to." "Here's an article; I don't have time to read this six pages. Give me a summary of what this is all about." And you can use those things, and it's, usually, pretty good and pretty accurate in reflecting that. And then you say, "Give me the ten-top points, in bullet points." Then go ahead, "I need to write my own blog, and my own post. I need to set up, give me a two-week schedule to implement this program, which is going to include these steps." Or, "First of all, tell me the steps. Then make me a two-week schedule or a 30-day schedule." "I'm on a diet, I'm traveling, give me a tour. How about some restaurants?" Back to the hallucination, though, it gets names wrong. I actually made a list of the 50 CPA associations, across the country. The societies’ CPAs, I said, "Give me the executive director, their email, their address, their phone, and their abbreviation." It got every executive director, or CEO, wrong. It got every email address for those CEOs, obviously, wrong. It made them up. It made up names, but it sounds so good. I looked at it and said, "Oh, this is cool."  And then I realized, "But South Carolina, and Massachusetts, Wisconsin, I know these guys. I've never heard of these people, who the heck are they?" And the same thing for education journal articles. Book titles, it makes up book names, like, "Give me a list of the top 25 books in the career space." If I'm looking for this kind of role. And it gave me 15 or 20 that were actually pretty good and pretty well recognized, and three or four, I said, "I've never heard of these." And the reason was they didn't exist. So you look at that and start saying, "Okay, it's got good stuff, but it's got a balance." Mfon:             Yes, but I think as that reliability and the focus on that on ending that hallucination, as far as the education portion. There's going to be way more value and emphasis on critical thinking and the problem solving skills, and not using that as... So I think it'll shift even more. Scott:              The only constant is change, and you're right about that. Those exams that I told had a roughly 46%, 52%, depending on the exam, was a 3.5. Jumping to 4.0, we're over 80%. So it's improving, too.  I discovered this in December I said, "Okay, I've got an exam, let me play with it and see what it does. The first five out of six questions, it got right. And I said, "Oh, my students are going to cheat like mag dogs, and I can't give a take home exam ever again." But the next six out of seven questions, it got wrong. And then I was more worried because, again, I know how trusting students can be when they look at the logical, the good English, the nice flow, and then get a wrong answer. But they would trust it because of the proper English and the flow. Adam:            So that's a great example of how you can incorporate it into your classroom. Are there other ways you can integrate that or similar tools into the classroom, as you were building this? Scott:              I'm using it daily, in terms of asking a question for the day kind of thing, and that response, I actually, grade it. I discuss it with my students, and then they grade it. And in three different classes, in the same day, once I got a B+ for one, I got a D for another, and I got a CC+ on a third. So I'm an academic, I'll grade them.  Then we show what was wrong, what the shortcomings are. But every time you get a different answer, and it's not always improving. It's not stepping up to say, okay, this first time, I asked it this, next time that, it depends on the word choices. We're going back to the beginning. "Ah, this word sounds good after the next word." And that's the flow.  I once asked it the question, "So when did the dragons defeat the Roman Empire?" And it said, "In 650 BCE, king so and so and the dragons defeated the Roman Empire. But 200 years later, the Romans fought back and were restored to order." Whatever it was. I couldn't get that answer again, by the way. I've been in there since, trying to ask the same or similar question. And it says, "But dragons are mythical creatures, they don't exist." So it does learn, but it also can give you some pretty far-out answers.  Mfon:             Yes, it does, and as educators, we need to expose our students to it, talk about it. We can't really bury our heads in the sand and pretend like, "You know what, this isn't here, it's not coming." They are using it, and it's important to at least understand how they're using it. Understand what type of access they have to it.  Because I survey my students; I have some students who have the free version, and they've tried it a few times. I have other students that have the paid version and they are using it every day, diligently, and they let me know. So it's important to understand that and get a gauge on it, and then dive into it and use it because it's not going away. It is not going to go away. Scott:              And it really starts back at secondary education. I mean, the State of New York has banned it. Can't have it on the Chromebooks, can't access it. The City of Baltimore looking at it saying "No, can't do it." The City of Seattle.  But what's that telling our students? And what's that telling our environment? And what's that going to do for graduates? When the employers are saying, "We want folks with experience, even if they're not college graduates, even high school graduates. We want them to have some experience." So the haves and the have not barrier is going to get wider because students that can't get it on their school computer can go home, "Mom or dad can I use your computer for school?" Who's going to deny them? But the students, I'll call the have nots, that don't have a parent with Internet access or a computer, and are stuck with their school computer, now they can't access it. So what happens at graduation? We have the haves that played with it, used it, even though they banned it. And the have nots that don't have that skill set or level, or they both go to college and, again, there's that still gap coming into college. So our work's cut out for us. But Mfon is so right about not being able to bury our head in the sand. We need to embrace it, use it, apply it, and help our students do the same. Mfon:             And that's a good point, because with more penetration of ChatGPT and other platforms like it, there will be that, I guess, you can call it the AI gap. So you'll start to see there'll be a gap between those who are using it or have exposure to it, and those who do not. Scott:              I'll quote you on that AI gap, for certain. Adam:            I was reading an article, I saw an article yesterday, I think, it was on CNBC or one of those things they got. Somebody was quoting it and linked to it, and it was listing this very large number of organizations, that are starting to look for ChatGPT as experience on resumes even now. And it's not just saying, "I know about ChatGPT." But what can you do with it? And being able to express what you can do with it on your resume, that's a game changer right there. Scott:              There are a lot of HR folks fearing and saying, "Well, if they use it to write a cover letter, how can I tell if they used it?" Well, actually, if they use it, more power to them. They're, actually, applying the technology to something. And then they say, "Well, we can't differentiate." Well, maybe you don't want to because everyone's going to be able to have great cover letters. Now we got to look deep at something different. Maybe content, maybe certifications, maybe the ability to understand and integrate. But that prompt engineering is alive and well, and we really need to embrace that, too. Adam:            So, as we're wrapping up the conversation, as we look to the future. What can we do as practitioners in the space? We've talked a lot about educators. What can we do, as we move forward? And what are some steps we could take as takeaways? Mfon:             I would say the, big one, as a practitioner, get comfortable with being uncomfortable. And you have to have that life-long learning mindset, at this point. And dive in and use the technology as much as you can, and learn as much as you can about it because it's changing, it's growing. You've got ChatGPT, you've got Google's Bard, which is developing. You've got Caktus AI. So you have so many of these various platforms, and they're going to be more and more widely adopted. So understanding how they work, and where they're going, and how they apply to your practice, I think is very important. Scott:              And most of us have been using AI whether we realize it or not. You look at Alexa, you look at Siri, and you look at Netflix, they've been using AI for a while, that means we've been using it for a while. But I, wholeheartedly, agree that we need to embrace it. Because, frankly, our clients and customers are going to be using it. Our staffs are going to be using it. Our kids are going to be using it. Owners need to be using it. We need to get comfortable with it, appreciate it, and take advantage of what it can do, it can magnify. It's just like RPA, Robotic Process Automation, it can take a three-week process and complete it in two hours, cool stuff. But so can AI.  Mfon:             Yes, and if you think about it, if you have a business and your competitor is doing more with less, they can outpace you, potentially. Scott:              And I want to clarify the job challenge. There was a study, out there, that said 85 million jobs will be eliminated, The World Economic Forum, put that out, by 2025. And they said 97 million will be created. To me, that's a net gain of 12 million. And think of the profession 100 years ago, we had 30 accountants for a 100-person company. Then we had ten accountants for a 100-person company. Now we have one and a half or two accountants for a 100-person company. Does that mean we have a bunch of out of work, unemployed accountants? Well, last I heard, there was a shortage. So there really is a need. But it gives an opportunity for accountants to do higher level stuff. To enter the C-suite, to be able to help make decisions and in process.So learn the tools, take advantage of the tools. And, as we said before, it's a springboard for a lot of opportunities. Adam:            It definitely is. And I know we could keep talking about this for a long time. But I'm going to promise our listeners that I'll have these two guys back on, in the future. Because I know, probably, a year from now, six months from now, this conversation will be completely different. And, so, if they're willing, we'll do that. Thank you both for coming on today. It's been a great conversation. Mfon:             Absolutely, thank you for having us. Scott:              It's been an honor. Much appreciated.  Announcer:    This has been Count Me In, IMA's podcast. Providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard, and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

In today's challenging business landscape, organizations need to adapt, innovate, and maximize efficiency more than ever. In today’s episode of Count Me In, we dives into the heart of support functions within organizations, discussing the current markets in 2023 and the inevitable squeeze that many businesses face. Our Guest Kevin Herring, president and founder of Ascent Management Consulting, discusses how you can leverage expertise within your organization as cuts and reorganizations loom on the horizon. Kevin will unpack the role of accountants, finance, IT, HR, engineering, supply chain, and more in optimizing the resources they have in the organization. Discover how you can shift your mindset, change how you operate, and bring your expertise to bear on critical situations.Connect with Kevin:https://ascentmgt.com/https://www.linkedin.com/in/the90dayturnaround/Full Episode Transcript:Adam:            Welcome to another episode of Count Me In. Today's world is filled with uncertainty, and with 2023 looking like a challenging year, organizations are feeling the squeeze. Our guest, today, Kevin Herring, president and founder of Ascent Management Consulting. Brings a wealth of knowledge and expertise to our discussion, on support functions within organizations.  We'll explore how businesses can optimize their existing resources, transform their thinking, and redefine roles to survive and thrive in these turbulent times. It's time to reimagine your organization's potential. So let's dive right into this essential conversation. Kevin, I want to thank you so much for coming on the Count Me In podcast. I'm really excited to have you on. As we talk about support functions within organizations. And as we both know that the markets, in 2023, are not looking great. The futures are not looking great. And it's going to put a squeeze on many organizations. And can we start talking about, within organizations. How you can leverage expertise, within your organization, as cuts and reorganizations are going to have to start coming? Kevin:            Yes, that's a great question. How do we do that? And I think that you're right. Everything that we read, everything that we hear CEOs are saying that they're hunkering down. They're planning for a rough 2023, possibly 2024, and they really have to maximize, maybe, a better way to put it is to optimize the resources that they have in the organization to get through it. And our support functions play a critical role in that.  Every organization has a lot of natural slack in the system. And, sometimes, we don't realize it until we really start to drill down and look at what's working, what's not working, that sort of thing. And what we find is that when you talk to people, when you talk to teams, and ask them, are they contributing everything that they could possibly contribute to the organization?  Not are they working as hard as they can, but are they contributing everything? Do they have capabilities that are not being used? Do they have information, understandings of things that are not being tapped? And the answer is almost always, "Absolutely, yes. I'm doing the best I can with what I have, but I could do so much more for the organization, if they just let me." And people and staff functions play such a critical role. Accountants, finance folks, IT, HR, engineering, supply chain, all those functions can play a huge role in maximizing or optimizing the use of our resources. The people that actually produce the product. The people that actually interface with the customers directly. And one of the ways they can do that is really to take a different look, maybe, than they have, historically, about their role in the organization.  So here are a couple of ways to do that. One is to think, when I go to work each day, how do I see myself? And this is not just a semantic exercise. But do I see myself as an accountant who just happens to work at XYZ manufacturing company, for instance? Or do I see myself as an XYZ business person, who happens to bring accounting expertise to the organization? And it's a different way of thinking about my role, "Why I'm here?""What am I supposed to do in this organization?" Am I just supposed to perform a bunch of tasks related to accounting? Or am I actually supposed to do things that, sometimes, might even stretch me a bit outside of my area of expertise. To help the business, overall, to be successful and to look for those opportunities?  And, so, when we do that, we start recognizing that for an organization to get the full use of our expertise. We need to think of ourselves in terms of how can we bring our expertise to bear on the critical situations that the organization is dealing with. The critical issues they're dealing with, "How do I do that?". And that's a consulting role, that's not an activity role. That's not a compliance or regulatory role, that's a consulting role.  That's where we're looking for ways that we can help those who are in the core business. To produce more efficiently, more effectively, to satisfy the customer better. To produce better products, higher quality, optimized, profitability, reducing cycle time, all those sorts of things, delighting the customer. Those are all things that anyone in a support function has the ability to help with. If they think of ways to apply their expertise in solving existing problems, and preparing the organization to handle possible future issues.  So that's a shift in thinking, it's also a change in how we operate. Because now, if I'm a consultant, I need to learn how to be a consultant. I need to learn consulting skills. I need to learn how to identify opportunities, diagnose problems, gather data, assess it, and determine how I can solve that problem. Or determine if maybe I don't have the expertise to solve it. Who might have that expertise, and be willing to source that for those in the core business that are struggling. That's a different role, for a lot of people. Adam:            That is a different role. And it's almost like within your internal organization, your title may be Chief Financial Officer or Chief Staff Accountant. But what you're saying is that your mindset needs to be that of a consultant, to better help the organization. So how do you start changing that mindset so that you can better help? Kevin:            Yes, well, first you have to decide who your client is. And this is a problem for a lot of people. Most people, when you ask them, "Who's your client?" They point to their boss. That's the client or the boss's boss, the CEO or the CFO. That's who they really serve in the organization, and that's not an effective mindset to have. Sure, those people play a critical role, but as bankers, really as bankers. People who provide the assets, the resources, the budgets, the tools and supplies, and things you need to be able to take your expertise and apply it to the core business. They want a return on those assets. So they're going to extend the resources for you to be able to use them in a productive way, for the organization.  And, so, that begs the question — Who is the real client? Well, the places where you can have the biggest impact are in production, or in those who are interfacing with the customer, or closest to the core work. That's really where the biggest impact can be had.  And, so, if we see those folks as the clients, and then we learn to interface differently and we interact with them. We are always in the mode of gathering data, gathering information, and trying to look for opportunities to help them. Quite often, when things get tough, we focus on cost.  We think, "Well, how can we reduce costs?" And it's all about squeezing the bottom line instead of really focusing on profitability, not that they're not related. But, ultimately, how can we invest our time, our existing resources, in a better way to get a better return on our assets? And, so, people with financial expertise go into an organization and, sometimes, it's very easy to see waste, and redundancy, and opportunities to help people work better, more effectively, and make better business decisions.  And one of the classic ways is when accountants and finance people go into an organization, and they start building the business literacy of the people who work there. So that they can make better decisions. Not just the leadership, I mean, that's certainly a place to start.  But once the leadership has the big picture, what about all the people who are executing in the front lines? If they don't have the big picture, they're making mistakes all the time. They're operating in a vacuum, and they're doing the best they can with what they have.  But often they have so little, they make a lot of bad decisions. Or they're not given the resources to be able to act in the moment to solve a problem, and the delays are costing the business a lot of money. So there are lots of opportunities for our support functions to go in and make a huge impact on the business, in the next couple of years. Adam:            Now there's one thing I wanted to touch on a little bit, as you talked about the real internal client. Now that's something that I think a lot of people overlook. As many times we're always thinking, "Oh, how can I please my boss?" And looking at your boss as like the banker.  The person who gives you all the resources you need, is something that I don't think many people speak about. How can leadership help the constituents under them understand, "Hey, I'm not your client. Your client is our customer base is whoever we're looking at." How can they help them get that big picture in their head? Kevin:            Yes, one way they can do that is to simply have the conversation. Sit down and talk, frankly, about what that role is, what that relationship is. As a banker, if I'm extending assets to you to do something for the company. I'm expecting some kind of return on those assets. So there may be some promises that we have about how you're going to use what I give you in the organization. What you're going to do for us. How are you going to help the organization realize a benefit from these assets that I'm extending to you, as the banker? And that's a great conversation to have.  And, sometimes, you're not able to have that conversation until folks go out into the core business and start learning what goes on closer to the customer, and the production areas, and see where some of the opportunities are. And, then, they see how they can apply their expertise more effectively. And, then, they can come back to the banker and say, "I think I understand now what I can do for the organization." So when I look at the resources you're giving me. Here's what I need, more or less or whatever, here's what I need to be able to help these people improve their performance." Or whatever it is. So I make a promise, if you extend this amount of money to me to do, for instance, a business literacy program in the business.  I'm confident that we can now help people make better decisions down on the front lines. That will have a profound impact on our ability to produce with higher quality, and lower cycle times, and so on, and that's all going to go to the bottom line.  So what is it that I need? I'll make a commitment to you, to make that much of an improvement if you'll give me the resources to do it. And, likewise, it's the same thing, if I'm meeting with a client. So I've been doing consulting for a lot of years. But I was in house for many years before that. And that's when this new idea developed, and started to have some conversations about what my role was inside the organization to those who we defined as my clients. And I recognized that I need to have conversations with my clients about what I can do for them. And work things out with them so that they give me what I need to be able to help them.  There may be some things I need, some resources. There may be some information, access to data, whatever it is. And if I ask you, as my client, if you'll give me those things, I'll come back with a plan that will help you with your business. So let's work out those arrangements so that we know what I'm promising to you. And what you need to give me for me to fulfill that promise to you.  Adam:            Yes, as I'm thinking about this, employees are going to feel the competitive pressure. As you mentioned, CEOs are feeling the squeeze. They're going to have to tight squeeze. I'm sure we've all read about the beginning of 2023, with what happened at Goldman Sachs. What can employees do, as they need to capitalize on these competitive things and be able to stay on top of things? You've mentioned, a lot of that stuff. But I feel like there's more that they're going to need to capitalize on, as the pressure continues to rise with the market way it is. Kevin:            Absolutely, and part of that is that education. That business literacy process, understanding the big picture. And as a person on the front lines, it's helpful for me to understand what business we're in. What the competitive pressures are. How do we stack up against the competition? And are we a big player, are we a small player? What are our strategic advantages and what are our disadvantages? What do we have to overcome to be better competitors?  I mean, all those things are important, for me, to understand. Because when I do my work each day, hopefully, I'm contributing by looking for ways to improve our competitive position. I'm looking for ways that we can do things more efficiently, more effectively. We can streamline, we can cut out redundancies. We can find a breakthrough in being better able to serve the customer or deliver faster, and that sort of thing.  We need to get our core employees to work on building the business and helping the business prepare for tough times, and to help us to survive in it. And we're not going to do that if we think all the great ideas and all the great work is going to come from the leadership.It's just not going to happen. We need a strong, cohesive, interdependent, team of people all pulling together and looking for ways to work together to make these things happen. And our leaders, our front line leaders, our support functions, all play a critical role in making that happen. So that people have that orientation, and the orientation of serving each other.  You talked about competing, we're going to be competing in a tough market, we figure, in the next couple of years. Well, if it's going to get tough, where do we want competition to be? Do we want it to be inside the organization or do we want it to be us against other providers of these goods and services?  So let's stop competing internally for resources and let's start finding ways to serve each other. So that we optimize the resources we have and use them to their fullest. So that we're able to better compete, against those who we truly need to be competing against. How many organizations are operating where people are fighting, having turf battles, and fighting over office space, or the copy machine, or the forklift, or whatever it is that we're fighting over. And, sometimes, even undermining each other for our own convenience? I mean, how much does that cost the business? I mean, it's huge, it's absolutely huge. And, so, we have to stop doing that. We have to create a culture of commitment to the success of the whole. Adam:            Mh-hmm, and that's got to be really hard. When certain places there's that fight to get to the top, as opposed to let's help each other get to the top. And, I think, a lot of businesses don't have that atmosphere, but we need to help each other in order to succeed. Kevin:            Right, that helps take all the egos out. And just say, "Look, we all play different roles. We have different sets of responsibilities." But when it comes down to it, we all need to choose accountability for the success of the whole business if we're going to make this work. And if we don't, we're undermining our ability to successfully compete in the near term, for sure, probably, in the long term. Adam:            So when you're looking at creating that cohesive team. I think that word you just used, accountability is the key thing. How do you create that real accountability and what does that look like? Kevin:            Yes, so often we talk about holding people accountable. We say if we need to get better performance, more results, we need to hold people more accountable. We need to get things more into control. And what that, generally, does is it creates an environment of micromanagement and compliance responses from employees. And I like to say it's pretty hard to really hold people accountable, in the sense that we hold them accountable and still enable them to be responsible. Because the minute we start taking charge of something.  We tell somebody, "I can't trust you to get the work done. So I'm going to check up on you. I'm going to follow up with you. I'm going to make sure you get it done." The minute that we do that, we've taken responsibility for it. We've taken it away from the individual. Now they're just a pair of hands doing what we tell them to do. And we've taken away their sense of responsibility and commitment, and they're operating out of a sense of a, need to comply to keep their jobs.  And there's a huge difference in performance between those who are operating just to comply and keep their jobs. Versus those who are, intrinsically, motivated and openly choosing their own accountability to their teams, to their coworkers, to their leaders, and the organization, overall. So it's important for accountability to be shaped the right way. To where we orient people to the big picture.  Here's what we all need to accomplish as a business. Here's how our team fits into that. Here's how our team interfaces with other teams, to help us produce whatever it is we produce or deliver to the customer.  And then inside of our team, let's make sure we're clear about what each person does and how it impacts everybody else on the team. And make some commitments to each other about how we're going to work. So that the team can work effectively, and find ways to improve the way that we get the workout. And then the next phase of that, then, is to take that team and say, "Okay, how do we now help those around us to do what they need to do?" We're interfacing with these other teams in the organization. They have work they need to produce. What can we do to serve them and help them, so that they can do what they need to do? It's the same mentality we have to have with our customers. What am I delivering to my customer? It's satisfying a need.  My customer is trying to do something, they want something. So how do I help them get what they need, that satisfies them by their standard, not by mine. Internally, we have to do the same thing. As employees, working together as teams, interfacing with each other, it has to be the same mentality. Adam:            Yes, it really does. And one thing that I'm thinking about, as we talk about making sure that everybody sees the big picture. A lot of times it's hard to apply the big picture. If, let's say, you're a front line worker and you have a lot of activities you're doing, every single day. It's very hard to understand those activities, as becoming results to help the overall organization. To help the big picture. How do you bridge that gap? Kevin:            I had a group of people I was working with, a finance group, and we were doing this in the organization. Trying to increase individual understanding of the overall business. And I remember the finance manager saying, "Yes, we did this in another company and we decided that everybody, to a certain level, needed to have the big picture. Those who are like janitorial staff and other people, they didn't need to know, they didn't care. They weren't going to have an impact.  And I said, "Wait a minute, you can't pick and choose who is going to make the most impact, in any given moment in time." Everybody makes a contribution and otherwise we wouldn't be paying for it. We're investing in people to do things that help us get done what we need to do for the customer. So everybody needs to understand the big picture, to make the right decisions.  And, so, even if you're looking at the janitor makes decisions about how efficiently they use chemicals, for instance. Or how efficiently they do the work, and what they do to provide the environment such that it's ready for people to work, and perform, and that sort of thing. I mean, whatever it is they do they can do it well, and they can have a sense of satisfaction that they're contributing to the whole. Everybody needs to be part of that, you can't exclude people. It's one organization, not a two-tiered system where you have the primary class and the secondary class, that doesn't work. Adam:            Yes, it's hard because our society looks at people that way. And you have to break that down when you get into an organization. Kevin:            Yes. And, so, one of the things that works really well is to bring people together. I always find that when you bring a team together. And you say, "Okay, let's educate each other. Let's talk about what each does in the organization." And a lot of times people say, "Well, that's obvious, we know what each other does."  And I say, "No, everybody take just two or three minutes, highlight, here's what I do for, not the tasks I perform. Here's what I actually do in terms of output for the organization. Here's what I accomplish. Here are the things that get in the way of that the most, that make my job difficult."  And as people understand that the light bulbs start turning on. They go, "Oh, I could probably help you with that."  "I could probably help you with that." And pretty soon they start talking about ways they can serve each other. And if we get them into that mindset in that activity, they start making commitments to each other. About how they're going to help each other in the coming months. And, then, we do follow-up conversations and give each other feedback.  We can start talking about how we're doing, how much better we're doing, and where we still need work. And, then, we can start talking about opportunities to create breakthroughs, as we start looking at the overall systems that we operate in, and identify the ones that are making our work the most difficult.  And we identify where we might be able to streamline something, or reduce steps, or simplify, or whatever. Do things concurrently, instead of doing one, and then waiting for the next, and waiting for the next. There are a lot of things that we can do. Once we get people having the education, it's called the business education, to understand the work that they're in and how it matters.  I use the example a lot, in sports, you look at sports players, football, for instance, since we're in Super Bowl season. Everybody, on a sports team, is well aware of the competition and their competitive position. The advantages and disadvantages each team has. Their strengths and weaknesses. They know every player. There are statistics all over the place, about what people are good at and what they're not so good at. And they use that information to create a game plan to defeat the other team.  And, then, during the game, there are all kinds of indicators that tell us how we're doing. So that we can make adjustments and look for ways to create a breakthrough in the game, if we're behind or struggling. And we don't do that very well in business. But Sports is a business, just as much as any other organization, for-profit organization. We're all in it to make money and be able to meet the needs of the customer. So that we have the ability to remain viable in the marketplace.  So if we apply those same principles at work. We find that we need to educate people about the game plan. We need to help them understand what the competition is. What's at stake each day, each month, each quarter, and what are the things that we need to accomplish. And then how are we, at a tactical level, going to contribute so that we can succeed? Adam:            Yes. Kevin:            Those are important conversations to have, and they're not often had in organizations. Especially traditional organizations, where at the top of the organization pyramid; all the knowledge, all the understanding of the big picture, the departments. How the systems, in the organization, work together to produce the product, and satisfy the customer, all those kinds of things. The authority to make decisions. They all tend to reside at the top, and then get delegated to lesser and lesser degrees down through the organization.  So by the time you get to the people on the front lines, doing the work. Who have information, by the way, that nobody else has because they're doing the core work. They're interfacing with the customer. And they have to make decisions in the moment, all the time, that have a huge impact on the business. And, yet, they're the least knowledgeable about the overall organization, the impact their decisions are having.  And, so, they have to make those decisions in a vacuum. And, quite often, they don't have permission to make a lot of decisions. And, so, the decisions don't get made at all. So that's by default, whatever happens, happens. Or there are huge delays while they try to get permission to do something. Or they feed information up the line, and hope somebody somewhere does something about it. That's costing businesses an incredible amount of money. Which is why when we work with people, they're astounded when they get a 50% improvement in performance from a team.  How is that possible? Is it because there's so much slack in the system and you just don't see. But when you find that people are working differently, more effectively together, the results are astounding. Adam:            Yes, that is so true. So this has been a wonderful conversation, Kevin, and I just wanted to ask one last question. In light of the squeeze that is coming with the market, and restructuring of organizations that are coming. What advice would you give to somebody on the other side of a restructuring? And you're still at the organization, and suddenly you have the responsibility of three people now because two other people were let go. What advice would you give to that person, as you're trying to look in things, in the aftermath of that. Kevin:            Well, the first thing I would do is I'd pull my team together and I'd say, "Okay, let's regroup. We've all been through a lot. There's a lot of emotion that we're experiencing. Loss of teammates, increased workload, increased expectations. It's a tough spot to be in." And to be authentic about it, not to paint a rosy picture of everything, and spin the message, and pretend like everything is great. And nobody has experienced anything challenging, recently.  But to be authentic about it and say, "Look, we've gone through some tough times. That's a lot of turmoil to deal with. And I know that you're, probably, feeling a lot like I am about it. You have an empty feeling, maybe, about the people who are gone. You feel concerned for them. You have a little bit of anxiety about our own future, and how things are going to work out for us.  This is all natural, and I'm not immune from it any more than you are. I mean, we all have to deal with those things. And the reality is we have to figure out how to make things work going forward, so this doesn't happen again.  We need to really figure out how we can produce, at a higher level. And not, necessarily, pushing ourselves to work crazy fast or ridiculous numbers of hours. But we have to think smart, so let's pull together.  Let's analyze the work that we do. Let's look at the processes and the systems that we're dealing with. Let's map some of those and let's identify what kinds of things are getting in the way, and let's see if we can't tackle those and create a breakthrough. Either in profitability cycle time, customer response, or quality of product or service. Let's go through and figure out where we can create a breakthrough in the work that we do. So that we can have a positive contribution to the business, to help us be more competitive.  Because the marketplace is unforgiving and they've just spanked us, and we don't want that to happen again. We want to be competitors in that marketplace. And if we're smart about it, this is an asset that we have that we can leverage, is our way of working together that can push us ahead of our competition. And we can, actually, maybe benefit from this difficulty because maybe we can pull ahead of them. Because we've done some smart things in the face of these challenges." That's what I do.  I think people need to just pull together and face the reality of what's happened, and the challenges associated with it, and all that it does to us internally. And to say, "Okay, what are we going to choose to do now going forward?" And that's what a leader does. A leader says, "Look, I'm no different than you. I'm not going to be phony about it. I'm going to tell the truth; this is stressful for me. And I'm going to choose to do the best I can for us to be competitive. And I'm inviting you to work with me for us to all to work together, and do this as a team." Adam:            Yes, I agree. And I think a lot of people are going to need to hear that, as we go forward. Thank you so much, Kevin, for coming on the podcast today. Really appreciate you sharing your expertise with us. Kevin:            Thanks for having me.Announcer:    This has been Count Me In. IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

In this riveting episode of the Count Me In Podcast, we dive into the complex world of cybersecurity within the accounting profession. Join us as we sit down with Tom Woolley, CEO of Today CFO and Founder of  Today Cybersecurity, who has navigated the transitions from corporate industry to founding his own cloud accounting firm, and then into cybersecurity for accountants. Discover the biggest challenges faced by organizations today, from integration headaches to the buffet of software solutions. Whether you are a Fortune 100 company or a mom-and-pop shop, you'll gain insights into striking the right balance with technology to ensure information security. With regulations tightening, get ahead of the curve with expert advice and real-world solutions. Don't miss out on this episode – tune in now!Connect with Tom:* Website: www.todaycybersecurity.com * Tom's LinkedIn: https://www.linkedin.com/in/tom-w-2b6256173/ * Facebook: https://www.facebook.com/todaycyber * Twitter: https://twitter.com/todaycyber_ * Instagram: https://www.instagram.com/todaycybersecurity/ * LinkedIn: https://www.linkedin.com/company/today-cybersecurity/Full Episode Transcript:Adam:    Welcome to another enlightening episode of Count Me In. Today we have an exceptionally exciting conversation lined up for you. Our guest today is my fellow podcaster, and an author on Amazon's bestseller list, Tom Wooley. He has expertise in corporate accounting. Spanning sectors like pharmaceuticals, oil, and gas, and now he's making waves in the realm of cybersecurity.  From big corporations to small businesses, the tech landscape is ever-changing, and Tom's insights are here to guide us through it. We'll discuss;The rapid shift to remote work. The challenges of secure information handling. The complexities of selecting the right software. And the impact of new regulations.  Buckle up, as we explore how technology is shaping the future of accounting. Tom, welcome to the show. Adam:            To start off, I just really wanted to, maybe, you can talk a little bit about your background and how you got here. Tom:               Hi, Adam, thanks so much. It's a pleasure to be here. So I've been an accountant for 15 years, in the corporate industry before starting my own firm. I started off in pharmaceuticals, and then went to oil and gas in more of the financial analysis role and a lot of management accountancy. One of the things I used to do a lot of was whenever we would acquire a new company, we had to look at their financial systems. What they had in place, and then integrate them into our SAP financial system. All their historicals, and then get them trained, up and running for the future. So I got a lot of experience, and had a lot of fun working in accounting technology in my corporate career. And then decided that, "Hey, there's a lot of technology to be brought or to be moved over and implemented in the small business accounting world as well. Smaller firms need just as much tech, if not more, sometimes, than the big guys. And with the way the technology world is moving, especially, with everything going over to the cloud. I decided to start my own cloud accounting firm, back in 2015. And, then, when everybody started going remote, in 2020, I decided that was a good time to pivot again and go into cybersecurity, for accountants. And help other people tackle some of those issues that we saw as we transitioned to a lot of people working from home, remote, and just coping with a very wild and flexible world, over the last couple of years. Adam:            Yes, it's been a very wild and flexible world. There's been so many things happening with everybody working from home, and all the challenges that organizations face. And cybersecurity is something that's in the news every day. You see ransomware attacks, and so many different things that's affecting so many organizations. Maybe we can start by talking a little bit about what are some of the biggest challenges you see organizations facing, when it comes to cybersecurity. Tom:               Absolutely, there are a couple of things that really hit home. It's how to keep everybody working in a fluid environment. Where you can access all of your information securely. How can you find your clients' information securely? How can you receive it from them securely? We work in a time where we've got so many different communication channels. We have to actually tell our clients what is a safe and good way to get your information over to us.  And when we started transitioning from working in the office to working from home, the biggest challenge that we faced, and that other accountants are facing is–how do you go mobile with all of that? How do you keep it in the cloud and know that it's secure? And, really, importantly, how do we instill that trust relationship with our clients. So that they know that their information is in good hands? And we started looking at so many different software out there.  The second challenge is with a huge buffet of cloud software. Which one goes with which? How does it integrate? And it really came down to what does the process look like, for internally and externally with our clients? And that's what we hear a lot; is which software should I use?  How do I implement it?  There are some all-in-ones out there. Should I piecemeal, together, best in class? And there are just so many solutions. Accountants don't have time for that, especially, during tax season, which has been basically year-round for the last couple of years. Adam:            Yes, I can only imagine. And also the biggest challenge, too, is if you're a Fortune 100 company, you have a lot more financial ability to get a larger software. A big all-in-one software. But if you're a smaller organization, or a Mom-and-pop shop, it's a lot harder to implement those bigger softwares. And, so, trying to find that challenge; how do you balance that depending on which organization you're with? Tom:               Yes, that's a great question. There are smaller softwares like QuickBooks Online and Dropbox, that people, typically, use when they're starting off. All the way up to SAP or NetSuite when they're the Fortune 100. So it really comes down to what is the budget and how customizable does it need to be. Something like NetSuite requires not just getting the software, but hundreds or thousands of hours of customization, and implementation, and training. And what we really want to go for is finding out how the firm is interacting internally, and with their clients. Do they really need something that's super integrated and very expensive? Or can we put together those best practices to make something like OneDrive, Windows, QuickBooks Online, or QuickBooks Desktop, in a hosted environment, work in the same effectiveness as those bigger softwares? Adam:            Yes, there are so many different factors. You almost need a team of people to understand what your organization is doing. What your challenges are, and how you're going to be interacting with the different things to know what, if I'm understanding you correct, it's to know what software works best for you. Tom:               Right, I mean, that's the best way to go about it. And that's what I recommend is putting together a committee. Somebody that represents from each department, what their needs are when it comes to implementing a security software, and how they are moving information on a daily basis. One solution for marketing may not be a winning solution for accountants, who are trying to move PDFs every day back and forth to their clients.  So, yes, representing in that committee is a great way to go about seeing what the use case is, what the needs are. And, then, finding the right software solution in, like I said, that sea of what is out there and what they're all capable of. Adam:            Mh-hmm, and then once you actually find a solution. You still need to tap into that committee to say, "Hey, is this actually meeting your needs and is it working right?" Tom:               Absolutely. It's an ongoing commitment to working with those groups, and making sure that implementation goes according to plan. And things change along the way, sometimes, too. So that really helps give a sounding board for, "Hey, this isn't working the way we need it to." Or, "Yes, we're getting good feedback from the rest of the people in the department." And, hopefully, a few trial clients that have opted in to participate, too. Adam:            Yes, because you need, actually, that real-world experience, to see if it's actually working, of course. Tom:               Exactly. Adam:            I think one of the biggest challenges, when it comes to the accounting and finance team, is that working with other parts of the organization can be difficult. Whether it's working with the marketing department, making sure things are meshing together.  How have you, maybe, helped organizations that you worked with, and you're helping them choose files or choose software to use? Have you found that as a challenge, when you're trying to help implement things that they have trouble working with other departments? Or are they coming together, since we're all kind of breaking down those walls, since we're all remote in a lot of ways, too? Tom:               I think it's going a lot more granular than that these days. I would have said, six to seven years ago, an all-in-one integration, everybody using the same platform is the way to go. But what we're really seeing is that there are departments out there that really want to work within their specialties. I mean, marketing, wants to work in Salesforce.  Adam:            Of course. Tom:               The accounting department is not going to want to work in Salesforce, it's not the right place for them. So, really, cybersecurity has become top of mind and top of conversation so much, because as we're trying to move into best in class solutions for different departments and scenarios. Moving that data, safely, has become a real concern. If everybody is working in NetSuite or SAP, or something fully integrated, you don't have to worry about it as much. But when we're looking for the best solution to help people do their jobs, in a rapidly changing, very competitive environment. We want to give them the best software that they can get their hands on, than what they're used to using.  And, so, that's when the technology industry has to step in, and find a way to make that work where it's still secure for everybody. Where they can work from home on their laptop, if they need to. They can have that exact same functionality at their desktop in the office. Where they've got the printers, and the scanners, and the other things that we need to do our jobs, and phone systems, even, too.  A lot of people don't think about the vulnerability on the phone systems. But I want to make calls from my house just as easily as I'm doing it from the office. And I don't want the clients to know if they've got to try me at the office or try me at home. So everything's got to be flexible, and it's got to be seamless internally and externally. Adam:            Yes, and that's not an easy task to do for any organization. Whether you have a one-and-done system or you're piecemealing everything together. It's quite the challenge for any organization. And as I'm thinking about of all this, I know that there's a lot of rules and regulations throughout the government. I know the U.S. government; we had talked about the FTC Safeguard Rule. Maybe we can touch on how that's affecting people's decisions, as they're going down the line. Tom:               Yes, so the U.S. government is really moving in that direction and solidifying a lot of these rules/regulations. To address what has become insurance company concerns, client concerns, and concerns voiced by the Big Four, about how people's data is being secured and moving around. And a lot of large companies have had security challenges, recently, like Deloitte. Where their best efforts are going forward to protecting their clients, and it's a big investment both in time and financially.  So the government's really moving with these FTC Safeguards Rules. The IRS already has the Gramm-Leach-Bliley Act that has been in place for a while now. So we're looking at, both, the enforcement of already existing rules, that are starting to clamp down. And then we're looking at the FTC Safeguard Rule, that was supposed to be implemented already, but they pushed it back. And these rules apply to businesses of all sizes, which is the really important factor here.  Because in the past, a one to two-person CPA shop may not have to worry about a lot of these regulations and the costs that go along with them. But now it's everybody from that one-person show, all the way up to the Fortune 100, like you were saying. So the government is really stepping in and emphasizing how important it is, for people's information to be secure. What they call personally identifiable information. Adam:            Okay, so what does that look like for your accounting Mom-and-pop shop, whether they're a fractional CFO office, or they're an internal accounting team. What does that look like for them, as they're trying to adhere to these new regulations?Tom:               Yes, it's a challenge because a cybersecurity person is not cheap, from a financial standpoint, it is an investment to go out and get somebody. Somebody that, right now, the demand is already really high for. Salaries are going anywhere between 120 and 160, if you can even find somebody.  Adam:            Wow.  Tom:               Anyone, right now, looking at staffing an accounting firm, is very familiar with how difficult it is to get good people. And we're looking at that same thing, right now, in the IT industry, especially, with cybersecurity, because the demand is just so high. So outsourcing is really their only solution right now. Because it's not as easy as a virus scanner or malware, where you can just toss it on the computer and leave it there.  The FTC safeguards goes above and beyond; into employee training, active threat hunting, and putting Written Information, Security Policy, what they call a WISP, in place. So, for smaller companies, it's a big time and training burden, that really is slipping in there, commitment-wise, with your continuing education every year. Adam:            Mhm, and, so, that's an added burden because as accountants we, like IMA has the CMA certification, if you're a CPA. Everybody knows, if you're in this industry, you need to keep your continuing education credits up. And now, all of a sudden, accountants have to be at least versed in, when it comes to cybersecurity, they need to learn technology. Some people are saying, "Oh, you need to do data analytics." Like, "Oh, you need to have data scientists." There are all these different things that accountants have to do. How can they stay up to date with these things? Obviously, outsourcing that, but what level of understanding do accountants need to have, in order to be at their best to do this? Obviously, they won't be able to be a cybersecurity expert. But what level do you think they need to be at, to best support their organization? Tom:               Yes, I think specialty training is the way to go with this. It's something that we can do on a one to two-day basis, a couple of times. I like to do it with my clients quarterly. Just to let them know what the new ransomware attacks we are looking at, if we've got any vulnerabilities, and it helps us build what we call a cybersecurity culture. Where we're talking about not just training in a one-and-done fashion, but building that mentality, like you were talking about, with y'all skills programs. Where internally we're focusing on ongoing education. Watching for those red flags, in case our computer is doing something weird or we're getting any emails that are suspicious. So these smaller continuing education-type courses, are really the way to go with stuff like that. Adam:            That makes sense, and it seems like, as organizations, we need to keep training our people. To make sure, "Hey, this is what you look for." I know our organization does a yearly cybersecurity training. Where it's like, "Hey, a reminder, look out for these things, look out for those things. If you get an email from the CEO saying, 'Hey, what's our routing account number and account number for our bank account, again?'" Don't do it.Tom:               Right. The real popular one right now, is a text message or an email from an executive level or someone's supervisor saying, "Hey, I'm in a meeting, I need you to get me iTunes gift cards or some other gift cards for the people here in the meeting, as a marketing. Go get them right now." And it sounds silly right now, but it's happening. I mean, people are falling victim to that every day, it's crazy because it's a numbers game. So you just got to find somebody in the right place, at the right time. Adam:            For sure. And, so, we've talked a lot about organizations, and training, and stuff like that. What can we do personally, on a personal level? Everybody has their own personal accounts. Are there things we all should be looking out for, and being aware of just to protect our own data? Just the other day, I logged into an organization, I forget what institution I logged into. And it was like, "Oh, by the way, we were hacked, but none of your account information has gone out. But your name and email address might be on a list somewhere." And I'm like, "Should I be worried?" Tom:               I'm really glad you asked. Because identity theft is really where a lot of this goes, and I think about it all the time. And I can tell you, personally, I recommend when your computer at home and any other personal device that you've got, always do their most recent updates. A lot of people will hit Not Now, Update Later. But I promise you, they don't make you download and reboot unless it's something pretty critical.  So always do your updates, and don't give anything out over email that you wouldn't tell somebody that they could hold for later. So don't ever send your personal information via email, even if it's in a password-protected PDF, those are not secure. You really want to have it sent through either voice or an encrypted uploader, whenever you're moving that kind of stuff around.  And the other thing is, always keep your virus scanner and your malware scanner updated. A lot of people don't, or they turn it off out of convenience. And, then, the number one thing that I will end on, that everyone is going to hate because even I don't like it. But it really works, is the multi-factor authentication. Adam:            Yes. Tom:               The dreaded—Please send me a text message code or pull the code out of your email, or these authenticator apps that we use, I use Google's, it works really well. It works. I cannot tell you how many times I've gotten a random code in my email, going, "I don't know what that was for or who requested it, but I'm glad it is there." Adam:            Exactly. Tom:               Because even that little one, even if it takes you two minutes, to use the multi-factor authentication. I can promise you it is way better than having to cancel all of your credit cards, file a police report, undo any kind of identity theft. Because it is not a friendly process when we have to go through that. It's very invasive and it is not fun. Adam:            Yes, that doesn't sound like fun at all. And, I agree, multi-factor authentication is annoying, but I think it's very essential. Microsoft has an app, too, I use theirs. But anytime I can set it up, I try to turn it on because I've gotten the same thing that you've gotten. Where I've gotten a text message and I'm like, "Well, I didn't try to log in there."                         So I quickly go and change my password and go update those things. And I think it's important to be vigilant about your own personal things, and the more vigilant we are about our personal, it'll help us understand how vigilant we need to be at a corporate level, as well. Tom:               Yes, that's one of my advantages, of going from owning an accounting firm to owning a cybersecurity firm, that works with accountants, is I know the pushback, personally, that I'm going to get from my team when I implement stuff. So when we look at implementing any cybersecurity, we look at; is it necessary and effective enough to warrant the frustration it's going to cause for our employees. And can we make it work as well and seamlessly as possible?  Because I know, from personal experience, if it doesn't work or if it's too complicated, people are going to bypass it. And, so, you might as well not have frustrated them with it at all. And I don't lie to people and say that multi-factor is not a big deal, "It's no problem, just put it in there." It's a pain. People don't like it. There's a lot of pushback with employees and executives, whenever we go to implement this. And I always drink my own Kool-Aid, so I know I don't tell anybody, "This is going to be completely frustration free." I tell them, "It's absolutely necessary, but it's only the level of necessary that we need to stay safe." Adam:            Yes, sometimes, inconveniences help us stay safe, and I think it's balancing that. And I like what you said, is it worth the people's headache to help us keep us safe and trying to balance that, especially, in making those choices as an organization. Tom:               Exactly. Adam:            Yes. Well, Tom, it's been really great talking with you, getting to know you, and I really appreciate the expertise that you share with our audience, today. I know that they're going to find it beneficial as they're going on their journey, and their organization, and personally as well. Adam:            Thanks, Adam, the pleasure has been all mine. I hope your audience and your listeners, really, get something out of this. I hope it was helpful. Announcer:    This has been Count Me In, IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

Unlock the mystifying world of cryptocurrencies and blockchain in this enlightening episode of Count Me In. Join our guest host Kelly Richmond Pope, accounting Professor and author, as she speaks with Lamont Black, an Associate Professor of Finance at DePaul University.  They navigate us through the complexities of blockchain technology, its relevance to accounting and financial services, and the turbulent landscape of cryptocurrency exchanges. Lamont takes a deep dive into how blockchain serves as the foundation of cryptocurrencies, elaborates on its inherent security and transparency, and paints a picture of its significant role in the future of digital commerce. We will also unpack the rise and fall of crypto prices, the risks involved, and how to safely engage with cryptocurrency exchanges. No matter whether you're a finance professional grappling with the challenges of a rapidly digitizing economy, or a curious listener wanting to unravel the world of cryptocurrency, this episode is an invaluable resource.Connect with Lamont and Kelly:https://www.linkedin.com/in/lamontblack/https://www.linkedin.com/in/kelly-richmond-pope-cpa-83689a5/Full Episode Transcript:Adam:            Welcome to another enlightening episode of Count Me In. Where we delve into the pressing issues shaping our world and the business landscape. Today, we have the privilege of hearing a wonderful conversation between our guest host, Kelly Richmond Pope, accounting professor and author, and Lamont Black, an Associate Professor of Finance at DePaul University. They discuss an issue that is at the forefront of finance innovation; cryptocurrencies and blockchain technology. Lamont brings his vast knowledge and expert insights to help demystify these complex topics and explain their relevance to the finance industry. So whether you're a CFO, a controller, a finance professional, or simply a curious listener, prepare for a deep dive exploration into the world of blockchain and cryptocurrencies. Let's get started. Kelly:              So Lamont, thank you so much for joining me, today. And if you could start by just introducing who you are. Lamont:         So I'm an associate professor of finance in the Driehaus College of Business at the DePaul University. So I'm one of your colleagues. Kelly:              You are one of my colleagues. And, so, I want to welcome you to the IMA podcast series. And I have been working with the IMA, a little over a year. Working in research and thought leadership about ethics, corporate governance, risk, and you know my favorite love, fraud. And as we watch the news, read the news, what has just been in the news, so much, in the past, I'd say 18 months, is this really weird word called cryptocurrency.  And when I came to you, originally, about trying to understand what in the world is cryptocurrency. What you shared with me was how important it was to understand blockchain. And what I want to do, today, is have you really break down the importance of understanding blockchain. Because what I think the world is getting a little scared about is when you keep hearing about cryptocurrency, these exchanges that are falling apart. And, I think, everybody is really skeptical of this concept of cryptocurrency. But what I know you feel is, though, people might be scared of that. But you still need to understand the soundness and the value of the underlying technology, which is called blockchain. So could you tell us a little bit about what blockchain is and why we need to know about it as managerial accountants? Lamont:         Yes, so blockchain is the platform behind cryptocurrency. And blockchain is a technology, that, I think, everyone should be trying to understand. It's really a system of shared record keeping. So if you think about how we now live, in the information age, most of what we do is involving data. That data is being stored and shared using different systems, today. Whether that's on the cloud or other types of servers, and the blockchain is a way of sharing information. So that it's recorded on a shared ledger. So you can really think of blockchain as a system of accounting. And what makes it different is that rather than these ledgers being held in a private form. Different ledgers on different institutions that, then, have to communicate, blockchain cuts across all those silos. It's a way of recording information across an entire network. Sharing that information with the network, that makes it very secure, very transparent, and very efficient for sharing information.  So as we move deeper and deeper into the digital economy and e-commerce. I think every organization should be trying to understand how do we store and share information on the internet. I think blockchain is likely that next platform. And, so, even in the world of accounting, this is where things are likely headed. Kelly:              So that's a great explanation, and it really makes me feel a lot more comfortable in understanding that. Although, I hear all this craziness about cryptocurrency, and cryptocurrency is just where you shouldn't put your money. You've made me feel a lot more comfortable about why I need to understand blockchain. But let me digress, for a second, what in the world is going on with all that we hear about FTX, and the collapse of these exchanges? What is that conversation even about? And how does that affect or how should it affect our opinion of blockchain? Lamont:         Yes, so cryptocurrency is the money that is transferred across public blockchains like Bitcoin and Ethereum. And, so, people can own Bitcoin and Ethereum as digital assets, and crypto prices ran up, dramatically, during COVID. There are different arguments for why that occurred.  But one of them would be the amount of monetary stimulus. As people had all these different sources of income coming in. Let's say through stimulus checks in the form of fiscal stimulus, that money flowing into the economy. A lot of that ended up in crypto. And, so, Bitcoin almost reached $70,000 for one Bitcoin by late 2021. And as we moved into this year and our economy started to slow, inflation started to rise, largely as an outcome of COVID, crypto prices started to collapse.  Now, some people focus on the collapse of the crypto market as being something unique. But I just would point out that the stock market also entered bear market territory in the first half of this year, and in particular, tech stocks. So tech stocks are very risky. And, so, speculative assets during an economic slowdown, those prices tend to fall the most.  I view crypto as a form of technology. It's the frontier of technology. So, to me, it's no surprise that as risky assets have sold off this year, crypto has gotten hit the hardest. Now, as it relates to the exchanges, that's really been the problem this year. Because most people when they buy crypto, they buy it on an exchange like Coinbase, here in the US, or FTX, which was an offshore exchange headquartered in the Bahamas.  Now, many people wanted to jump on the crypto bandwagon, especially, as prices were rising. And, so, a lot of people were investing their money in exchanges like FTX. But one thing that people didn't fully appreciate, in this period of time, is when you own crypto on an exchange, you don't actually own the crypto itself. It's really being held on your behalf. And, so, FTX is what's called a centralized exchange.  When a centralized exchange fails or goes bankrupt, you're going to lose your money. They're going to freeze those redemptions. You're not going to be able to get it back. And, so, now, I think a lot of the fear around cryptocurrency is not just in the price volatility, it's also the fact that you could lose everything. And, so, I think crypto does have a PR problem, now, of people just being hesitant and confused about where all this is headed. Kelly:              Well, and I think what's interesting, about our conversation, is as managerial accountants, as CFOs, as controllers, as finance professionals. We could be interacting with clients and or in an organization that either embraces blockchain or accepts cryptocurrency. At the way that they handle transactions.  And, so, it's really important for us to understand some of these nuances. And my question to you is this how do I know what exchange I should engage with if I do want to purchase cryptocurrency? Because I do have to use an exchange, correct? That's the only way. Lamont:         Yes, it's the only way to enter the crypto ecosystem. So if you think of cryptocurrency as a currency, a form of money, then, it's like a foreign currency. If you want to buy euros with dollars, or if you want to bring the euros back into dollars, there's an exchange rate.  And, so, the price of crypto is really an exchange rate between dollars and crypto. And the U.S. money, the dollar, is a fiat currency. And there's a long history behind that term but it, basically, means that we are no longer on the gold standard. So the U.S. dollar is not backed by anything physical. It is a fiat currency.  But in order to buy crypto, you have to go through something called a fiat on-ramp. Because you're basically buying crypto with U.S. dollars. You can't do that just anywhere. You have to go through one of these exchanges, which is why that's the starting point for most people.  But one key point that I would like to highlight is you don't have to keep your funds on that exchange. And, so, the exchange that I typically use to buy crypto is Coinbase. Because Coinbase is a U.S.-headquartered institution. It's publicly traded on the U.S. stock market. Highly regulated by the SEC. And, so, it's, relative to FTX, a little bit safer but not totally safe.  There could be a run on Coinbase as well. But once you own crypto on Coinbase, you then have several options. You could move that money into something called a digital wallet. And what makes a digital wallet different from an exchange is that you, then, own the crypto. You manage what's called the private key. There's no risk of bankruptcy for some type of exchange because it's like money in your wallet. Just like U.S. dollars in a physical wallet, this is crypto in a digital wallet. You own it, you manage it, and so it protects you from some of those types of risks. Kelly:              For the first time, in my life, I understand everything you're saying. Lamont:         That's great. Kelly:              But you know what, how you described the exchange is making transactions on your behalf versus the digital wallet. I understand it because I actually own some crypto. Yes, I'm the accountant that owns some crypto. And let me tell you a little bit about the way Lamont and I met, first. Because, yes, we are colleagues at DePaul University in Chicago, but we also were in a movie together. And we were in a movie about a fast-appreciating asset, at that time, called HEX.  And, so, there was this production company that was doing a documentary about this gentleman by the name of Richard Hart. And Lamont and I actually flew out to the south of Spain to interview, can you believe we did this Lamont? Interview Richard Hart at this undisclosed mansion on the cliff of a mountain, on the side of a mountain. And I was completely skeptical of everything crypto. I didn't have the understanding that, of course, you had Lamont.  But it was fascinating to watch you go back and forth. You were a finance superhero going back and forth with this gentleman, about this cryptocurrency that he created. So my question to you is this; when we did this project, together, and all that you know about blockchain, all that you know about crypto. And then there's this new created currency that this gentleman started, what was your opinion of that experience? What was your opinion of HEX, at the time? Lamont:         Well, that was a pretty crazy experience. But it was great working with you on that. So I think what's hard for a lot of people, with cryptocurrency, is that there are so many of them. So I think everyone's now heard of Bitcoin. Most people have now heard of Ethereum or Ether. Those are the two largest cryptocurrencies. But if you go to a site like coinmarketcap.com you can see that there are now over 10,000 cryptocurrencies. And, so, people wonder, "Well, where should I invest?" "What's right, what's wrong?" "What's legit?" "What's a scam?" And I would acknowledge that there are a lot of cryptocurrencies that are a scam. That's why I don't encourage people to just follow hot tips. You should never be looking for some crypto that no one's ever heard of, but you think is going to pump for 100 X over five days or whatever. You should just focus on the core ones like Bitcoin and Ethereum.  But this documentary, we worked on, was for a particular cryptocurrency called HEX. Which is really an application, a project, built on Ethereum. And, so, what's also important to understand with cryptocurrency is you have your native tokens that trade on the blockchain itself, like Bitcoin or Ether on Ethereum.  But HEX is a project built on Ethereum that can create its own token, on top of the Ether token. And that project, the documentary, was really about is this project legitimate or not? And we were brought in, as the skeptics, to try and ask some hard questions. And I think we ended up in a place where we were not fully convinced that this was the future of cryptocurrency. I'm a big fan of this space. I do think cryptocurrency has a lot of potential still. But for some of these individual projects there's still a lot of question marks.Kelly:              Now, when you go in and you do your consulting with organizations. What do you find to be the questions that the employee population may have or the executives may have? Lamont:         Yes, so I'm in the finance department, in the financial services area. And, so, a lot of the firms that I work with are financial institutions, banks, credit unions. Trying to understand what does this mean for the future of money and banking, which is actually how I got into this space. So, as a quick background, I'm a former economist from The Federal Reserve. I was there through the financial crisis. And, so, my background is very much in risk and regulation.  But when I left The Fed to join DePaul and started teaching money and banking back in 2013. It was my students who started asking me about Bitcoin. And that started a whole journey, for me, about is Bitcoin money? And I'm now convinced that it is an important chapter in the evolution of money.  Whether Bitcoin itself will become a common means of payment, it's still yet to be seen. But money is digitizing and assets are digitizing, I think everyone would agree with that. And, so, the financial institutions that I work with are often inviting me in to speak to their board of directors, to speak to the leadership team. To talk about strategy and really strategic risk.  Could this emerging ecosystem of crypto and blockchain, potentially, disrupt traditional financial services? If people start using blockchain as a peer-to-peer payment system, that could disintermediate banks and credits from the payment network and the payment system. To the extent that people are now able to get loans on a blockchain. So decentralized finance, or DeFi, is an entire financial system that's being built on the blockchain network.  And, so, banks and credit unions are looking at this, trying to figure out do they have a role to play in the future of this technology? Because the original vision for crypto was replacing banks, even money without governments. But with the importance of regulation, with the importance of ethics and society. What we're likely going to see is an integration between traditional finance and decentralized finance. And banks and credit unions are going to have a very important role to play at that intersection. Kelly:              Interesting. Well, Lamont, this has been great. What I'm also excited about is we are working on a paper, together, in conjunction with, of course, the IMA, about the management, the risk of blockchain and what managerial accountants and finance professionals need to know about this space. So I hope that everyone that listens to our conversation, today, also reads the paper that we write because it's eye-opening.  I know that I've learned so much from working with you and listening to you. I did purchase a little snippet of HEX when we were doing that project, of course, it is almost worthless at this point. So I don't know that I am a big cryptocurrency cheerleader, yet.  But I do have a respect for blockchain and understand that it is something that we need to know. Like you said, I don't know where we'll be five, 10 years from now, but I do want to make sure that I am current. And this sounds like it could be a big change.  Something that you said in one of the answers to the questions, is you talked about the idea that blockchain is this decentralized, peer-to-peer type process. And I want to focus on the word decentralized. Because one thing that you said, when you talked about it being decentralized, is you then said that you used Coinbase. Which Coinbase was highly regulated, had oversight by the SEC.  And, so, what I took from your comments is the point of this integration piece is probably what makes most people feel confident, more confident and more secure. Because there are pros and cons about something that's decentralized. The pro is you don't have this third-party intermediary. But the con is you don't have the regulatory body that may give a sense of security and integrity to the data that a lot of us, especially accountants, are used to filling.  So I like how you talked about this idea of the integration of the two as opposed to the replacement of one. And that resonated with me because for people like me who are ultra-conservative, especially, when it comes to money. I think the integration and appreciating the integration of how this technology can impact business transactions, in the future, is really important to understand.  So I'm rambling a little bit, but I finally understand what you're talking about. I'm not a cheerleader like you, yet, but maybe one day. Maybe one day. So, any lasting thoughts that you want to say before we end our talk, today? Lamont:         Well, first of all, I'm very excited to work on this paper with you, Kelly. Because I think I'm coming at it from the perspective of finance. You're coming at it from the perspective of accounting. So in terms of managerial accounting, we're going to bring those two perspectives. Help people understand the implications of this technology, and help remove some of the fear and hesitation around this.  Because, like you said, crypto has very much gotten some bad press, recently, because of FTX. But I want to help people understand blockchain and crypto are related. We don't, necessarily, have to pull these two entirely apart.  And, so, in this article, we're going to talk about public blockchains like Ethereum. How can you use that for business use cases and things like that? So this will be a unique take on blockchain, relative to some of the other things that are out there in the accounting space. So I think we're going to have a lot of value to bring to the profession. Kelly:              Well, thank you so much for the time, Lamont, this is great. And, listen, we have a movie premiere coming up one of these days soon. So we need to walk the red carpet, bring our families to the red carpet, talking about this crypto movie we did together. So I can't wait for that day. Lamont:         I'm looking forward to it, too. Kelly:              Thanks so much for the time, today, I really appreciate it. Lamont:         Thank you, Kelly. Announcer:    This has been Count Me In, IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website site at www.imanet.org.

Join us in this episode of Count Me In as we welcome our esteemed guest, Nykema Jackson, Head of Reporting, Policy and Technical Accounting at Airbnb. As we navigate the tides of remote work, hybrid models, and the aftershocks of the 'Great Resignation,' Nykema shares her insights into the art of staff development and leadership in these changing times. Discover how organizations can keep their staff engaged, foster open and trusting relationships, and leverage technology for connectivity and team building. Nykema also delves into the importance of empathy, clear vision, and timely feedback in creating a culture that inspires employees to stay and grow. Tune in to decode the leadership formula for the new world of work. Connect with Nykema: https://www.linkedin.com/in/nykemajackson/Full Episode Transcript:Adam:            Hello and welcome to Count Me In. The podcast that brings you the latest insights and practical advice on leadership, accounting, management, finance, and business. I'm your host Adam Larson, and today we are delighted to have Nykema Jackson with us. With a rich background in consulting and a significant leadership role in corporate America. She's here to share her views on the pressing issue of our time; staff development and leadership in the era of remote and hybrid work models.  As we explore the new paradigms that have emerged in the wake of the Great Resignation, let's dive into the conversation to learn how we can foster engagement, trust, and growth in these transformative times. Please join me in welcoming Nykema to the show. [00:00:43]        Adam:            So, Nykema, thank you so much for coming on the podcast today. We're really excited to have you on, and today we're going to be talking about staff development and leadership. Which is a big topic today because in the last three years we've seen a lot of changes. With the change to working from home. And, then, now, as things have gone back, going back to hybrid. And we've had terms like The Great Resignation and quiet quitting being thrown at everybody.  And, so, as we're talking about that, can we maybe discuss, from your perspective, how do you see an organization can keep their staff engaged and continue to develop them in the midst of all this? Nykema:        Sure, and thanks so much for having me. One thing that I've seen in my career, and I've come from a consulting background and, currently, I'm in corporate America working for a company. I've seen that individuals need leadership that knows and is very intimately versed in the mission of the company. That is invested in their employees. And investments from a learning and development perspective, as well as investing in them as a person.  And, so, COVID has brought around this environment where we've merged lives. We had our work cells before we had our personal cells, and now those things have come together. I find that it's critically important to recognize and acknowledge that in people, and to support them down both avenues. And when someone feels invested in and developed, and they know the mission that they're marching towards. I feel that turnover is less and you can get around the big resignation. Adam:            So I completely agree. As you continue to engage people, they will stay where they are. But, then, there's also the quiet ones who aren't really as engaged with what's happening. You can develop, and you can pour yourself into the people who are engaged and want to be there. But how do you grab those folks who are not quite there and want to be there? Nykema:        So one of the things I do, personally, are one-on-one check-ins with my directs, and sometimes I do skip levels. You'd be amazed that for those quieter ones, how much they open up in a one-on-one environment. I think people need to know from leadership, and I feel like sometimes we get lost in our own trajectory and progression. We don't realize that as we rise in the ranks, there is a level of intimidation for people. So you need to make it an open-door policy, and you need to make people feel comfortable to come to you. And one way to do that is to develop relationships.  But it takes a concerted effort on the leader to make time for that. Because it's not that time is on our side in a lot of situations, and COVID has created an additional barrier around that. Where people can't just pop in your office, they can't just see you in the hallway. They can't just strike up a conversation around the coffee machine.  They have to be deliberate and intentional on making those relationships and fostering that along the way. And the only way to do that is to schedule the time. So that it can start to become organic. Where they feel more comfortable with their relationship, with leadership, and they'll come to you naturally. Adam:            Yes, it's almost like you need to create some open-door Zoom call or open-door office hours on Teams, where people can just pop in at any time. Where they're able to do that, and the technology is out there. And how has technology helped you in the midst of the COVID era and able to reach out to people? Nykema:        So, for me, COVID has opened up a whole universe of additional time, for me, it's saved me a commute. So I've been able to use technology, in a way, to connect with people, and I make it less transactional. So some folks get a little intimidated by being on screen.  And, so, one thing that I've done is I don't multitask while I'm on calls. I silence my email so that I can really focus on individuals. And with the use of technology, we're able to do teaming events virtually. Sometimes we'll do happy hours, where we'll send a bottle of wine to individuals. I haven't done that on my current team, so don't tell them.  But in the past, I've sent bottles of wine, or if there's something that they like around coffee, or something, gourmet, I would send that, and then we would have a virtual outing. And it gives people the flexibility to still be there for their families, and their children, and whatever extracurricular activities that they have. But we can, literally, pick any time of the day to do this now. Versus sequestering it to the end of the day. Adam:            Yes, our team did a virtual wine and painting. Where they sent the wine and the painting thing, and then the person did it through Zoom and show us. And we'd all sit there painting, and drinking our wine, and it was actually quite fun. More fun than I realized it would be, doing it virtually. I never thought it could be like that. Nykema:        Absolutely. Adam:            Do you have any other examples of how you've been able to develop your team, in the midst of the COVID era. Even before the COVID era, where it was difficult for the team members to connect. Nykema:        So one thing I find with individuals, from a connectivity perspective, is that you have to build trust. And to build trust you have to be vulnerable, and to be vulnerable, you got to share. So being authentic at work, a hurdle for some people because they don't want to expose themselves.  But I've found that I've reached more individuals and created more solid relationships by airing my, I would call it, dirty laundry. Sharing examples of obstacles that I've had and I faced. Things that didn't go well, how I approached that. Sharing my network.  I think when people see that you're vulnerable and you make mistakes, too, they're more comfortable to come to you about what their career goals are. And once you tap the pulse on where someone wants to go. What they want to do, professionally, and sometimes even personally, and you're able to support them in that vein. Then you're able to crack the code on what do you need to do to support that person with whatever that thing is. Some people are technically savvy. They may need help with soft skills, they might need help with setting agenda-based meetings. They might need help with public speaking. But you don't know what those insecurities are, or the things that they're wrestling with, without opening up the door of conversation. And a lot of your folks will, sometimes, feel like, "Hey, I got to operate this level because I don't want to expose any of my weaknesses." So by sharing your weaknesses, it gives them the avenue and the invitation to share those that you could better help them and develop them. Adam:            Yes, it's almost like you have to get over that hurdle. That social hurdle of, "Well, if I share trust with you, it'll show my weakness, and then somebody will take advantage of me." And it's creating that aura, that safe space, in a sense. Nykema:        Absolutely. And I find that that's very critical in building relationships so that you can lead a team; inspire, motivate, develop them, to come around what the overall mission would be for that company or that particular function. Adam:            Definitely. It makes me think of, I remember years ago, reading, so I think it was Stephen M.R. Covey did the speed of trust. And I think his biggest thing was always that trust is always a two-way street. That you can create that atmosphere, but then it has to come back. In order for it to build and grow that relationship, and that's huge in a work environment. That if you're open, then, other people start to feel that safety to be open as well. It's kind of what you were saying? Nykema:        Absolutely. And one thing I would add on to that, Adam, is also empathy. It's a lost art, I feel, in some spaces. And that when people feel like you really see them for who they are. You can relate to what they're going through. Because there's a lot of personal hurdles that have come out of COVID. People have lost loved ones.  People have had to balance work and life and the intrusion of that. With taking care of small kids or taking care of the elderly. And I feel like when you can relate and support them in that vein, they're willing to go to the mud for you when they have to. But it's a two-way street, like you mentioned. You're there for them and then they're there for you. So it's a reciprocation of that trust, respect, and support.Adam:            Mh-hmm, and it builds a better, stronger team because we see each other as humans, and we see each other no longer as boss and employee. Nykema:        Exactly. And, to me, when I look at the cutting-edge companies or the companies that are leading, it's that leadership that people can follow behind. It's not so much focused just on salary, and the company. It's the leadership and where they're taking that company, and the spirit and the tone at the top that permeates throughout. Adam:            So when thinking about leadership and its effect on staff development. What are some traits that you've seen have been the most effective, when trying to create this atmosphere that we've been talking about in leaders? Nykema:        So one is clear vision. You want to follow behind someone that knows where they're going and how they're going to get there. Not that you have to know everything. I think using the talents of your team, and building your team around some of the areas that you may have some developmental points, personally, is important as a leader.  Delegating and not just delegating the tasks that you don't want to do, but delegating the inspiring tasks. The things that they want to actually get involved in, the things that are going to develop them. Showing that vested interest in individuals, as you're taking them along. And feedback; feedback is so important to people, and not just at the annual or the biannual periods. Where it's structured through talent.  But feedback on a timely basis on what they're doing well, and constructive feedback. And I find that a lot of leaders do shy away from constructive feedback because it is uncomfortable. But I do realize in all my roles, currently, and my prior roles, that I've won the most trust in people when I've given them the constructive feedback. In a way that they can digest it, of course, but something that they can hold on to to increase their capabilities or to develop further for that next step. Adam:            I feel like that constructive feedback is almost like the lost art of empathy, that you mentioned earlier. Where having that it's like that coaching. Where you're coaching people to become better versions of themselves. And have you been able to find ways to do that constructive feedback or even coach people, in order to help improve them? Nykema:        Absolutely. So, typically, what I do, if I'm starting in a new organization or I have someone that's new coming into my team. I like to lay the groundwork, up front. So I usually have a one-on-one discussion with them about my leadership style, what motivates me. Then I'll ask them what motivates them. How would they like to receive feedback? What's the best form? How frequently would they like to receive that feedback?  And then I tell them, when we talk about the avenues of constructive feedback, that feedback is a gift. And because it's so hard for people to do it, whether it's a function of time constraints or just their comfort level. That when you have someone that does that, to me, it's a quality that shows that they're really invested in you.  And, so, when you have someone that does that, they're truly supporting your progression and not just saying, "Hey, good job." And you're able to work on the things that are not mentioned to you. And, then, sometimes, people wonder why they're stagnant and why they're not moving to the next level. Because they haven't gotten that behind-the-scenes feedback, that's discussed in a lot of review committees.  So when they can see that feedback as something that's beneficial and something that is important to building, to your point, that lost part of empathy and trust. Then they get on the bandwagon with it, and they're okay with receiving it because they know it's coming from a good place. Adam:            Yes, that's a really good point. And as you were talking it made me think of as leaders, sometimes, we get so lost in the weeds of the day-to-day work. That we forget to see the bigger picture of how we can help improve our employees. And what would you say to somebody who is like, "I never remember to give feedback, until it's time for reviews? How do I remember to do that more often?" Nykema:        That's a good question. I'm trying to think of what I, personally, do. I think it has to be just part of your way of working. And from an objective perspective, I think that if folks don't feel like they have enough time to do it, then, they're probably not delegating enough.  There should be a good portion of your day or your week, where you're really just thinking about "How well is the week going?" Sometimes that's based on the tactical objectives. But, sometimes, that's based on how they were executed. And your biggest, most important resource, at any company, whether you're in consulting or at a corporation are your people.  Your people drive your business. Your people interface with your customers. Your people grow your bottom line. So without investing in them, you're remiss to not give them the feedback. So that they can better themselves and feel more tied to that mission and their own personal development. Because I always say, and I know you've heard this from other people, people don't leave companies they leave bosses. So if you're not taking that time to invest in them, why would they stick around? Why would they support you when you need their level of flexibility? When you need them to go and work extra hours, or push through on a very important deadline, or a deliverable. If you're not even taking that little bit of time to invest in them and show them that you care. Adam:            Yes, and as a leader, if you feel like you don't have that time, you have to reevaluate how are you spending your time. And, then, like you said, are you delegating enough? And, then, if you aren't able to delegate enough, then it's more of an organizational, like, "Hey, everybody's kind of overworked, how can we reorganize things to help things?"  Because a lot of organizations are feeling the pressure of, "Hey, we're back to work. We need to be back to pre-COVID levels of sales, and yada, yada, yada." And I don't know that people are adjusting as well. Nykema:        I totally agree and I've seen it in my career. In that when an organization is overworked and you're stretching your people, your turnover rate is extremely high. There's definitely a correlation between the two. So you have to make time and mental space to do it because feedback also is a delicate delivery. It's not something you could do off the cuff. You really got to think about how you want to deliver that message, and what's your ultimate objective in giving that feedback. Do you want to harm confidence? Do you want to build confidence?  Do you want to motivate?  Do you want to inspire? So it's not just a matter of delivering the actual facts of what happened. It's how you deliver it that will allow that person to receive it and do something good with it. Adam:            I agree. And I just keep thinking back to when you said the lost art of empathy, it just really set something off of me. And I really connect with that as somebody who has come to realize, as I've reflected on myself, that I'm a very empathetic person. Where I can look at somebody else's situation and connect with that because of just my life situations that I've had. And thinking about that, I think that's why we've seen a rise, within corporations.  Not only because of the social structures of what's been happening in the U.S. and around the world, but a rise in people's recognizing the true importance of Diversity, Equity, and I'll add Accessibility and Inclusion, I feel like we miss the A, sometimes, in that terminology, within organizations, on how you're developing your team.  How you're connecting with your team. And I feel like COVID helped us see that where we were invited into people's homes as we had meetings, and we're having meetings, and suddenly a kid runs in, or a dog runs in, or they have those issues. But we're suddenly seeing the importance of connecting with people and empathizing with their moments. And how diverse we all are within our thought processes, within our life experiences, and how important that is when you're leading your team. Nykema:        Absolutely. DEI is one of my passions, no matter where I go or what organization I'm a part of. And I find that companies, across the board, they do a good job, some of them do a great job with diversity. So making sure we have people of diverse backgrounds, experiences, cultures, way of working, and all that good stuff. Where I find companies struggle sometimes is the inclusion and the equity piece.  And, so, you get all these diverse people together. It's almost like you have a dinner party and you invite everyone there, but you don't prepare a meal for everyone. So everyone doesn't get to eat. And I feel like that is something that companies are still trying to strife for, and I know there's lots of training on it. There's lots of self-development on it.  But I really find that the companies that get it right, it's just a part of the overall fabric of the company. And it's not something that you're, necessarily, just teaching. It's coming from the tone at the top, and it's being those allies in those situations because you're bringing all these people from different background, different companies. They don't, necessarily, have a focus on inclusivity.  And, so, I've seen it work really well, in my current employer, in that there's a focus on being an ally. So if you see something, you say something. And you mentioned earlier about the quieter ones. So they have protocols for people that maybe don't want to have direct conversations in situations where they feel like something's going awry. They say, "Hey, why don't you pull that person to the side and ask how they felt about that interaction, or that situation?" So it's taking it a step further, beyond just being a diverse company, but creating a mechanism and developing a culture that's focused on now that we have everybody at the dinner table, let's just make sure everybody's eating. Adam:            Mh-hmm, yes, to use the dinner table analogy, you can have everybody at the dinner table. But if all you're serving is steak, the vegans, the vegetarians, the pescatarians won't really feel like they can be included in the meal. They can maybe just pick up the salad and that's about it, but they don't really feel like they're a part of the team. Nykema:        Absolutely, and it makes me think back to what you said earlier around traits of a leader. One thing I want to call out is flexibility. So flexing your style. So to your example around the vegans around the table or maybe the pescatarians.  You may have to flex your style once you understand what motivates that person. And it doesn't mean that you're not being true to yourself, it just means you're being a servant leader. And you're figuring out, "How do I adapt, as an executive or in a leadership role, to make sure that I'm reaching everyone on my team." Everyone is talented, everyone has the right skill sets. But it's a matter of how do I motivate them, individually, because we all have different personality types. Adam:            We do. Nykema:        So, sometimes, it even goes beyond just skin color, or race, or nationality. It's my personal style may be a driver; someone's personal style may be an amiable. I have to figure out what motivates that person, to be able to reach them. To have that empathy, to connect with them, and to develop them. Adam:            Mh-hmm, and that's the biggest part of DE&I is going beyond just one element of it and seeing the whole picture, and that's how we become better at the inclusivity part of it.Nykema:        Absolutely. And it reminds me of, you've probably seen this, that visual aid that you see in a lot of DEI trainings of that iceberg. Adam:            Yes. Nykema:        The stuff that's above the water. The things that are below the water; the only way you get to those is by developing relationships. So it goes back to our earlier conversation around how does a leader develop people that are on the quieter side or the people that they want to have a level of influence over?  Well, you can't get to below the iceberg unless you're having those one on ones, and really trying to understand, and asking the questions, and empathizing with who they are. What their goals are personally and professionally. That's the only way you could be fully inclusive beyond just what you see visually. Adam:            Mh-hmm, and by being able to do that is by being open yourself, by building that trust, and also by being empathetic to their situation and how they can communicate. Because not everybody communicates the same way. And if you don't communicate, if you're not able to adapt and be flexible to communicate in a way that makes them comfortable, then, you'll never get to know them. Nykema:        Absolutely. Adam:            Well, Nykema, I feel like this has been such a wonderful conversation. I feel like we can keep going. But I just want to thank you so much for coming on the podcast, today. This has been wonderful and I really hope our audience enjoys it. Nykema:        Thanks so much for having me. I enjoyed, equally, as much, engaging in this discussion with you. [00:21:56]  Announcer:    This has been Count Me In, IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard, and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

In this illuminating episode of the Count Me In, we sit down with our esteemed guest, Janis Parthun, VP, Advisory & Project Services at RGP. She is a leading voice in the world of Environmental, Social, and Governance (ESG). Dive into the intricacies of ESG, understand its importance in a business context, and explore its different facets - from the environmental to the social and governance perspectives. We also delve into the challenges companies face in implementing ESG strategies, discussing the evolving regulatory landscape and offering insight into the best practices adopted by forward-thinking businesses. Whether you're an industry veteran looking to refine your ESG approach or a newcomer eager to implement an ESG program, this episode is brimming with valuable insights.Connect with Janis: https://www.linkedin.com/in/janisparthun/Full Episode Transcript:Adam:            Welcome to another exciting episode of Count Me In. Today we have a special guest with us, Janis Parthun. VP, Advisory and Project Services, at RGP. She is an expert in the field of Environmental, Social, Governance or ESG, as many of us know it.  Janis brings a wealth of knowledge providing a fresh perspective on the complexities and significance of ESG. She will walk us through the intricacies of ESG, discuss its growing prominence, and share valuable insights on its implementation. So if you're looking to understand ESG better, and how we can add value to your business model, this is one episode you won't want to miss. Let's dive right in. Janis, we're really excited to have you on the Count Me In podcast. As we go into today, we're going to be talking about ESG or Environmental, Social, and Governance, and we hear a lot about that. IMA talks a lot about that. We've been publishing articles. There's a lot of things happening in the industry. But maybe we can start off just at a higher level and talk about what does it mean, what does it represent, in an organization? Janis:              Yes, Adam, happy to do that. The term ESG or Environmental, Social, and Governance can really differ just depending on who you speak to. But I'd like to establish some initial background here. Where environmental focuses on the company's impact on the environment. On the risks, and opportunities associated with the impact of climate change on the company, its business, and its industry.  Social may focus on the company's relationship with people and society, or whether the company's investing in its community. And governance focuses on issues such as how the company is run, and possibly connect to executive compensation.  So ESG has been an important element to organizations approach to create value, as part of the business model, and just to the greater society impact. But what does this entail? Is what I often hear. And to elaborate a little bit more, a company's overarching ESG program will likely have top priorities determined around ESG matters. With goals, which includes metrics and possibly targets for future outlook has been set and established. To reach the goals and the targets, the company may have various initiatives and action, in order to support the goals. For example, a company may have climate change as one of its ESG priorities or material topics, and a goal to reduce emissions with the target of 40% by 2040. The organization, then, may have an initiative or a project to convert all transportation fleets to electric vehicles, as a strategy to reduce the emissions.  But when we're discussing ESG, at the overarching program or program level, this is applicable across multiple material topics or priority topics. Now, the topic of ESG is not new, and there are significant funds and investments around this.  Currently, over 96% of the S&P 500 already, voluntarily, publish sustainability reports in some form or fashion. But an increasing interest from parties to invest, and companies wanting to communicate or report on ESG. Regulatory and standard-setting bodies are also paying attention to how companies are reporting on ESG matters. Adam:            Definitely, and you see a lot of the bigger organizations implementing it. But smaller organizations may not quite be ready or there, yet. And if you are one of those organizations that are saying, "You know what, I want to jump into this, get into this." What are some steps that a typical company might undergo to establish an ESG-type program? Is there a specific, strategic, approach that you need to take when you're implementing that? Janis:              Yes, that's a great point, Adam, and there is a recommended strategic approach to this. So the other aspect to think about is the ESG strategic roadmap or steps that companies, typically, may undergo to establish an ESG program. First, is really having to determine materiality. This is driven by stakeholder and market input, industry profile, business strategy, and suggested standards and frameworks. And, then, setting goals and targets and execute on the reporting.  So establishing process and oversight to have that accountability, and report or update related to performance metrics. And, then, establishing quality control. Establish process and governance to ensure the quality control of the data that's collected or reported, and of course, reevaluate in that cycle.  But, more often than not, companies are encountering challenges, during the midpoint stages of executing on the ESG program strategy. And this includes adhering to regulations, standards and frameworks, and just trying to stay current and up to date. There are several in the horizon, and it's a lot going on for companies to navigate through. Program management and governance, having organizational governance over the ESG program, and monitoring and tracking against existing goals, appropriately, and evaluating progress. For example, do you have a governance process around adding or revising priorities or metrics? And monitoring the actions or involved in ESG committee that helps govern the goals set and tracked. And data quality management; is the information reliable?  For example, is the information collected comprehensive to the metrics being tracked? Such as inclusive the various regions and markets. Is that information reliable? Such as is it trackable or include supporting details. And with each of these challenges, it's important to pull the right resources in to help and address. Adam:            Before we get too much into the details of program management and those challenges. You've mentioned, a few times, about different regulating bodies have been watching in certain areas. There are regulations and new standards coming up, and that can be challenging for anybody and everybody. A lot of people are overworked. People are getting stressed out, and the idea of having more regulations to follow can be very stress inducing. But, maybe, you can talk a little bit more about how it's affecting companies and what people can expect? Janis:              Yes, I can, definitely, elaborate that a little bit more, Adam, and dive a little bit deeper. From a regulatory driver perspective, and you're so right on this. And there's such an increasing scrutiny just on how companies are presenting the ESG-related information. As well as the push to reduce the climate impact to the environment. That multiple regulatory authorities are pushing their agendas, and that's what's creating all this pressure, too.  For U.S. public companies the pressure is coming from the SEC. With the biggest proposal on climate-related disclosures announced last year. To disclose governance, strategy, risk management, and targets on the climate impact and, specifically, greenhouse gas emissions. And there are multiple elements within the proposal that's creating concerns for many public companies. Especially around disclosing climate-related financial impact and Scope 3 Emissions.  I think by the time this recording is released, the SEC will likely announce an update and issue, possibly, a reduced-scope version of the original proposal. It is a lot to ask for companies to disclose on those areas. And this is just one specific proposal, and there are several other SEC proposals anticipated to finalize in the horizon, this year, as well. Beyond the climate-related disclosures.  And in the EU, the pressure is coming from the EU Commission. The Commission recently adopted a new rule, late last year, The Corporate Sustainability Reporting Directive or CSRD. For companies to publish detailed information on sustainability matters. To increase the company's accountability, and to prevent divergent sustainability standards.  This is a pretty big ask since there are 12 standards drafted with 10 specific ESG topics. Spanning from climate, to workforce, to business conduct. And this may also impact a U.S. company if the company has subsidiaries in the EU market. And there are also country jurisdictional specific requirements to consider. That I won't mention here because there's just a lot to capture.  But beyond reporting, the EU is also proposing another new rule to streamline information about companies' environmental performance of products, and to reduce misleading claims. So just to add one more thing to this, related to all this, is that companies are also, increasingly, being asked to communicate and report information that's understandable, across a broad base of the investor community. So more so around voluntary standards. And this is happening through recognized standards and frameworks for comparability, and there are a number of them as well.  So the top two standards that are frequently referred to is SASB and GRI. But there are also others, each with a specific mission. And, again, this is just a lot for companies to get a handle of and stay on top of. And I just wanted to, at least, share a little bit of the landscape of the different type of requirements or voluntary type of disclosures.  And, then, interesting enough, just to highlight or illustrate a little bit. So, for example, we at RGP had helped one of our clients on a related issue last year. The Task Force for Climate-related Financial Disclosures or TCFD, issued new recommendations in October 2021. And the client needed to understand the degree of the changes. As well as consider how this impacts the clients reporting to another global environmental disclosure system, the CDP in connection to the TCFD changes. So that's just one example. But the reporting information can also be interconnected across the requirements. Adam:            That's really interesting, and as you're going into this process. Either get some help or make sure you're staying on top of that, or find an organization that can help you stay on top of those standards, and help understand it better. Because depending on where your organization is, will be what standards you have to follow, obviously.  So we've talked about the standards and the different regulations, and you've gotten a very good overview of that, for the audience. But you mentioned aspects of program management and goverments outside of their keeping up with the standards and regulations. You have to actually manage the program. Maybe you can talk about what you've seen where companies are on track, where they're not on track, and maybe give some best practices. Janis:              Yes, happy to do so, Adam, it's a great point to bring up. So I've seen companies where they're really leading the pack, and companies where they're falling short on their ESG commitments to their stakeholders. Now, in terms of companies where they're really on track and where they're not. Industries that are ahead of the curve in ESG reporting are in consumer products and real estate, and for good reasons.  So for consumer products, recent studies show that consumers are shifting their spending towards products with ESG-related claims, and products making ESG-related claims have averaged higher cumulative growth, over a five-year period. This is a major reason that consumer product companies are pushing to be ahead of the curve in ESG initiatives, and to report on ESG commitments.  Chipotle is one setting a good example, recently. The company announced that its 2023 ESG goals will be linked to executive incentive compensation. Impacting its 2023 annual incentive bonus by 15%. So making that commitment to set the goals and hold its people accountable, to achieve the goals, is a great example.  For real estate, considering there's a significant emission generation from the real estate value chain, ESG is now a top-risk priority for the industry. And CBRE is one setting a good example. When the company entered into a new five-year revolving credit agreement, last year, to increase it's revolving credit facility. It linked the agreement with achieving certain sustainability goals. Such as to provide procurement spending with sustainable suppliers to converting vehicle fleet to electric vehicles.  But there are instances where the companies are using ESG to promote and market products misleadingly. And this is a lesson learned for one retail company last year. On what might happen when your organization lacks the program governance and the structure to manage the ESG initiatives, and the integrity of the data reported.  In this instance, the apparel company was investigated by regulators for misleading sustainability related products, and had to remove the labels from their products and websites. I mean, the company really broke the brand promise of offering sustainable apparel. It's clear that there's consumer demand for more eco-friendly products.  But, again, this is where the regulators are stepping in. And the European Commission had, recently, highlighted that over 50% examined environmental claims, in the EU study conducted, were found to be vague, misleading, or unfounded. And because of this, the Commission had since proposed a rule that I just had mentioned earlier to address.  And companies that are lagging behind in ESG reporting are more likely in IT or healthcare industry. With less direct customer or consumer pressures, or just have other pressures to take priority, such as COVID-19 in the past few years. And companies may also have other external pressures, such as having to obtain capital, for example, from the mergers and acquisition perspective.  A number of studies indicate that senior management suggest they're willing to pay premiums to purchase companies with positive ESG records. ESG is also influencing capital raising process. For example, this year, credit ratings agency, Fitch Ratings, announced plans to use its climate vulnerability scores to enhance the process to consider credit-relevant, climate-related risks or its corporate credit ratings for non-financial attributes.  So with the increasing demands by stakeholders, companies may wonder how they can establish or elevate to a solid ESG program and governance. To start, it's about understanding your priorities, based on your industry profile and business model. Because once the priorities are established, organizations can drill down further. Understand what specific metrics goals and targets are relevant, and integrate these activities to the business strategy.  With all this having a structured, more formal ESG program, with governance structure, can help set clear strategic goals and expectations. That are recognizable by a broader audience, and hold management and internal stakeholders more accountable. Whether public or private organization; just having structure can really help better communicate ESG efforts and progress to the community, to creditors, or investors that large Adam:            Janis, as you're given that answer one thing that really stuck out to me is data quality. And as we, in the accounting world, know how important your data is, and having numbers in the right place, and reporting accurate numbers. And I know that there are concerns around the quality of data in ESG information that is reported. And you made some examples of people not giving that accurate thing and, especially, on how they're marketing things. What can companies do to address these types of issues? Janis:              Yes, that's a great point to have a discussion. Yes, data quality is a significant concern for companies. And the concerns used to be more around the data collection and the availability of the information.  But now companies are getting more comfort around what information is available just through understanding and research. And it's been shifting more focus on the data quality, or the completeness and the accuracy of the data collected, calculated, and reported out. And there's been an increasing focus on the data quality with a number of our clients in preparation, more so for future assurance. And this is an increasing trend that's also being observed at the board level.  According to a recent survey, conducted with corporate directors. Over 50% of public company director respondents indicated that the higher quality of ESG information is being presented to the board. But, then, with a lower percentage and less progress for private companies. To address the concerns or focus area companies are seeing how they can prove the quality, through building internal control structure to ESG data. And interesting, and timely enough, the IMA, also, recently, issued a publication, Achieving Effective Internal Control over Sustainability Reporting. That directly speaks to having effective control and oversight to that ESG information. To have that high-quality and fit for purpose for decision making.  This publication is really resourceful, it's providing an overarching, regulatory landscape and incorporating the COSO Internal Control Framework, also at RGP, we've also built a consultation approach on this for our clients, incorporating the COSO Internal Controls Framework. So that we can be able to help guide the clients to be able to add control structure, and improve the reliance of ESG-related information.  Now, another strategy is around automation for the data collection and reporting systems. And while I don't, necessarily, think there's one true solution leader, yet. But there are definitely tools, currently, out there in the market, to help address either at the initial collection process. To the generation of the report or disclosures, and there are, definitely, a few few that are more prominent. But I do think that the platforms are maturing. They'll likely be a leader on this as the platforms mature.  But it's also important to consider what systems you can leverage within your organization. You'll want to think about what system or combination of systems, can also be able to help you pace all the way through. Adam:            Definitely, and depending what systems, as you can tell, as we talk about ESG, it applies across multiple functions within an organization. But who are we, in IMA podcast, to not talk about the finance and controllership function within an organization? What role does the finance team provide in the ESG reporting ecosystem? Janis:              Well, Adam, within the finance organization. Historically, controllership functions are familiar with implementing new reporting requirements. Working across multiple stakeholders and, at the same time, bringing that structure and that rigor to the process outcome. And this can be, similarly, said about the FP&A's function, as well, or the reporting and analysis role. Leveraging the same expertise to apply to ESG reporting. I really see the future role of accounting and finance professionals, to be ranging from the orchestrator to the gatekeeper of the ESG programs. Depending on the industry and the business model of the organization. If the company is more focused on addressing risk, finance may likely play a more significant role, as an orchestrator. Versus if the focus is on supply chain; operations or sustainability office more likely would be the orchestrator. While finance is the gatekeeper for the reported information. But regardless of which spectrum of the role the finance organization fulfills. One, definitive, role is to be the partner, working collaboratively alongside other functions. I have seen similar experience and value translate from financial reporting to ESG reporting. Besides staying on top of regulatory updates, finance and accounting professionals can also provide process and governance structure to sustainability reporting.  This includes developing standard processes for data collection. With associated reviewers and workflows, with sign off functions to building similar support structure such as a SharePoint site. For a one centralized communication of requirements, such as with dates, processes, sources, and training. The same attributes apply to operational reporting. As organizations are setting goals and targets to monitor and work across multiple stakeholders. Finance professionals can also bring that structure and the rigor to process outcome. The shift towards the future role and change can really be accomplished, through guidance development and education.  Companies in more mature stages of reporting, are developing guidance and, typically, expected from the finance organizations to enhance policies and procedures. That add to the structure and the rigor. But there are still many organizations not at that mature stage, and this is where education and training is key. To educate the finance and accounting professionals, to be the partners to the ESG reporting ecosystem. The other aspects to consider is to educate the process or data owners. Who may not have been previously involved from regulatory reporting or audit perspective. To be able to strive for and achieve for that level of detail and the quality of information expected. And as finance and internal control functions are, increasingly, getting involved.  We at RGP are also developing the project methodology and an ESG training program. To educate our consulting team on ESG reporting, and this is really to upskill our talent base, and to be able to anticipate our client need, and to be better prepared. Adam:            That's awesome, and it sounds like you're doing great work, and those are some great insights. And we've covered a lot during this podcast, and, maybe, to finalize things, maybe, you can give a summary of some final thoughts that you want our listeners to remember, as they walk away. Janis:              Yes, happy to, and a key point I want to emphasize is that, now, there are many more external pressures and expectations to consider when companies are issuing sustainability reports. And it's important to bring in the right people, to either implement and manage or to improve the ESG program. And this includes bringing in finance and accounting professionals. Who can be a valuable partner working, collaboratively, alongside other functions.  I am, personally, passionate about this topic. But more, importantly, how much value our finance and accounting profession can bring to a company's sustainability program. We should advocate more for this role, and just provide the guidance associated to support the profession. And that's really my last point, I want to emphasize. So thank you, Adam, for having me on this podcast. And I'm very excited about the future developments to come related to sustainability reporting. Adam:            Yes, thank you so much, Janis, for coming on. I really appreciate you sharing your insight with the audience. Announcer:    This has been Count Me In, IMA's podcast providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard, and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org

Welcome to a brand-new episode of 'Count Me In' where we break down complex financial concepts into simple, understandable terms. In this episode, we unravel the mysteries of cryptocurrency and explore its volatile nature. We're joined by Jason Cozens, the CEO and Founder of Glint, who shares his insights into the current state of the market and explains why cryptocurrencies have become such a significant player in the global economy. Plus, we dive into the golden alternative, exploring how gold has held its purchasing power over thousands of years and how innovative technologies, like Glint, have made gold a feasible medium of exchange. Whether you're a crypto enthusiast or a gold advocate, this episode is packed with valuable insights that will help you navigate the world of alternative currencies.Connect with Jason: https://www.linkedin.com/in/jasoncozens/ Full Episode Transcript:Adam:            Hello and welcome to another episode of Count Me In. Today we're diving headfirst into the complex and ever-evolving world of cryptocurrencies. We're excited to have Jason Cozens with us. The CEO and founder of Glint, a global fintech platform.  He's an expert in cryptocurrencies and alternative currencies, and he'll be sharing his extensive knowledge about the current state of the market. Why cryptocurrencies exist, in the first place, and their inherent risks. He'll also shed light on the appeal of gold, as a stable, risk-off asset, and how it's been modernized for everyday transaction with technologies like Glint. So if you're curious about the state of cryptocurrencies, or the power of gold, as an alternative, this episode is a treasure trove of information. Let's dive in. Jason, I just want to thank you so much for coming on the podcast today. Really excited to have your expertise around cryptocurrencies and alternative currencies, in the market. And maybe we can start off by discussing cryptocurrencies and the state of that market, as it stands right now.  Jason:             Yes, sure, well, I mean, before we start looking at exactly the state of the market, now. I think it's also important to understand why the market even exists and, then, just to touch on that for a second. Why do we even have crypto currencies?  My movement into alternative currencies started in 2008 like a lot of people's journeys did for this. Where they realize that banks are not risk-free deposits of funds. When you put your money in the bank, it ceases to be yours. That money is put at risk, and it is lent out, it's a liability of the bank. And that's a problem for people and a problem for businesses that have money, and want to be able to put it into those banks. And, of course, we get all kinds of insurances from the FDIC et cetera.  But, at some point, they're going to change the rules, and they've already passed legislation called bail-in rather than bailout. Which means that when, next time, there's a banking crisis, instead of the government's bailing out the banks. They might say to, actually, "We're going to do bail-in this time."  Which means that if you've got a significant amount of money in the bank, they swap that for shares in the bank. Which you may or may not get back in a few years' time, and that's what they did in Cyprus, they tried it. They've passed the legislation. So it's something we've all got to be cognizant of. And, then, of course, inflation, and very few commentators are talking about one of the biggest drivers for inflation, of course, is money printing. And inflation is now rip-roaring through the economy, it's affecting individuals. It's affecting businesses. I thought it was bad back in 2008, when governments are trying to keep it at around 2%. Over my lifetime, the dollar has lost more than 85% of its purchasing power, let's just think about that. 85% of its purchasing power, and that was before actually the surge in inflation, I calculated that.  And, so, there's a need or people have been looking for something to hedge against systemic risks. They've been looking for something to hedge against inflation. And, also, generally speaking, the financial system is getting better at payments and cross-border payments. But, again, they're looking for efficiencies with that, too. So that's why we're in this space.  Innovations around Bitcoin, model a lot on gold and other types of cryptocurrencies now, like Ethereum and even stablecoins, of what created what was a $3 trillion market. And, obviously, what we've seen this year is that $3 trillion market completely collapsed to below a trillion dollars. Which is a huge drop for anybody involved in the cryptocurrency industry. But, yes, one trillion is still better than the kick in the teeth, and it's a significant industry, still, and I don't see it going away. And there's been a huge amount of money invested in that. But we all know it's been volatile. We've seen that volatility on a weekly, sometimes, daily basis. We've seen huge swings in the value of Bitcoin. For instance, it's gone down from $65,000 down to, I think, we're currently at about $17,000, something like that. And, again, that volatility is huge.  But previous to that, of course, we saw huge gains. I mean, it went from three or $4,000, over a few years up to $65,000. So you can see the attraction and why people got involved in that. Hey, it's this fantastic growth story, and we can handle the volatility in the belief that that growth story is going to continue forever.  But, I think, what happened when Russia invaded Ukraine was really telling. It was the time when we saw that, actually, cryptocurrencies are definitely what I consider a risk on asset. They're a speculative asset that may or may not work, may or may not stand the test of time. There's lots of optimism around it and, certainly, lots of ideas around how it can benefit society. But it's very much still a risky asset, as opposed to say something about other alternatives like gold, which are just considered slightly more boring, but risk-off assets and stuff.  So when the Ukraine was invaded by Russia, then we saw the crypto price plummet, and we saw the gold price go up, for instance. But there's lots of advantages around this. Apart from even the hedging against inflation and the hedging against the systemic risk, and the payments technology, just generally speaking.  The tech, the ability to program these currencies, is what's exciting a lot of people, isn't it? So I definitely think that crypto is here to stay. But we've all got to understand what it is and understand its nature.  Adam:            Yes, we do have to understand what it is. Because you don't know it, it doesn't seem as solid as something like holding money in your hands. But then we all know that money doesn't have any backing anymore. And, as you've already mentioned, the inflation and the things with banks can be can be risky, as well. So as organizations are looking at to getting into alternative currencies, are there benefits that they can look at? You've already mentioned a lot of risks, but there have got to be benefits to getting into this.  Jason:             Yes, there's huge ones, as I said. I mean, some alternatives do protect against inflation. I mean, you can't get any worse than fiat currency, in my mind, when it comes to inflation. I mean, it's the most terrible product in the world, when it comes to maintaining its purchasing power. So companies, especially ones who are long term, doing well, where they put that money, in order to maintain your purchasing power. Whether you're a company or an individual, you're having to make risky investments. Just to make sure you're maintaining your purchasing power of what's on your balance sheet, and that really, for me, is wrong.  So we've all got to look for how alternatives can help us make that fight. And, as I said, transactions and payments, I mean, a lot of people are using cryptocurrencies for payments, and it could be stablecoins as well, for instance. Although we've got to remind ourselves that a stablecoin is still backed by the inferior, in my mind. And current fiat currency is no different just because it's a stablecoin, it's still losing, its purchasing power over time. But at least it has the technology wrapper around it with a stablecoin.  So using cryptocurrencies, whether it's Bitcoin, or a stablecoin, to be able to move value from one part of the world to another, obviously, there's growing use of that. There's trillions of dollars' worth of transactions, now, happening and, sometimes, they're used for in real need. People trying to get money out of difficult regulatory environments. People are worried in China now about what's going on with their premier, and is it a good business, friendly place anymore or not? And even though they've banned cryptocurrency, over there, mining et cetera. A lot of companies are still trying to use that to move money offshore. But, then, just genuinely trying to move money quickly, and it can be used for that.  So, yes, they're all the benefits that we're all trying to find. I would say, though, that the idea that it's a get rich quick thing, you got to decide what business you're in. Are you in the business of making widgets or providing the service? Or you're in the business of using your hard-earned profits to speculate in markets? I don't really see that as a benefit.  Adam:            Yes, that is really tough as you're trying to weight the benefits versus the... So you discuss a lot about gold as a risk-off asset. And if anybody's heard you talk, in the news, you talk a lot about the benefits of having gold. And maybe we can talk a little bit about that, and how can that benefit organizations, or people, or individuals who are looking to have a more not-as-risky asset in their portfolio. Jason:             Sure, well, I mean, gold is valued, globally, by just about everybody on this planet. No matter what culture or region that you're from. No matter what demographic you're in, everybody understands the value of gold. Because gold has been the ultimate store of value for, literally, thousands of years. And it has a proven track record in holding its purchasing power.  I mean, in the time, as I said, the dollar, and the pound, and the euro, et cetera had lost 85% of their purchasing power over my lifetime. Gold's purchasing power went up by over 500%. And, in fact, it still buys you what it did 2000 years ago, never mind just 50. So there is nothing that compares with gold, when it comes to store of value.  But, of course, what about the medium of exchange? And a lot of people say, "Well, gold, it's a great store of value, but it's a useless medium of exchange." You can't exactly pop down to your local supplier and buy some goods with your gold. You can't chip that off, they're not going to accept coins, et cetera. Well, actually people need to wake up. There are lots of changes in the space and, certainly, Glint has built technology that allows gold to be used as money. So, for instance, in Glint's case, what we've done is built a kind of payments and trading technology, that effectively allows you to diversify some of your working capital into gold.  So you can have a Euro wallet, a dollar wallet, a pound wallet, and a gold wallet. You can buy as little as a penny, or a million, $10 million worth. We've fractionalized the ownership of that gold, so it's easy to use it as money. And we've even implemented payment instruments that allow people; this is a MasterCard, for instance, linked to a Glint account, that allows me to spend my gold in real time. We're the first company in the world to enable physical gold, real allocated gold, that I own, to be used in payments in real time like that.  But you do have to be careful. A lot of these things; with the cryptocurrencies or with gold, you got to be careful of the nuances, some that can be very important. So when you buy gold, you got to ask yourself, what kind of gold are you buying? Are you buying real gold or are you buying paper gold?  Is the gold that you're buying the physical gold? Is it allocated to you? Do you legally own it? Or is it unallocated gold, which you own but it can be lent out by the custodian. You don't really want that really, do you? Because when the music stops, it might not be there. Or are you buying futures options, derivatives?  Are you buying ETFs? Where you are buying a share in a fund, which may or may not be backed by gold, and I believe, and what we've built Glint around is that you should own allocated gold, that's gold that you own, and it's no one else's liability. But, yes, we've built this system that allows it to be used as everyday money.  And, so, whether it is diversifying your portfolio, your savings. Whether it's allowing some of your ready money to be stored somewhere safe, protecting you from inflation, et cetera. Or whether it's diversifying some of your working capital, your balance sheet, if you're a company, then there are lots of reasons why you might want to own gold. Adam:            So this isn't something that many people are talking about or saying at all. And as you were saying that it made me think of the old days where gold was the standard. Where everybody wanted to get their hands on it. You had the gold rush in San Francisco, California, in the 1800s, and all of those things. How can you have gold as your backing and still be able to spend with it. Even you have your card and the ways you described, but it seems like you can still tank just like everything else, right? Jason:             Well, it's really important to understand that when things are priced in dollars, or pounds, for instance, in the UK, or euros. When they're priced in that fiat currency, then the confidence in those fiat currencies can, of course, go up and down as well. So the confidence in the dollar is going up and down every day, but generally down. So it's up and down, up and down, generally down. That's why its purchasing power is decreasing over time. But gold is just gold, it doesn't change. It's the same thing as it was yesterday, as it was 1000 years ago. It's created when two neutron stars collide in space. So its nature, it cannot be changed, which is why we love it. Because, in my mind, anything that its nature is defined by human being is subject to change or subject to corruption, even if with the best intentions, originally.  So, yes, you've got to understand that, effectively, if you're in gold, but you're working in a foreign currency, then you've got to be aware of those foreign currency fluctuations. But it hasn't tanked in 2000 years. Is it going to tank tomorrow? There's no way it's going to tank tomorrow; I can bet my life on it.  It might drop by 10% or something like that, over time. It's medium monthly variation is half a percent or something like that. It's certainly not as volatile as cryptocurrency. Cryptocurrencies will get there someday, I'm sure over time, and more mass adoption and less affected by whales within the system, et cetera. That's one of the advantages of gold is that it's owned by everybody.  When I say everybody, it's owned by lots of people globally. And from the poorest person on the street, in some parts of the world, to central banks, remember still back their currency, they back their power by holding gold. A lot of them do the U.S. still does, and Russia was building up gold over the last 10 years, so has China.  I don't think there's any coincidence about that. Their actions today are, I'm sure, planned and carefully thought through over the previous decades. And gold-backed money, until relatively recently, I mean, I don't consider myself that old. But 1970 was when I was born and the dollar was backed by gold, then, and it was backed by gold until 1971.  And I know some people might have, as I get older, I start to realize, I start to understand, now, how whole generations of people can be born into scenarios. Where they have no understanding or appreciation of what went just before them and, actually, that can lead to all kinds of challenges. For instance, how many of the audience, who are listening to this podcast, have had a mortgage on a property when interest rates were over 5%? Very few, I'm guessing. And, yet, in my parents' generation, there were interest rates of up to 12%. And lots of people were used to paying mortgages with interest rates at around 5%. But gold-backed money, until 1971, and we didn't come off the gold standard because gold wasn't very good. We came off the gold standard because the very fact that gold was awesome.  Nixon loved gold, but the problem was that they couldn't afford the Vietnam War. They couldn't afford the promises to the electorate, so they were printing money. And De Gaulle, the French president, said, "I think you're printing more dollars than you have gold, guys. So I'll tell you what I'm going to do. I'm going to use my Navy to come into New York, and swap my pallet loads of dollars for gold." And that's what was happening in 1970, 1971, the amount of gold in Fort Knox was going down. And Nixon was like, "We can't lose all our gold."  So they went away to think about it and decided, "Let's just come off the gold standard." And they did that, temporarily, it was supposed to be a temporary window. And, of course, Nixon ended up getting thrown out, and we, live, today with the repercussions, consequences, of that. Which is that we're off the gold standard. Governments, central banks, all over the world, print as much money as they want to their heart's content. And, actually, it ends up being the greatest tax that no one talks about.  Because if you're a saver, if you're a responsible saver, and you're putting your money away. And you don't want to put it at risk in the stock market because a company can go to zero. A fiat currency can go to zero, and they do. So the dollar and the pound have already lost 85% the value, so they're nearly at zero, anyway. Gold never does, that's why people are already attracted to it.  But what seems to have just gotten lost in translation or missed is that everyone's rushed towards creating alternatives based on technology, and dismissing gold. Without realizing that, actually, companies like Glint, and we're not the only ones, there are stablecoins, and stuff like that, based on these types of things, but using technology to make the ultimate form of money, the future. Back to the future of money I'd, maybe, call it. But, certainly, giving everybody their own personal gold standard. And our vision, certainly, is a world where everyone has an equal opportunity to prosper. And we think that bottom up returns to [Inaudible 00:17:38] money is the only way we're going to get to any kind of fair society, and governments are not going to do it.  So private individuals, directors, and companies, we need to take control of our money ourselves. And, I think, this whole explosion in innovation and stuff is just fantastic for people and businesses. You can always rely on people's innovation to come to the rescue. But there are challenges with all these things, as you've intuited. There are problems, aren't there? With implementing these new things into businesses and that people have got to be very careful about what they're doing. They want to think carefully before they jump, I think. Adam:            They do have to think carefully before they jump. And that's a perfect segue thinking about your accounting and finance team. Who would need to take into consideration all of these elements, as they're putting these on the balance sheet. What are some considerations that they do need to take into consideration as they're implementing this? And are there best practices they should think about?  Jason:             Yes, sure, well, I mean, you've got to be thinking about four things. You got to be thinking about the volatility, this is a risk on. If you're cryptocurrencies it's a risk on assets, if it's gold, it has a level of volatility as well. So you got to be thinking about that. You got to be thinking about anti money laundering issues, especially, around cryptocurrencies. Is there a possibility that the cryptocurrency you're bringing in to your business or to your life has been the proceeds of crime? You've got to look at the regulatory issues around tax. Around the nature of money itself. Is it cryptocurrency or gold money? Or is it property? Or is it security? And we've got to look at the systems and processes we've got in the business. Because a lot of those are designed for the incumbent system, not for the new one.  So, yes, we've got to look, very carefully, at those in a bit more detail. So regulatory wise, well, you can lobby governments to make changes and those businesses that might be listening that have some influence there. You got to be talking to government officials about that. Obviously, there's been a lot of change, or concerns about what changes there are in the elections in the U.S. and it's quite obvious that Republicans seem to be a little bit more cryptocurrency friendly, compared to the Democrats. But either way, both parties are going to see some clampdowns on the cryptocurrency industry. My appeal to governments and regulators out there is stop being vague. Businesses and people need regulatory clarity on this. So there are chances that, I think, the problem in the U.S., at the moment, and any government where they don't have a leading majority, is that any crypto-related bills might not get passed. Unless there's bipartisan belief in what needs to get done, and that that's an issue. I don't want to get political about things. But, generally speaking, two parties, when they're so far away from each other, and they can't find a good center, then, actually, nothing gets done. But we do need that clarity. So I appeal to regulators and governments around the world to try and do that. Because, I mean, the SEC chair, Gary Gensler, has said that he believes the majority of cryptocurrencies are securities, and in the UK they see it as property, and I'm sure a lot of your listeners think it's money. So we've got to get to the bottom of that.  But when you're diversifying your balance sheet to include alternative assets, you've got the challenges around your reporting currency, and what effect that might have on your EBTDA. Losses may occur, even if only temporarily. And, of course, when you're doing your audits and your accounts that can lead to quite a misleading view or misleading information for readers of those financial statements.  I mean, you can have a situation where your assets look great, because cryptocurrencies just shot up. Or it could be that the cryptocurrencies just bottomed the day before you had to submit your accounts. So, what is happening? How do you deal with that? Capital gains tax. I see gold as money, I don't see it as an investment, it's just a store of value. And if you said to me, I'm in London, at the moment, so if you said, "Jason, come over to the States, and let's have a week here, let's discuss cryptocurrencies, and alternative currencies, and gold in more detail."  I might buy £10,000 worth of dollars, and I take those dollars, maybe I've got 12 or $13,000. And I come to the U.S. And you get there, and you say to me, "Hey, Jason, don't worry about spending anything, I'm feeling great. I just won the lottery, so I'm paying for everything." And then I come back with my money after a week and the pound is, we've had another Brexit problem, or another prime minister has been elected and another one has resigned, and the pound has plummeted. Suddenly, I now have 17,000, when I exchange my dollars back for pounds, I've got more pounds than I left with there's a capital gain there.  But do I have to report that to the tax authorities et cetera? There's lots of exemptions around using money in relation to tax. But there isn't with cryptocurrencies or with gold. Because the traditional view of gold is it's a bar of gold, it's an investment, traditionally. The views on cryptocurrencies are varied.  So, as we say, some see them as different things. So you got to be careful about that. And you've got to get your advice, in your own region, about how we should be treated. And probably taking the safest approach to say, "Well, we'll assume there has to be a tax on this, a capital gains tax or whatever, we're going to put that money aside." Even if you don't submit it, every region is has got to deal with their own situations there, but you must be cognizant of it. and how do you track all the fees? How do you track the fluctuations in the currency's value? I mean, with cryptocurrencies there can be quite big gas fees, for instance, around some things, and the fees can be different depending on what's going on the network or the block chain is busy at the time, suddenly, those fees are going up. You've got a bit of a difficult situation, where you're trying to manage all of that, manage that volatility, manage the counterparty risk in terms of AML.  So there are a couple of different approaches to this, though, you can take a hands-off approach where you go, "Look, we're going to take any crypto that comes to us as a business. We're not going to actively go out there and buy crypto but what we might do is accept cryptocurrency, in lieu of payments of services or products. You might do that with gold, or you might do that with cryptocurrency. And what you could say, you could choose a vendor and exchange that for you automatically. So you might not even touch the cryptocurrency.  You say, "Look, I still want the currency of my residence, I still want my default currency for my accounts to come into our system. You can pay me in cryptocurrency or gold. But my vendor or exchange that I'm working with will convert that to dollars that comes in and that's obviously the easiest way to deal with this. And, so, nothing really changes for you in the back end.  But if you do want to take that hands-on approach. You got to think about three things, you've got to think about, well, what treasury systems and processes do I have to put in place?  What are my banking relationships going to say about this?  Are they're going to be happy that we're taking on cryptocurrencies about that? And they might not allow me to exchange it and bank it later. And some banks, increasingly, they're more comfortable with things; alternatives, like gold and cryptocurrencies.  But you've got to ask your question, what is my bank's attitude towards this? And then you've got to choose who your vendors are. Are you're going to be working with vendors like exchanges or are you going to be working with your own wallets? There's challenges with both. If you've got your own wallets, how are you managing access to those wallets and security around it? How are you dealing with...  If you're working with an exchange, then, I mean, we've all seen some of the problems, in the last 48 hours, with FTX. I mean, I think, it was Fortune Magazine. I was just in the club, the other day, and I saw a Fortune Magazine and there's the founder of FTX, on the cover, about he's going to be the future, and here we are with the company near collapse.  And, so, who do you choose to work with, if you're working with a vendor? So there's plenty to think about. But it's important that any business remains curious, remains innovative, creative. And you got to start thinking about this and doing this, because you'll find the right solution for your business if you take it seriously. And that can be the difference between success and failure. I mean, with inflation running in some countries that's anywhere between 10 and 80%, at the moment. This is the difference, and we live in a world that's very competitive. And, so, you've got to think out the box. I think, those people who embrace technology, generally speaking, get rewarded in the long term.  Adam:            I agree with you; I think they will. And, like you said, you'd have to know your local regulations like in the U.S. the FASB voted on October 12 that cryptocurrencies are no longer intangible assets, their guidance has changed. So you have to know that, and you have to know how to account for that. And I know IFAC and all those other places are trying to consider how you should view these or account for these. And, so, you have to know what your local regulatory body is doing.  Jason:             Yes, and, as you say, it's changing all the time. So Hong Kong, for instance, had a very strict attitude towards cryptocurrencies. But then what happened is they saw money flowing to Singapore, which had taken a much more relaxed view on cryptocurrencies. And now the tables are turning, Hong Kong has just announced that it wants to be crypto-friendly.  Singapore is starting to tighten up its regulations around that, and even saying that they might restrict it because of the volatility. And in April, here in the UK, the UK Government said that we were going to announce rules to say that stablecoins can be recognized as a valid form of payment. I'm not quite sure what that means. They, obviously, want Britain to become, now, a global hub for crypto asset technology and investment.  But what does that really mean? You're going to accept our taxes in cryptocurrency? And, actually, that's something to mention, being able to pay your employee-related taxes, or your value added taxes, your product taxes.  I think early on, I sold a company to a business. One of the very first electronic barter-based trade currencies, and I was involved in that business for a few months, after the exit. And they had a very simple approach, "Yes, I can get paid in this alternative currency." But, at the end of the day, the government still wants to be paid in their currency. So you just have to, again, account for that.  Adam:            Yes, so as we think about the future, look into our crystal ball. Do you think we're heading toward what the science fiction movies always say, like "I'll pay you 20,000 credits, here you go?" Or are we not going that direction? Do you think we'll get to that point, where everything will be virtual or do you think we'll still have some hard currency that we'll be working with?  Jason:             Well, I think, the term is we always overestimate what can happen in the next five years and underestimate what could happen in the next 20. And, I mean, I was involved in virtual reality, the first time it was called back in the '90s. And I see what's going on with Meta and Facebook and there's no way the virtual reality is going to deliver the kind of returns, and the kind of innovation that is needed. That is reflected with the enthusiasm that people like Facebook have for it and stuff. We're just a million miles away from where we need to be.  And, so, it's the same with cryptocurrencies. For instance, they need to mature, they need to get more mass adoption before their volatility will start to come down. They can be considered valuable stores of value. They're already a good medium of exchange-ish. Transactions are still very high and costly, in most of these cryptocurrencies. So there's still a lot of immaturity there, and I love the enthusiasm for it. And I do think I'm singing from the same hymn sheet, in terms of gold, for instance.  But, I think, long-term there will be lots of progress made and some progress that, maybe, some of the listeners are even thinking about right now. I mean, what's the effect of quantum computing on finance? And you might say, "Well, what's that got to do with finance?" Well, it's got a lot to do with security. The idea that you could have two elements quantumly entangled with each other, and then separated by great distances. I mean, I don't profess to know, I know a tiny amount is very dangerous. But the idea that you could have new security systems based on quantum computing, might mean, for instance, that you can actually tell whether or not this is a real user accessing the system, when the system is on earth and the person is on Mars. So, actually, there's no reason why, for instance, currencies could be intergalactic. And whether that is a fiat system. Whether it is a cryptocurrency system. Whether it is a gold-based system. I don't think matters; I think that the future leads. There's a huge amount of innovation and excitement, for me, as we move forward. I would say, though, fiat currencies all come to an end. They all. There is not one fiat currency that stood the test of time ever. And we can see that they are becoming, right in front of our eyes, worthless.  And, so, I think that there will be an end to the U.S. dollar, the pound, and the euro. But when it will be? They'll probably last a lot longer than we think they ever will. Gold will still be here and, still, I think, a store of value. And with the technologies behind it, it's a tantalizing opportunity to be a fantastic global interstellar currency, based on the kind of technology we could bring forward.  But I do think that block chain and distributed ledger's, in general, can offer a huge amount of increased transparency and trustworthiness, in the long run, to make accountants and finance teams lives much easier.  Adam:            I agree. And, Jason, I just want to thank you, again, for coming on the podcast. It's been great having this conversation. I know we could keep talking for a long time, but thanks for sharing your expertise with us, today.  Jason:             Adam, it's been a pleasure, thank you. Announcer:    This has been Count Me In, IMA's podcast. Providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard, and you'd like to be counted in for more relevant accounting and finance education. Visit IMA's website at www.ima.net.org.

Get ready for part two of our insightful ESG (Environmental, Social, and Governance) discussion on the Count Me In podcast. Our expert panel, Douglas, Dan, and Catie, unpack the pressures and fraud risks inherent in ESG reporting, offering invaluable insights gleaned from real-world scenarios. But it's not just about identifying risks; they also provide practical guidance for those embarking on their ESG journey. Learn how to start with what you have, concentrate on materiality, and establish a robust, cross-functional ESG team. Tune in for an essential roadmap to navigate the complexities of ESG reporting in today's business landscape. This is one episode you won't want to miss!Connect with our speakers:Catie: https://www.linkedin.com/in/ctserex/Dan: https://www.linkedin.com/in/dan-mosher-8552519/Doug: https://www.linkedin.com/in/douglas-hileman-fsa-crma-cpea-p-e-6abbb71/Download the reports mentioned into today's podcast:Achieving Effective Internal Control Over Sustainability ReportingManaging Fraud Risks in an Evolving ESG EnvironmentFull Episode Transcript:Adam:            Welcome back to Count Me In. Today we have part two of Unraveling ESG. We're joined, again, by Catie Selex, Douglas Hileman, and Dan Mosher for the completion of their conversation. Now, if you didn't hear part one, I encourage you to pause right now and listen to that first. In today's episode, we explore the challenges and risks of ESG reporting, including the potential for fraud. Our experts delve into the pressures companies face and discuss real-world examples of how well-intentioned sustainability efforts can sometimes lead to misreporting and potential fraud. But it's not all about the pitfalls, they also offer essential guidance to those new to ESG. Emphasizing the importance of starting with existing resources, focusing on materiality, and setting up the dedicated cross-functional ESG team. Don't miss this invaluable conversation, so let's get started. [00:00:55]        Dan:                Doug, I mentioned the ACFE's Fraud Triangle earlier, and I'm eager to hear some of your perspectives on applying that Fraud Triangle to ESG.  Doug:              Thank you, Dan, it can be done too. It's a familiar construct, and I was fortunate to be an in-house at a Big Four when Sarbanes-Oxley hit. And at the very beginning of designing internal controls and testing internal controls, we had to consider the possibility of fraud.We had to design controls to prevent fraud, in audits we had to detect fraud.  Being an environmental specialist, and then with the IIA coming out with changing their IPPF, their framework, to require testing for fraud. I've been testing for fraud and considering fraud for 20 years, in the environmental space since 2002. It looks a little different for ESG, but not as different as you might think. There is pressure, pressure can be, "We've got to get this report out." "The customer wants this answer." "We have to say, for example, that our products didn't come from Bangladesh, so what the heck? How will they find out?" There's so much pressure. I see that people are involved in ESG, in this non-financial reporting, as an add-on to their jobs. It might be 20% of their job, and it's the 20% between 120 and 140% of what they're supposed to do. People are under, and companies, are under tremendous pressure to put the right answer out there.  They have the opportunity to do so because the controls are not designed, and have not been implemented with the potential for fraud in mind. So where there are weak controls or no controls, the opportunities are there. I see this comes into play, also, when data and information comes from outside the organization. There's this tricky thing where so much of what we do, in ESG, is not only what the organization controls but what the organization can influence. There are some challenges there, how do you control what you don't control?  So the opportunity is there because the controls can be weak or nonexistent. And the rationalization can be, "Well, everybody does it."  Or "It's not about money, it's about prestige." "It's not really this, we want the award." We've seen, for example, there's a magazine, an organization, that rates colleges, the 10 best colleges in each thing. And we've started to see, in recent years, where the colleges are even fudging the information to get the prestige of being in that award. That may have secondary effects for how many people go to that college or what they're willing to pay for tuition, but that's fraud.  In my book, if you submit data and information that is incorrect, or inaccurate, or misleading, with the intent to deceive at the expense of others. Especially if that turns into actual or potential financial gain, I call that fraud. So that applies on all three sides of the triangle. It's just a matter of thinking about this ESG and non-financial world and how that can happen. Dan:                Excellent, Doug. Yes, maybe, just to add a couple of extra points around those pressures and incentives. Today we are seeing that there is incentive compensation for certain executives that is linked to various ESG measures. If you think about that and the opportunity for management override of certain controls that are out there, that's a great incentive.  If you're going to get paid a bigger bonus because of greater ESG metrics, and your ESG, for example, your emissions information is held in Excel spreadsheet, which in many cases that is the case. I saw a survey, not so long ago, of more than a thousand executives saying that, I think, it was 86% of them had their emissions data just sitting in a spreadsheet. And if you could change that with a few keystrokes, at the executive level, to boost your bonus, someone might do that. Other things I think of are from an incentive or pressure standpoint. Things around ESG-linked bonds or credits where there are a key performance indicators and you're required to maintain those metrics, to maintain certain interest rates or payment on your bond. Those things are out there and they're going to influence some portion of those that are held to them. Catie, maybe, you have some other thoughts around this as well? Catie:              Yes, Dan, so one of the things that we're seeing in ESG, especially because people are so compelled to make great strides on their data and to make progress towards their targets, in a very quick manner, is there's an emerging market of solutions that some are absolutely legitimate and there's good actors, but they're also bad actors. So one real-life example of this happening is the Vatican used a third party to preserve a forest area, as part of its carbon offset effort and to help move towards its emissions reductions targets. So, in this instance, the Vatican thought that it had protected an area of Hungarian Forest as part of that reductions plan, but that actually never happened.So while there were good intentions to reduce the Vatican's emissions footprint, ultimately, that desire left them to susceptible to fraud by this third party. So that's something else to think about is as you're incorporating other entities, that are outside of your organizational boundaries to help you reach these targets, are they genuine good actors?  Have you conducted the due diligence to ensure that they're going to support you in getting to those targets, as opposed to hinder or even mislead you, which could lead to misreporting on your part? And, Dan, I wanted to get back to that pressure element. A lot of the clients that we're working with are in those early stages of ESG reporting, and are just getting their program started. So, Dan, Doug, and I am happy to contribute, as well, but what are some guidance that we can give to listeners? In terms of for those who are at ground zero and need to start reporting, and disclosing, and to ease some of the pressure that they're experiencing from stakeholders and regulators. What are some ways that they can approach this? What are some tools that they can use to mitigate associated risks?  Dan:                I'll go ahead and start. So I refer back to some of those frameworks, that you have mentioned, Catie, as a starting point. In terms of the kinds of disclosures that an organization might make in a certain business sector. I think that they should be taking stock of the various channels in which they might be reporting that information, and looking at the various kinds of scenarios, in which the information might be incomplete or inaccurate. So even just thinking about those processes will get them on a good path forward.  I think that you probably want to think about starting fairly small, with the kinds of disclosures, and build upon those as your maturity from an ESG perspective grows. Doug, what are your thoughts? Doug:              For companies just starting out, or in the early stages, what I would say to them is, first, just recognize this is not a hobby. This is not a nice to do, this is a business imperative and it is not going away. Put the right people on it and devote resources to it, who can really get things moving. Another thing I would say is, one of my phrases, is begin with what you've got because you really can't begin with anything else. A gap assessment is a really good idea. What are the requirements that are expected from the general capital markets?  What are the questions you're getting from impact investors and customers, where you're getting that pull and you're expected to provide something? Well, what is it you have? Companies may have a little more information than they think they have. Because much of this information is already being collected to achieve regulatory compliance obligations, with let's say the EPA, or with OSHA, or the Department of Labor. Is that data and information fit for purpose or can it be modified a little bit, to meet the expectations of the stakeholders who want this kind of reporting and disclosures? Another point I would say, we've touched upon the cross-functional team. This cannot be the responsibility of any one person. This is a team effort because this non-financial information touches every part of your business internally, and it touches many parts of your business externally. With your providers of capital, your banks, your insurance companies, your customers. So all the people who engage in external relations with folks outside the company, it has to include those.  One tip I would say is climate change is the single biggest issue of our time and climate change and climate change reporting, greenhouse gas emissions reporting, is expected of everybody. So climate change has got to be on your agenda. There is some specialized expertise that comes with that.  I would suggest that climate change has even its own team and its own work streams. I think supporting that when the ISSB put out their two exposure drafts. They had one for all sustainability reporting disclosures and one for climate change risk and exposures. So you've got to address climate change. And, finally, I would say I put in a shameless plug for using the COSO Framework, that if the data is going to be complete. If it's going to be accurate, if it's going to be verifiable if you're going to have the right people with access to it and only the right people with access to this data. There's nowhere better to start than that COSO Internal Controls Framework. And even backing up that COSO Enterprise Risk Management Framework to lead into materiality. And to lead into what are the issues where we should be reporting on and focus our efforts.  To use an extreme example, if you're a Chevron you're not going to bet the company on recycling paper. So what are the issues that matter to you as a company? Where you invest your time, your resources, your people, and your initiatives on improving performance.  Catie:              And, Doug, you brought up a great point when it comes to materiality, and I want to make sure that for our listeners, they know that when it comes to ESG and sustainability, materiality is separate and distinct from the concept of materiality under federal state securities law, as well as GAAP. And that's because items that are material to ESG they're not, necessarily, the same as those that are material under securities law or GAAP.  So one of the ways that we help clients and, especially, our year zero clients who are trying to uncover what is material to their company. We always recommend starting with a materiality assessment, and ESG strategy and policy development. This is going to help you set your own guardrails so that you don't overextend or overcommit on ESG. Doug mentioned that climate change is becoming one of those topics, that companies absolutely need to have resources and teams dedicated to. And I'm seeing that with most of my clients, climate, even if it's not on the horizon immediately, it's coming.  And, so, it's something that you will need to consider and continue to refresh what's material to you. So having those assessments, we recommend every two to three years because material topics for ESG are not stagnant. You don't select them, and then that's what you have for the entirety of your company's lifespan. They change because society changes, the political environment changes, and the actual environment changes. So you want to make sure that you're staying on top of and looking ahead to what those risks are.  So that you've got the data, mechanisms, and the internal control processes in place, to be able to have that data, have those baselines that you need. And then as you're planning out your ESG programming, set realistic goals and targets. So that you're not overextending yourself and that you are setting commitments that you know that you can achieve, and you're not falling victim to the fraud triangle in an attempt to achieve those commitments that you set for yourself. Dan:                Doug, I know you talked a bit about the great importance of climate change and emissions reporting. I did want to give our listeners some food for thought around emissions reporting. If you think about how some of that emissions reporting takes place, it's a calculation. So, for example, I've been in touch with a large organization. They calculate some of their emissions, taking their rented square footage of office space and applying the relevant coefficient to it, to come up with an estimate of their emissions.  I asked the question, well, "You have a number of offices across the country. What would happen if you, accidentally, forgot the Dallas office? Would someone catch it?" And the answer was, "Not necessarily." And, so, the care and the completeness, and the extra effort to make sure you have that completeness, it can be challenging, but I think it's completely necessary. Because if something could be forgotten accidentally, it could be forgotten on purpose, and if it's forgotten on purpose that's contributing to fraud.  Catie:              And to add to that point, Dan, some of the frameworks, specific to climate, already have built-in mechanisms to help you guard against that fraud. So, for instance, The Greenhouse Gas Protocols Corporate Standard sets guidelines for when to recalculate your corporate base year emissions. Because companies are setting their targets and their reduction strategies based upon that base year calculation. And, so, there are some particularities in terms of, for instance, if your company goes through an acquisition and your footprint goes by X percent, that is what triggers a base year recalculation for your emissions metrics specifically. And, so, that's a policy example. That's an example of a policy that you would want to have in place for some of these metrics.  So that as your company continues to grow, and circumstances change, and your footprint either shrinks or increases, based upon your operational size. You'll want to have policies in place so that you know when to recalculate your base year, so that you're continuing to report complete and accurate data.  Doug:              I think carbon emissions reporting, encapsulates everything we've discussed on this podcast and everything that's in both of our reports, the COSO Report and ACFE Report. And I think we could probably do a separate podcast on that. I'd encourage our listeners, many of whom are accountants, to read the Greenhouse Gas Protocol and become familiar with it.  There are operational and technical people doing it, but at its heart it really is an accounting protocol. We've discussed how you put together data and information to meet different purposes. I've worked with clients who get called upon to publish a greenhouse gas report, greenhouse gas emissions, using an operational control basis. Using the equity share basis, using the financial… So there's the same data that needs to be sliced and diced three different ways and for different reporting periods. Catie brings up the good point that there are protocols to restate or to correct errors when identified, or to account for forgotten facilities. There are uncertainties documented in it because many of these emissions that are reported involve estimates. What if you get better estimates? Do you apply that to this reporting period or do you retroactively do that and report it? Much of this involves judgment. What is a material change? So maybe you apply materiality in ways that you would apply it elsewhere or differently. All this has to be documented and the possibility of fraud starts to creep in, when there is the pressure to say, "We are on target for getting carbon neutral by 2030, in accordance with senior management's directives." So they can get their compensation bonus, and we can stay in that ESG-preferred trading fund, and we can get our low-interest rate from the bank or decline from that. If you understand, if accountants, and business folks, and operations, and environmental people take a good look at the Greenhouse Gas Protocol and you overlay that with the COSO Internal Control Framework, and you overlay that with that terrific publication on ESG fraud, from the ACFE. A lot of what we're saying will start to make sense and you will understand where you can contribute to more effective and more efficient reporting, and prevention, and detection, of fraud.  Catie:              So we know that, especially, because ESG is still an emerging discipline and there's different interpretations of data, and some of the data points themselves are evolving. So what do you say to those who are concerned about, unintentionally, misreporting data. And realizing two to three years down the road, "Oops, we made a mistake." How should they approach that in the future?  Doug:              Well, that's a great question, Catie, and we see that all the time. And I predict we will see it a lot more as this field matures, and as companies mature their processes and controls, and as more people take a look at it, both, assurance providers, investors, and the like, we're going to see more of that. And it's understandable that everybody will be handwringing and so afraid of making a mistake. And I go back to what we said 20 years ago, at the beginning of Sarbanes-Oxley. I was on many financial audit teams supporting them as ESG specialist for asset retirement obligations, environmental liabilities. And, well, we don't know the right number. We don't know if it's going to happen, and my advice, at the time, as a non-CPA, just an engineer and auditor is to say, "Well, in good faith, read, interpret what is required, develop a process, document the process, and then follow the process and document that you followed the process and the output from that process." That's what goes on the line item in your financial reporting.  If somebody determines that that was not correct or it can be improved. Maybe it's an internal suggestion, maybe it's from an auditor, maybe it's from an enforcement authority. It doesn't really matter how you discover something that needs to be changed. At least you can produce what it was you did and show that you were consistent with the design. The operation was consistent with the design. If you need to change it later, then change it later. Then comes the question, do we change it from this point going forward or do we have to do an adjustment for prior reporting periods? So that can be part of your process and your criteria. Set a threshold, a materiality threshold for that. Develop a process for how teams consider that and who decides yes or no. It's really using processes that you already have, and apply those for non-financial reporting.  Catie:              And just to jump in there from the ESG perspective, Doug, I think, not every year will be one marked by progress towards your targets. There's a million different circumstances that can affect progression on your commitments. And, so, again, going back to being transparent and communicating challenges and setbacks to your stakeholders, goes a long way in the ESG space. In terms of them continuing to have faith that you are reporting these disclosures, as they go along, and highlighting where you are experiencing those challenges and setbacks. Doug:              That's right.  Dan:                One part of the ACFE's Fraud Triangle is rationalization, and I think that this longer time horizon that Catie was just pointing to, actually, causes some rationalization to happen. Because there's a longer time horizon, someone might say to themselves, "Well, I can catch up next year.Let me fudge the number a little bit this year, and show some progress, and I will make it all better next year." And, so, there is something particular to ESG with that longer time horizon for those commitments being made around, "I'm going to be net zero by such and such a date. Well, that's a long time from now, let me just show that I have progression every year and hope that I can catch up in reality." Dan:                I maintain that non-financial reporting has a couple of attributes that are a little different from financial reporting, or at least they occur in greater proportion. Two of those attributes are much more narrative in non-financial disclosures, descriptions of processes, and also some forward-looking statements. Companies are encouraged to announce goals and targets, which sets the stage for reporting in future reporting periods on their progress to the goals and targets.  One of the things that is starting to look a little different, companies will say, "We are committed to meeting our climate goals for 2040." Where they make some grand, forward-looking narrative statements, and talking to some folks who are reviewing that, and even some of the external auditors, they're comparing those forward-looking narrative statements to where the companies are spending their money.  So if you're making statements and disclosures that are these grand, forward-looking projections, and the auditors see you're spending $7, a year, towards meeting that goal. Well, is that statement itself? Is that disclosure? Is that negligent?  Is that sloppy, or is that in order to get into an ESG fund, or to attract Helen, in ways? Is that tiptoeing into fraud?  I think the dust is yet to settle on that, but the topic is coming up. Dan:                I think it's a great point, Doug, and I'm sure that there are a host of attorneys out there who will, gladly, be spending time to figure out when the line has crossed into fraud. Catie:              And I will add to that, we're seeing a lot of companies set 2040 goals. And just for context, that comes out of the Paris Agreement, saying that the global target for net zero needs to be… Hang on, Adam, let me pause and make sure that I don't misstate this. So part of that Paris Agreement was this global recognition that net zero needs to happen by 2040.  And, so, that's why you're seeing that number come up in a lot of different corporate targets, when it comes to their net zero goals. That said, there is still a lot of work that needs to be done, at the company level, in order to achieve that. And there are things that are beyond your control.  So the different breakthrough technologies that are needed in order to accelerate transitioning to a decarbonized economy. There's still a lot of research being done in terms of the electrical grid and the different green technologies that can generate energy, to help reduce that carbon footprint. So I urge caution in terms of setting your goals because it needs to be, again, coming back to the point, it needs to be realistic and something that you think you can achieve. So one thing that we encourage our companies to do is it's great to have a moonshot goal, and if 2040 is your moonshot goal, then that's awesome. But setting those intermediary milestones to hold yourself accountable, to that moonshot goal, is something we really encourage our clients to do.  So that could be as simple as setting your baseline year for Scope 1 and 2 emissions. So that you have a complete understanding of your carbon footprint. And then from there you can understand what are those emission sources that we have? What can we do, that's in our power, to reduce those emissions? Are there simple process changes that can reduce our footprint?  So it's important, again, just go back to what you have already, what you know, and work from there. And there's no shame in having a really great moonshot goal if it's 2040 or if it's not 2040. But I think that setting those intermediary goals is going to be what really helps you to not fall susceptible to the fraud triangle.  Dan:                I think, we've had a really good conversation here and we've covered a lot of ground. Everything from visibility into your supply chain and the challenges raised by that. All of the complexities around data quality for emissions reporting and other sorts of reporting. I really have enjoyed this conversation immensely.  Doug:              As have I, it was a privilege. I hope our listeners enjoyed it as much as we enjoyed having the conversation. Catie:              Yes, thank you to Dan and Doug for this discussion. I really enjoyed chatting with you and, hopefully, the listeners will get some useful information out of this that they can take back to their organizations, and start to implement some of those tools and mechanisms to help them guard against fraud. [00:29:20]        Announcer:    This has been Count Me In, IMA's podcast. Providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in, for more relevant accounting and finance education, visit IMA's website at www.imanet.org.

As highlighted in the recent COSO publication on Internal Controls over Sustainability Reporting, good governance and systems for sustainable business activities and ESG reporting require attention to potential risks around fraud and greenwashing.  Reflecting Grant Thornton’s recent report on control activities related to these risks, join us as we take a dive deep into the world of Environmental, Social, and Governance (ESG) in business with our latest episode of the 'Count Me In' podcast. Hosted by a panel of experts, which includes Catie Serex, Douglas Hileman and Dan Mosher, our podcast uncovers the truth behind ESG, its importance in today's business world, the challenges it presents, and importantly, its potential role in fraudulent activities. Tune in for a fascinating conversation on ESG reporting, corporate purpose, sustainability, and the latest trends affecting investors, employees, and stakeholders alike. Don't miss this chance to stay informed and ahead of the curve in the ever-evolving world of business.Connect with our speakers:Catie: https://www.linkedin.com/in/ctserex/ Dan: https://www.linkedin.com/in/dan-mosher-8552519/Doug: https://www.linkedin.com/in/douglas-hileman-fsa-crma-cpea-p-e-6abbb71/Download the reports mentioned into today's podcast:Achieving Effective Internal Control Over Sustainability ReportingManaging Fraud Risks in an Evolving ESG EnvironmentFull Episode Transcript:Adam:            Hello, and welcome back to another enlightening episode of Count Me In. I'm your host, Adam Larson, and today we're diving deep into the complexities of Environmental, Social, and Governance, ESG, with a distinguished panel of experts. We're joined by Douglas Hileman, an experienced sustainability consultant, with over three decades of experience in environmental management systems, and internal controls.  Alongside him, we have Dan Mosher, a seasoned professional who excels in helping businesses navigate the complexities of sustainability and environmental risks. Last but not least, we welcome Catie Serex. A leader in environmental, health, and safety, auditing and management who assists businesses in integrating sustainable and socially responsible practices.  Today's discussion will delve into the importance of ESG, the challenges businesses face in managing ESG data, and the potential risk of fraud in ESG reporting. Here we go, let's listen in together. [00:01:00]        Doug:              And one of the things that we might kick off is with a very basic question of what is ESG? Dan, when people ask you this, how do you answer? Dan:                Well, it really is a big umbrella, and I'll ask for some help from Catie in this regard. But ESG stands for Environmental, Social, and Governance. And, so, lots of things under that environmental area. Everything from waste management and air quality, climate change. From a social perspective, it could be your human capital management, health and safety matters. Governance, I think of anticorruption, data risks, and the like. So it really is a broad title when we say ESG. Catie, do you have some things you'd like to add to that comment? Catie:              Yes, Dan, you definitely covered the gamut as far as some of the phrasings and the terminology, and really the topics that fall under that ESG umbrella. What I would want to add is that ESG is certainly one of the buzziest words in business today. But you might not know that ESG is, very simply, the newest iteration of concepts you've likely known for a long time. It's been previously known as corporate purpose, sustainability, even philanthropy.  But what differentiates ESG from these previous versions is that it now represents the closest alignment, to date, of business operations, so think about your tangible assets. To those intangible elements of business that drive value. And, in this case, I'm referring to things like customer loyalty, labor environments, community engagement support. And because of this connection, ESG is moving from a nice-to-have to a need-to-have for companies, but also their investors, their customers, and other key stakeholders like their employees. Doug:              I also think of ESG as a convenient taxonomy for all things non-financial. Many people have published those pillars or the word clouds that's in the ACFE report, and what topic goes where. For financial reporting, we know where sales goes and we know where EBITDA goes. We know where those are in a format and how to put the data and information together for clarity and reporting. For all things non-financial, it's just such a sprawling array of topics that ESG serves for one reason, in one way, as just simply a taxonomy. And there are some issues, such as climate change, like Dan mentioned, that really transcend more than one category, if you will. But for purposes of just where do you find it, and how do you manage it, and it can just serve as a taxonomy. Catie, to your point, on how to organize some processes, some controls, some recordings to understand what the organization is doing. Dan:                And I'd be interested in hearing your thoughts on the various channels in which this information is being put out there in the public. Catie, maybe you have some thoughts around the wide scope of that. Catie:              Yes, so in terms of the reporting side of things and getting to the nuts and bolts of what, I'm sure our listeners are interested in, in terms of, what am I on the hook for? There are a lot of reporting frameworks out there that are guiding folks. And I know that that's been a point of confusion for people is understanding, there are all these different acronyms out there. That I can report to like SASB, or the Global Reporting Initiative, GRI, Task Force for Climate-Related Financial Disclosures or TCFD. There are a lot of frameworks out there, but the field is narrowing.  So some of the communication that we've been seeing from these wider umbrella frameworks, are that they are working together to consolidate. To make things a little bit more straightforward, and to make things a little bit more uniform across the reporting landscape. But that's currently in progress, and this is just a result of this being not in nascent stages, but still in its growth period, and really honing down what are the things that shareholders, regulators, and such need to see when it comes to these ESG disclosures. Dan:                And I know that Doug has been on the front line when things are misreported or omitted, and I'd love to hear some of his worst stories. Doug:              Thank you, Dan. The question about reporting channels is a very good one, and Catie brought up several things that are happening in reporting to general capital markets. I also observe that there are other channels for reporting, including impact investors who may be interested in one particular topic. The general purpose capital reporting takes in one tranche, if you will, of topics that need to come external from an organization, a company.  There are other investors who are interested, let's say, in human rights, or in product conformity, or in diversity, or in commitment to climate, and they want more information about those topics. So you may get information from investor groups or analyst groups, and that's a type of report.  Another channel of reporting that I see is B2B reporting. The customers, and business partners, and banks, joint venture participants, are looking more into non-financial risk management. Non-financial performance and alignment, which is ESG. So before entering business relationships, and even during business relationships up and down the value chain, there's also ESG reporting that happens there.  It is starting to align in some ways that they're asking questions about the same topics, but the questions themselves can be different. And, in many cases, the reporting, the demand for reporting has outpaced companies' abilities to report on the data and information. So that pull has created a bit of a vacuum. And many companies are scrambling to come up with processes, systems, and controls so they can generate the data and information that these stakeholders are expecting in terms of reporting. Catie:              Doug, just to jump in there, from a client perspective, we are seeing that a lot of our clients are getting, especially, those B2B requests from either their suppliers or their downstream supply chain vendors. And the way that we're seeing that manifest is a lot of these larger companies are looking at their supply chain. If you think about greenhouse gas emissions, they're looking at their Scope 3 emissions, which is all value chain.  And, so, they're sending requests to clients like ours that are asking, "What are your Scope 1 and 2 emissions? Because we need to report that." We are seeing clients feeling the pressure to respond to that, to continue to be part of those wider supply chains.  And, so, they're coming to us asking for assistance in figuring out what those ESG metrics are and being able to respond in complete and accurate ways. So that they can continue to have those key customers that are asking for that information. Dan:                Yes, and I'd like to pick up on that point, too, and Catie was just touching on it. I think some of the key challenges are, for businesses today, what is the providence of their ESG data?  What is the confidence they have over the accuracy and completeness of it?  And what is the integrity and quality of that data as it travels along its life cycle, from where it started to where it was reported? And has it maintained that integrity all along? Because bringing this back to our main topic of fraud, there are many pressures and incentives that might have someone misstate or omit information in their ESG reporting. Doug:              I'd like to pick up on a topic that Catie discussed on climate change and greenhouse gas emissions. It does, inherently, involve a complex web of data from different sources, including suppliers. And companies may be asked to produce or report the greenhouse gas emissions for themselves, as a company, on Scope 1 and Scope 2. I hope our listeners know what that means. Or on a part of Scope 3, or their carbon emissions as a company, or their carbon emissions in a particular country or state, or their carbon emissions for the products they manufacture for a certain customer.  So those are different ways to slice and dice much of the same data. And it all goes back, I'll put in a plug here for the COSO report mapping the internal control framework to ESG. That can be applied to anything, any topic, any company, including, for example, greenhouse gas emissions. In terms of fraud, there can be a difference between just sloppy, or just unavailability of data and willful reporting of incorrect or misleading data.  For example, to get preferred treatment at a customer, or to get preferred inclusion in an ESG index fund, or to get a reduction on interest rate from a line of credit, from a financial institution that's looking for green investments. So we're still seeing an increase in awareness of the fact where, "Well, we can just report this because nobody cares." Or, "Well, it's not regulatory, so we'll just let it go." And willful deceit in order to get a benefit at the expense of other competitors in these areas, which goes into the fraud bucket. That ACFE and Grant Thornton touched upon in that report. Dan:                Yes, thank you, Doug. The report that Doug is referring to is a joint publication of the Association of Certified Fraud Examiners and Grant Thornton called Managing Fraud Risks in an Evolving ESG Environment. You can get it from our website and from the ACFE, and within that, we did develop an ESG fraud taxonomy.  It encompasses both some of the traditional areas of fraud that have always been there. Corruption, asset misappropriation, and financial statement fraud. And there are certainly ways in which ESG fraud manifests itself under each of those headings.  To that traditional fraud tree we have added an additional area of non-financial reporting fraud, which Doug was alluding to. And the things that might happen under there, there could be false labeling or advertising. Think of things like declarations of saying that it's "Dolphin-free tuna" that has certainly been an area of litigation in the past. I'm thinking about false disclosures or representations, and that might be along the B2B relationships. Where you are omitting information or misstating information to a company that you are a supplier to. Lots of ways that things can be contorted, and misrepresented, and misstated, omitted, and if it is done intentionally, then we're going to consider it fraud. Doug:              Dan, I can't say enough good things about the report that came out and, certainly, my hat is off to you, and Catie, and everybody who contributed to that. I know that was a massive effort. What I think is so elegant about that report is that many of our listeners struggle with how to get their arms around ESG, this sprawling issue is so new, it's so different.  The report begins with a construct that's familiar to everybody who deals with fraud, that famous ACFE fraud tree. And the report adds a leaf, if you will, if you look at that tree at the bottom row, that provides an ESG example for the fraud tree as everybody knows it. And then it was very elegant how you added that branch, if you will, for the ESG, the non-financial reporting with nine different twigs to describe a taxonomy there, and then the leaves with the examples, it was really well done.  So anybody familiar with fraud and the fraud tree. Anybody who has been involved in developing procedures to prevent fraud or to detect fraud on the audit side, you can just use that reference document and get pretty close to how you think about ESG fraud to prevent it and detect it.  Another thing I would observe that the human rights, no product was made with child labor. Non-financial reporting and compliance exists in a lot of places out there, and it can be possible, it can be easy for stakeholders to compare information that arises from different reporting channels for consistency. For example, Dan mentioned one of the claims could be, "None of our products use forced labor".  In the U.S. there's a law called the The Uyghur Forced Labor Prevention Act. That has the rebuttable presumption that products made from a certain area, in China, if you cannot prove that those products were made absent forced labor, the assumption is that they were made with forced labor. And the Customs and Border Protection is seizing products at the docks before they come into the country, and waiting on companies to provide evidence that the products are forced-labor-free.  So if you have claims on your website, or on products, or in contract documents that they're forced labor free, and the Customs and Border Protection is reporting that your goods are being held and not allowed into the country. There is an inconsistency there that can be embarrassing, at a minimum, to companies. And it can cost the company sales, customers, and reputational damage if it turns out that those claims cannot be supported. Dan:                Yes, so just picking up on what Doug was talking with The Uyghur Forced Labor Prevention Act, this is a big stick for the government in they have a presumption of guilt, so to say. That if they suspect that a good has any raw material or input within it because it is in whole or in part of your good that's being imported, is suspected of having forced labor in it, and that means every tier of your supply chain down to the raw material or seed, if it's an agricultural product. If there is a suspicion that it is tainted by forced labor, it will not be allowed into the country unless you can prove otherwise. And, I think, it's going to become, increasingly, challenging for companies to know their supply chain inside and out. And from a fraud perspective, whether any part of that supply chain is deceiving the rest of the supply chain on whether or not it's tainted by forced labor.  I was just reading over the holidays, there is a tremendous report that came out from Sheffield Hallam University, in the UK, around the various risks in the auto industry for being tainted by forced labor in the production of raw materials. it's really a very difficult area, and it is something that our clients are coming to us, asking for help around.  Dan:                Catie, do you have some other thoughts around the regulatory environment in which this is probably just one small piece? Catie:              Yes, Dan and Doug, you both brought up a great point of there are current existing regulations that apply to certain areas of ESG. But what we're seeing is a global movement towards more overarching regulations across different jurisdictions. So, for instance, last year, the European Union approved the Corporate Sustainability Reporting Directive Regulation, also called CSRD, and that sets reporting standards for entities that meet certain EU reporting thresholds.  In the UK, there IS BEIS, which is focused on climate-related disclosures for entities that operate in the UK. And then, of course, for our U.S. listeners, I'm sure you all have heard about the coming SEC final rule when it comes to climate disclosures. We anticipate that being finalized as early as April of this year. But all that to say that the regulatory environment, itself, from an ESG perspective, there is a growing recognition that there needs to be standards that companies adhere to. So that there is comparability across the landscape when it comes to ESG data. Because it is hard for whoever is looking at this data to discern what certain data points may mean because they may be defined differently.  So these standards are helping to create an environment that is more accountable and more comparable which, hopefully, will help clarify some things and clarify the way that you go about reporting. That said, even though some of those regulations are very early stage or haven't been released, yet, there are already consequences for misreporting.  So we saw last year, or in the past couple of years, that Goldman Sachs was fined $4 million and BNY Mellon was fined $1.5 million for what were considering material misstatements. And in the future, we see that more frequent consequences could be around the corner. But I can't speak to what that looks like just, yet. Dan, do you have any experience, or Doug, in terms of any additional consequences that you're seeing for misreporting of ESG data? Dan:                Yes, well, for me, as you said, there are consequences from misstating, publicly, the information. There are just a ton of business consequences of misstating the information. So, for example, I myself was involved in an investigation in which there was a licensor of images for the front of T-shirts and the like. There was a requirement that none of the production would take place in Bangladesh after the tragedy in 2013, in which a building collapsed, killing more than 1000 apparel workers.  And, so, there was a requirement that no production take place in Bangladesh, and there was wide-scale deception on that point. Such that there was a lot of production going on in Bangladesh, but it was being misreported to the licensor as being produced in India or in other jurisdictions throughout Asia. That finding, in the investigation that we carried out, was the subject of whether or not a billion-dollar license would go forward or not. Doug:              I can see several potential risks or consequences for misreporting or misleading content and reporting, and they vary according to the reporting channel. For example, there is ESG content in financial statements, in income statements and balance sheets. There are reserve estimates for contingent environmental liabilities.  Something that's a little newer is asset values for Emission Reduction Credits or expected costs in the future for Emission Reduction Credits, if that's part of a company's strategy for reducing greenhouse gas emissions. Those have a vintage and the value depends on the vintage. If those are, knowingly, misstated, you're subject to all the things that come with that in financial reporting, disclosure controls, and procedures, and the like. For misrepresentation and misreporting in the Form 10-K, the analysts and the investors are using this to make investment decisions. There are shareholders who are quite happy to file proxy filings or to file suit by claiming to be misled for the content in there. Some of those are starting to see the light of day or to get quietly settled. There was an instance of a major European bank, an employee blowing a whistle, publicly, saying that their screening process for companies to include in an ESG index fund was just not very good or, maybe, a sham.  So there's the reputational damage that can be a hit to a company and the market cap for many companies, the reputation, the intangible value, exceeds the value of PP and E - Plant Property and Equipment. So intangible value and brand value is something to watch out for too and that can take a hit, with misrepresentation or loss of reputation in ESG and non-financial matters. Catie:              And, Doug, just to piggyback on that point, there's the financial disclosure side of that, but there's also, as we talked about, the intangible side of that. So customers are increasingly wanting to purchase sustainably made goods, and engage with companies that align with their own personal moral values and beliefs.  And, so, when they learn that whether it's a good that's claiming to be sustainably made is actually unsustainable, you could lose members of your customer base. At times it inspires boycotts and protests and, especially, in the age of digital media, just imagine someone telling their community about their experience, and that going on Twitter, or TikTok, or something of that nature.  Those are some of the risks that we're seeing from not a regulatory penalty approach. But also there are consequences when it comes to your customer base, the value of your brand, and your brand reputation. Doug:              We've discussed a lot of different data, a lot of different stakeholders, a lot of different needs. So how do companies manage this kind of reporting. When everybody wants something different. There are different ways to slice and dice. How does a company get their arms around this and make sure that it's right? Catie:              Yes, that's a great question, Doug. So as I said before, there are a lot of different frameworks out there. But they are working to consolidate the frameworks and to consolidate the data expectations of those frameworks.  From what I'm seeing, it appears that SASB, GRI, and TCFD, all of which I previously mentioned, are emerging as the big three of ESG data disclosure frameworks. And it's important that our listeners understand that while these frameworks are not required for disclosure, they can help guide your reporting. And, ultimately, they can help your company be more aware of any potential fraud risks and avoid being susceptible to associated fraud with those activities and reporting.  Of course, the frameworks, themselves, are not mandatory for disclosure. They are, as I said, guidelines and we talked, previously, about the different regulations that are emerging. I think the thing that's important to know here is that some of these frameworks are being utilized to inform those regulations. So we know that the SEC climate disclosure draws heavily from TCFD reporting framework.  And, so, some of our clients are asking us to conduct TCFD reporting gap analysis to help them prepare for those upcoming SEC-required disclosures. We have clients who are asking us to do assurance readiness services because they know that they will fall in that year one reporting group, the large accelerated filers for the SEC.  And, so, having us test their existing processes, internal controls, things of that nature, and validate that their data is complete and accurate is something that they're doing to prepare for the upcoming regulatory framework. So the way to think about those frameworks is that it's a helpful way for you to organize your disclosures in anticipation of future reporting requirements.  Dan, do you have any thoughts from the fraud risk perspective of how those frameworks can usually help you. In terms of guarding against any potential misreporting or intentional or unintentional? Dan:                Yes, so when I think about this, I usually do go back to the ACFE's Fraud Triangle, thinking about incentives and pressures, the opportunities for fraud, and the rationalizations one might apply to committing those frauds. So when I think about reporting what is the role of that report?  Is it going to a regulator?  Is it going into a corporate social responsibility or a marketing publication? All of those bear different kinds of risks. So in terms of on this reporting topic, that people and companies should be thinking about taking an inventory of all the ways in which that ESG information is going out to the public, across those different channels. And ensuring that as they're building up their capabilities and infrastructure to maintain good data quality, that it is also ensuring consistency across all of those reporting channels.  What I anticipate, and I think we're starting to see it, is that there will be cases where the same information is reported in one channel, but is inconsistent with how it was reported in another channel, and that will be held against the company. You should not be finding yourself saying one thing to the government and something else in a publication. Doug:              Dan, I absolutely agree with that. I would say to this question, it comes back to a familiar trilogy that we hear as the answer to so many questions, and that is people, process, and technology. And I'll start at the end and work my way back, there are many vendors offering technology fixes and even companies, in-house, building technology fixes to gather and report data.  But the data and the information is only as good as the process it took to come up with the data. You can automate the wrong process and just get the wrong answer faster. So you back up to the process and say, "Well, since this non-financial information originates in so many parts of the company, and even from other companies, suppliers, customers, business partners, and the like. What is the process to get them?" There are also challenges I see on reporting periods. Governments, like EPA, may have an annual reporting process. There are companies with a non-calendar fiscal year, who need to report some of this on a fiscal year basis. So where are the reporting periods? What is the process to collect information and report to a state agency, to a stakeholder, to a customer? So those processes need to be nailed down, and that's where that wonderful COSO internal controls framework comes in. Just follow that and apply it as it's appropriate. And because that data and information comes from so many different sources, I encourage people to have the right people involved.  If companies establish a cross-functional team and get folks from all the places who provide this information. Real estate, operations, safety, procurement, R&D if they understand their roles and responsibilities in collecting this information to enable the kind of reporting that Catie has mentioned and others, then that goes a long way to making the process more effective and more efficient. Dan:                Yes, and I would like to add on to what Doug was saying. That in terms of the fact that this information is coming from different parts of organizations, that haven't necessarily undergone third-party assurance procedures. That this is a transition period here where, I think, a broader spectrum of people, within an organization, are going to be changing their mindset around the accuracy and completeness of the data because they know that they are subject to that third-party assurance. Catie:              And, Doug, you had mentioned, I think, very rightly, that having the right team in place is critical to being able to have the right processes and technology also in place, to ensure that your reporting is complete and accurate. And we're seeing on the client side that a lot of our clients don't, necessarily, have the resources in place to start to organize that.  So I wanted to ask, in your opinion, and Dan, feel free to jump in. How important is it to not just assign one person to do all of your ESG reporting? But how important is it to have that cross-functional team approach to these non-financial disclosures? Doug:              I think it is absolutely essential. One structure that I see work a lot is to have a steering committee. To set strategy and to be plugged into those reporting frameworks that you've mentioned, Catie, and some of the customer demands and organizational strategy and where things are going. And a more tactical working group that's closer to operations, and the systems, and controls to really modify those systems and controls and talk to each other.  A couple of things I've seen work really well. I've seen those committees be assembled, and people show up, and they don't know why they're in the room. And it really helps to have a coach or an external resource to help facilitate all that. To make sure that people are talking the right language and not talking past each other. So you get everybody on the same page to take actions in ways that are aligned with the company objectives, that helps a lot.  A couple of functions that I don't see on those teams but, I think, should be there a lot more than they are IT, for sure. And many of our listeners are from accounting, I would say accounting. I don't see on those cross-functional teams as much as I think they should be. Much of what is required for the sustainability reporting, it comes from accounting. You get utility bills from accounting. Get a list of assets from accounting. Get a list of our ten largest customers from accounting. Accounting has the master key to a lot of this information. But the information that's in company systems, in my experience, was not designed for the way the information needs to be reclaimed and used now. So there are some changes that need to be made in accounting to enable this reporting and to enable the systems and controls. To, then, ensure accurate reporting, verifiable reporting, and the fact that we tighten down the controls so that we can prevent the possibility of fraud. Dan:                Yes, great points, Doug. I really appreciate you bringing up the steering committee. Someone at the top of an organization that is there to set strategy. And I think that it is common, and it will become more commonplace, to have that steering committee require that any fraud risk assessments, that are being done within an organization, include ESG fraud as part of what they're doing.  And in conducting a fraud risk assessment that is a stress test, that's looking for ways in which various kinds of scenarios. Such as the scenarios we brought up in our report with the ACFE, of ways in which ESG fraud could be committed. And then looking at whether the controls in place within the organization, are sufficient to prevent and detect or detect those occurrences.  So, Doug, I know that you've been contributing to an exciting report, that's been recently released from the IMA. Could you give us a few highlights in that regard? Doug:              Sure, I'd be happy to. I was one of the primary authors of this document, the only non-CPA on the team. I provided the ESG specialist input for this very important report. It's a COSO report and IMA is, of course, a member of COSO and their leadership had a terrific role in pulling this together. And it will resemble a lot kind of the report you've had major involvement with from the ACFE, on fraud, ESG fraud. In that it begins with a framework that everybody knows and is very familiar with, the COSO Internal Controls Framework, and there's something old and something new.  There is a summary of some of the key points of the COSO Internal Controls Framework, the components, and the points of focus. And on each of the components there's some information demonstrating how the internal controls framework can be applied to ESG.  So that in terms of non-financial management of information, and of reporting, and of communications, and of control environment. It can be applied and it points you in the right direction on how it can be adopted to improve the effectiveness, and the efficiency of company organization, management, and reporting. I encourage everyone to read it and use it. [00:36:50]        Announcer:    This has been Count Me In, IMA's podcast. Providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.