EMBEDDING ANALYTICS INTO INTERNAL AUDIT
Ashif Abbas, Business Analyst
We are living in a VUCA world that is gaining REFLEX. But what does this mean? The rapid growth and development in technology have given us some of the best products ever seen, from smartphones to driverless cars. This improved connectivity has made our world more volatile, uncertain, complex and ambiguous (VUCA), with the result being an explosion of data. However, the growth in data is rising faster than technology can keep up with, thereby Rapidly Enhancing Complexity (REFLEX) in developing better tools to handle data. While the growth of data and development of analytics tools and techniques is one part of the equation, to keep up with this constant transformation, the other part is the need to embed analytics in operations to drive better outcomes, like increasing top-line growth, improving customer and employee engagement, cost reduction, streamlining procurement and mitigating risks. At HLB HAMT Chartered Accountants, we are working on a roadmap to embed analytics into our internal audit function in the coming years to ensure we remain relevant to our clients, employees, and wider stakeholders. Such a transition will help us deliver internal audit engagements that are:
Like any initiative, embedding analytics into the internal audit function starts with setting the vision, defining objectives, designing KPI’s and then asking relevant questions along the way:
- What are our current analytics capabilities?
- What are our desired analytics capabilities or the future state?
- How and where to implement those capabilities and solutions?
- How to reposition our resources to drive these efforts?
- How can we use analytics to be more strategic not just for our clients but also with competitors?
Once the vision and the strategic direction are set, the next step is to design the data analytics competency model. I believe a deeper understanding of the competencies needed to succeed in this journey will help organizations of all sizes to bridge the gap between people, processes, technology, and data. According to a survey conducted by PwC in 2018, 52% of organizations in the Middle East see the lack of in-house data analytics skills as a challenge compared to 53% globally. In fact, embedding analytics in internal audit is 7-step approach analytics in auditing is a game-changer. What I described so far is just the first step. A leading stationery manufacturer required rationalizing their portfolio of 720 SKU’s (stock-keeping units/ products) to turn around the widening losses over the years and to remain competitive. The task was to rationalize its portfolio based on two criteria:
- What products to discontinue manufacturing and why?
- What products to continue manufacturing and why?
Traditionally, they relied on profit and loss accounts by department or sometimes by category, not by SKU, to find answers to such questions. Such an approach was not effective given the lack of visibility and granularity at the SKU level. As part of the team, I drew up upon multiple internal and external sources of data to shed light on the status of the portfolio. A closer look at the analysis revealed that around 300 SKUs were responsible for less than 7% of the total revenue and almost 20% of total expenses. Using analytics, the client was able to make confident decisions on each SKU and to revise their portfolio to 386 SKUs, improving profitability and their market positioning. In another case, one organization in the hospitality industry had problems with the high procurement cost of raw materials, despite strategic partnerships with vendors. Traditionally the approach is to validate the reliability of the procurement cycle by checking purchase orders, invoice and GRN (goods received note) to ensure the effectiveness of internal controls.
However, in this instance by taking an insights-driven approach enabled by analytics to be helped to understand all purchase orders over a period of three years. The analysis revealed contrary to expectations, the business was making purchases outside strategic vendors. Furthermore, for some raw materials, they were overpaying by as much as 30%. The analysis was drilled further down into the data to shed more light on the nature and extent of the purchases. To do this, the organization had to answer specific questions like what made the procurement manager to approve purchases away from strategic vendors? Why there was a significant variance in procurement and whether procurement expenses were reported on time? If quality and on-time delivery are key, then why initiatives were not made to establish new strategic partnerships? Overall, analytics helped to go beyond a checklist approach and make recommendations on rationalizing their procurement processes for improved savings.
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Living with Blockchain
Most governments, services firms and accounting bodies around the world have invested their time to explore the opportunities offered by blockchain technology. Blockchain is an accounting technology and is concerned with the transfer of ownership of assets and the maintenance of a ledger of accurate financial information.
For accountants, using blockchain provides clarity over the ownership of assets and the existence of obligations, and can dramatically improve efficiency and reduce costs. Alongside other automation trends such as machine learning, blockchain will lead to more transactional-level accounting – but not by accountants. Instead, successful accountants will be those who assess the real economic interpretation of blockchain records, marrying the record to economic reality and valuation.
Blockchain is a replacement for bookkeeping and reconciliation work, and this could threaten the work of accountants in those areas while adding strength to those focused on providing value elsewhere. For example, in due diligence processes in mergers and acquisitions, distributed consensus over key figures allows more time to be spent on judgmental areas and advice and promises an overall faster process.
The spectrum of skills represented in accounting will change because of the move to a financial system with significant blockchain elements. This will offer many opportunities for the accountancy profession. Accountants are seen as experts in record keeping, application of complex rules, business logic and standards setting. Accountants can also work as advisers to companies considering joining blockchains themselves, providing advice on weighing the costs and advantages of the new system.
Blockchain also has applications in external audit. Performing confirmations of a company’s financial status will be less necessary if some or all of the transactions that underlie that status are visible on blockchains. Blockchain will result in a profound change in the way audits work.
Accountants need not be engineers with detailed knowledge of how blockchain works. However, they will need to know how to advise on blockchain adoption and consider the impact of blockchain on their businesses and clients.
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Meet UAE’s Most Influential Women
Meet UAE’s Most Influential Women
The UAE government has made significant progress on the women empowerment front and they have been giving equal constitutional rights to men and women. A glance at the list of popular UAE women who have been conquering heights in diverse fields proves the fact. Here, we have listed some of the most influential UAE women, who have been successful in creating their own niche in UAE as well as across the globe.
Sheikha Lubna is the first woman to hold a ministerial post in the United Arab Emirates. One of the most iconic figures of the country, Lubna served as the Minister of State for Tolerance, Minister of State for International Cooperation, and Minister of Economic and Planning of the United Arab Emirates (UAE).
Impressed by her hard work and determination, His Highness Sheikh Mohammed bin Rashid Al Maktoum awarded her the “Distinguished Government Employee Award” in 1999 and appointed her as Chief Executive of Tejari. It was under Lubna’s leadership that Tejari won awards for the World Summit for Information Society’s “Best e-Content Provider in e-business” (Geneva) and the UAE Super Brands Council’s “Super Brand of 2003”.
Fatima Al Jaber
Fatima Obaid Al Jaber holds the distinction of being the first Emirati woman to be elected to the board of directors at the Abu Dhabi Chamber of Commerce in 2009. She currently serves as the chief operating officer of the United Arab Emirates-based Al Jaber Group.
The country she resides in might be conservative, but not her thoughts. She is of the notion that success is dependent on skills, preparation, and ambition, and not gender. An influential businesswoman, Al Jaber has been instrumental in overseeing the construction of some of the most iconic projects in the UAE.
“A woman’s passion about something will lead her to achieving what she aspires, and that’s why she should pursue her interests.”
These are the words by Mariam Al-Mansouri, the first female fighter pilot in UAE. Mariam, who has led UAE mission airstrikes against ISIS over Syria, is a true inspiration for women across the globe.
Mariam Al-Mansouri is quite popular across the country, which is evident from her large social media following. Her courage and determination have helped her earn the titles “Lady Liberty” and “ISIS’s nightmare.” She was honoured with the Mohammed bin Rashid Pride of the Emirates medal for excellence in her field.
Expo 2020 is one of the most anticipated events in UAE and winning the bid to host the expo was not an easy task. It is the result of hard work and determination of many and one person who played a significant role in winning the bid was Al Hashimi. She is the Director general of the Expo, who also happens to be the UAE Minister of State for International Cooperation.
Reem Al-Hashimi is the chairperson of Dubai Cares, a children’s education charity established by HH Sheikh Mohammed Bin Rashid Al-Maktoum.
Nayla Al-Khaja is the first female film director/producer in the UAE. She made history at Cannes by being the first Emirati filmmaker, whose project got accepted by the festival’s Producers’ Network.
Filmmaking being one of the hardest areas to work in as a creative, Nayla Al-Khaja’s journey had never been easy. It was not all roses in the garden for Nyla; she had her shares of ups and downs but was eventually successful in building her own empire.
Nayla Al-Khaja was awarded the Best Emirati Filmmaker award at DIFF in 2006 and in 2017 she won the jury’s special prize for short fiction at the Italian Movie Awards.
Kattan is the person behind the billion-dollar beauty empire, Huda Beauty. A makeup artist, beauty blogger, and entrepreneur, Kattan is one among the “ten most powerful influencers in the world of beauty”.
Kattan rose to fame by doing makeup tutorials online and soon emerged as one of the biggest online beauty sensations. Kattan who is ranked #1 on the “2017 Influencer Instagram Rich List”, earns $18,000 per post of sponsored content.
Amal Al Qubaisi
Amal Al Qubaisi, the President of the Federal National Council, is the first female leader of a national assembly in the United Arab Emirates and the Arab world. Prior to her current role, Amal Al Qubaisi served as the chairwoman of the Abu Dhabi Education Council.
Amal Al Qubaisi is the senior most female politician in the Arab world who has been inspiring young women to cross barriers and conquer the world.
Amina Al Rustamani
Amina Al Rustamani is the former group CEO of TECOM Group, who started her career as an electrical engineer at the company. An influential and charismatic business leader, Al Rustamani was ranked number 9 in the CEO Middle East’s fifth annual list of the world’s most powerful Arab women, published in 2015. In the same year, she grabbed the title of Advertising Person of the Year by Dubai Lynx .
Al Rustamani took active participation in the development of Dubai Design District and Dubai Wholesale City.
Noura Al Kaabi
Al Kaabi is the minister of Culture and knowledge development for the UAE. She served as the minister of state for Federal National Council Affairs before she was assigned the current responsibility. She has also been the chairperson of twofour54 and Abu Dhabi Media Company.
Al Kaabi made it to the list of ‘Top 100 Global Thinkers’ by Foreign Policy Magazine, the first Emirati to have achieved the distinction.
She was honored with “Business Woman of the Year” title at the Gulf Business Awards and she also received the “Young Achiever Award” at the AmCham, Abu Dhabi’s Annual Excellence Awards.
Nahla Al Rostamani
Nahla is not your conventional type of woman who used to play with dolls when she was small. She was rather attracted towards racing cars and was successful in breaking through the glass ceilings and fulfilling her passion of becoming a racing driver. Al Rostamani is the first female Emirati F3 driver.
According to Nahla, “I had to stand tall and prove to society and to my culture that I am not doing anything wrong, I am just pursuing my dream and passion. As a result, I have gained respect, love and more loyal friends.”
She is a role model for other women to follow their dreams and to become their own boss.