Reference: IMA Data Analytics & Visualization

Fundamentals Certificate – Course Script

Becoming Data‐Driven

Introduction

This module will introduce changes to the accounting and finance profession that are on the
rise caused by advancements in technology and discuss the potential lasting impact of these
emerging technologies.

Expected Learning Outcomes

Upon completing this module, you should be able to:

1. Recognize the impact of technological advancements on the finance and accounting

profession;
2. Describe the typical life cycle of data;
3. Explain the impact data governance has on business and its stakeholders; and
4. Define types of data analytics and how each progressively creates value within an
organization.

Lesson 1: Changes to the Profession

Section 1: Technology is Changing

As technology transforms the management accounting profession at an ever-increasing rate,

are you concerned about having the necessary skills to further your career? Do you want to
enhance your skill set but don’t know where to start? Through this lesson, we will define the
essential knowledge and skills needed to adapt to the modern workplace and set the stage for
how you will be able to develop these skills.

Video: The Future of the Profession

Now, let’s hear from IMA’s President and CEO, Jeff Thomson as he discusses his thoughts
on the future of the finance and accounting profession.

Video Transcript (Est. time: 13:28 min):

Hello, I’m Jeff Thomson, president and CEO of IMA, the Institute of Management Accountants.
And I’m proud and honored to be speaking with you about the future of the accountant in
business, especially in a digital age. When you think about the challenge of digitalization of
the value chain, it really is a challenge, but it’s also an opportunity. So think robotics process
automation, think automation in general. Think about machine learning, cognitive computing.
The challenge of this course is to how to harness all of these technologies to add value. But a
challenge also relates specifically to our profession. Will this automation result in fewer jobs,
displaced jobs? I would argue that it will result in different types of jobs. Jobs that will add more
value of foresight and insight to the organization, but only if we commit to upskilling in areas
such as data analytics and data visualization.

So let’s talk briefly about the CFO team today and how it’s evolved over time. And as many of
you know, I was a CFO in industry during this evolution of the role expansion of the CFO and
the CFO team. So in the past, the CFO team had a very, very critical fiduciary responsibility

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and that was safeguarding of assets, what we would call value stewardship, protecting
value, internal controls, accurately and fairly reporting on the financial condition of the
corporation. But over time, that role has expanded to include those table stakes plus additional
responsibilities in the area of value creation, merger and acquisition activity, financial planning
and analysis, and much more. So the evolution has resulted in greater expectations for the
CFO and his or her team. In fact, the CFO is often referred to as the chief futures officer or the
chief value officer. In many cases, the CFO of large and small companies have responsibility
for operations, for strategy, for IT, and for more. So with this expectation, with this challenge
comes the opportunity, to add greater influence and greater relevance as individuals and as
professionals in accounting.

So technology and analytics is sweeping us, and moving at such an incredible pace that you
almost can’t keep up with all of the technology, but really we must all embrace technology.
Millennials are digital natives. It comes very, very naturally. But even in the middle of our
careers, as we see some jobs being lost or displaced, it’s important that we learn new skills
and new capabilities, especially in data analytics, data visualization, data governance, and
even storytelling. When we’re trying to influence the organization on a business case or a new
merger or a new product or service, we have to tell a story. We have to tell a story beyond the
numbers that’s futuristic, inspiring, and leads to great outcomes.

But the other aspect of learning and embracing technology is not just the Millennials and those
mid-career in terms of upskilling and staying current, and harnessing technology, but it’s also
tone at the top. It’s critically important that those at the top embrace analytics as the new
science of winning in the market, of being a competitive differentiator, to know your consumers
even better than they know themselves in terms of needs and wants and desires of future
purchases. So it’s very important that senior leaders embrace technology, not necessarily to
become experts in programming and coding, but to understand the value that analytics and
technology can bring to a differentiated value proposition to support training, courseware,
education, and more so, many would say that it’s crunch time for finance and accounting. You
know, finance talent models are evolving quickly with a premium placed on data scientists,
business analysts, and storytellers. Everyone’s talking about it, the big four, Downmarket,
McKinsey, Accenture, etcetera, etcetera. And so this is the trend we’re seeing to embrace
technology, but to also step up and upscale in the area of analytics so that we can add more
foresight and insight. And the softer skills of us as humans-empathy, active listening,
professional judgment, professional skepticism-really is not replaceable by a robot.

So some key messages, automation’s been around for a long time. What’s different now?
Look, we’ve been through multiple industrial revolutions. So why is automation the talk of the
town, so to speak, whether you’re a consumer or a professional. Well simple, the reason it’s
different this time is because we’ve programmed robots to be much smarter to think, to
synthesize, to react, to adapt. However, keep in mind that it’s human beings doing the
programming and harnessing the computing and cognitive power of the machine and not vice
versa. Second key message, look, we have a choice here. We’re at a turning point in our
profession. We could choose to be more relevant and influential or less relevant and influential.
Think about it this way. As automation over time replaces or displaces more routine, repetitive
tasks, it is a reality that some of our jobs, some of our tasks will go away, especially in auditing
and transaction processing. That’s at one end of the spectrum. At the other end of the
spectrum, if we say, you know what? This advanced analytics and providing insight and
foresight is not what I was trained to do as an accountant. It’s really not for me. I’m going to

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outsource the analytics and the deeper thinking, the deeper judgmental capabilities to a
consultant, to a machine, to whatever. Well, my question to you is what’s left? What’s left of
our great profession. So this is a call to action for us to upskill in strategy management, data
science, data analytics, and more. It’s a business imperative critical to the future of our
profession. So nothing less than our relevance and influence is at stake. And when you think
about the rate of change of technology, I mean just two years ago, who knew what blockchain
is or was. Today we’re talking about more and more use cases of blockchain in financial
services and insurance. And more, five years ago we weren’t even aware of what robotics
process automation is all about. And now there’s hundreds of use cases in organizations large
and small to create greater operational efficiencies. And then the final point, closer to home
as your CEO, CEO of IMA, is we are absolutely committed to being leaders in preparing you
for a great future. By the way, that future is now.

So I’ve referred to data science several times, and it could be a little bit intimidating. Change
is hard. Upskilling is necessary, but data science is really the overlap, the intersection of three
broad domains that I’d like to describe to you in turn. The first is business context. You know,
whether you are an FPA professional, financial planning and analysis, a statistician, an
econometrician, regardless of your level of analytical horsepower, you have to understand the
business question being asked. What is the problem we’re trying to solve? What new
discoveries are we trying to seek? As we mine through data and understand data, what are
the opportunities to learn something else to put us at a great competitive position? So business
context, understanding how customers behave, understand how value and cash flows in the
organization within your industry vertical is very, very important. To ask the right questions
and to seek answers in the data as a data explorer, business context, critically important. The
second element of data science is the technical modeling, some level of statistics, some level
of knowledge of forecasting tools and techniques. And this can be a little bit intimidating and
overwhelming, but it also is very manageable. If you focus on the problem at hand and the
opportunities to be seized, I’m not suggesting that every finance and accounting professional
be a Ph.D. statistician. But I am suggesting that the more data science, the more statistics you
know and can apply, the stronger you will be in this brave new world of digitalization. There
was actually a book written called exploratory data analysis written by a famous statistician.
And that very much is what statistics is all about. It’s not just reporting averages and standard
deviations, it’s to kind of seek new possibilities by mining through large sets of data and doing
forward-looking analysis. In fact, according to Glassdoor, data scientist is the No. 1-ranked job
in terms of satisfaction and entry-level pay. So we need to infuse more and more of that at a
reasonable pace, at a reasonable level into our profession. And then the third component of
data science is the actual applications. It could be Excel, advanced analytics and data mining
and Excel. It could be open-source software like R, visualization, like Tableau, Python, Power
BI. So learning these tools and application capabilities is also critically important.

I made reference earlier to a book that while it’s over 12 years old is timeless and it’s called
Competing on Analytics, The New Science of Winning. It’s one of my favorite books because
the title speaks volumes for what we must be doing in a competitive age. When you think
about winning in the market, you think about apps and things that face consumers, not things
that are kind of in the background but make no mistake about it in an incredibly treacherous
competitive environment with geopolitics at play, nontraditional competition analytics is and
can be the new science of winning. But you know, analytics should not be equated with
information technology. It is the human and organizational aspects of analytical competition

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that truly differentiates. You know, there is a language barrier though when we think about
analytics, data scientists, IT professionals, finance and accounting. We’ve got to get over it.
We’ve got to solve it. We’ve got to become data translators. Finance and accounting
professionals need to learn and understand more about IT. IT and information systems
professionals need to learn and understand more about the language of finance and
accounting. Because guess what? At the end of the supply chain, consumers and
shareholders are expecting that we’re doing that translation. So there’s plenty of opportunities
to upskill in these areas and to speak the language of the machine and speak the language
of business and who better than management accountants, CMAs, CFO teams to do that
translation to create great, great outcomes. How to prepare for the future of work.

In summary, look, there is no simple or prescriptive solutions. The environment is moving too
quickly and too rapidly. Technology is evolving very, very quickly and rapidly, and we must not
only keep pace, we must stay ahead. So as we embrace this new future, which is here today,
we need a combination of technological know-how, problem solving, and critical thinking as
well as the human skills, the soft skills as perseverance, collaboration, and empathy. We are
absolutely committed to preparing you today and in the near and future, whether it’s five years
out or 10 years out, that’s our obligation to you. Thank you.

Innovation and Change

These emerging technologies continue to drive innovation and change throughout the
business landscape. While these specific trends can seem abstract, accounting and finance
professionals do need to have an understanding of what these technologies are.

Arguably more important than any specific technical knowledge, however, is the ability to
leverage these innovations to become strategic partners.

Section 2: Keeping Up With the Trends

As a management accountant in the digital age, it’s important to have a fundamental working
knowledge of technological trends. Those include robotic process automation, artificial
intelligence, and blockchain.

Important Technology Trends Defined

Robotic Process Automation (RPA) is an advanced and intelligent form of process automation
leveraging software tools (or software robots) to effectively and efficiently perform tasks
traditionally performed by humans.

Artificial Intelligence (AI) is a field of computer science concerned with empowering machines
to think, behave, and act like human beings to draw conclusions and make judgements.
Examples include speech recognition, machine learning, and natural language processing.

Blockchain is a decentralized and distributed ledger of encrypted information. Uses for

blockchain include cryptocurrencies, smart contracts, and transparent proof of work.

Management accountants can leverage emerging technologies such as AI and RPA to

streamline processes and decrease the amount of time spent on repetitive tasks. They can
instead focus their time on strategy and decision making.

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Leveraging Technology For Leadership

Once accounting and finance professionals are armed with the knowledge of which technology
trends are currently generating attention and attracting investment, there are several
approaches and tactics they should embrace as they leverage technology to elevate
themselves as strategic thinkers and leaders.

Communicate Implications

Be able to communicate the implications of technology for the organization and its strategic
priorities. Not every new technology platform or tool is going to be equally helpful for every
organization. Regardless of whether it’s RPA, AI, or some other emerging technology, every
tool has its own set of pros and cons. Taking an objective perspective on technology and
articulating the pros and cons of these tools are critical steps for effective leaders to take in
an increasingly digital world.

Link Stakeholders

Link different stakeholders across the company into the conversation. One of the most
common pitfalls that can trip up even the most sophisticated and well-prepared organizations
is when important dialogue occurs in silos. Discussing technology tools and options with only
the accounting and finance team isn’t going to drive change and might very well lead to project
failure. True leaders and strategic management teams understand that involving as many
participants from different departments as possible creates a more diverse team, better
solutions, and more robust use cases.

Identify and Present Easy Wins

Identify and present easy wins. Having a conceptual understanding of, and a vision for, how
technologies will eventually transform a profession, subset, or field is a great start but doesn’t
usually generate actionable ideas for professionals to implement. After communicating the
potential of a technology or process and linking in a variety of stakeholder groups, presenting
goals that are achievable in the short term and documenting first steps toward achieving them
will get the ball rolling within the organization, increase the likelihood of stakeholder buy-in,
and help to create enthusiasm for future projects that are likely to be more complicated.

Section 3: The Changing Role of the Management Accountant

As management accountants adapt to new technologies, they are well-suited to increasingly

assume the role of facilitator, using the breadth and depth of their knowledge to find
opportunities for improvement and craft a shared vision for product stakeholders.

Management Accountants' Skills

Management accountants already possess most of the skills needed to implement advanced
analytics: They have a holistic view of business, they intuitively understand the interrelation
between financial and strategic business decisions, and they have strong written and verbal
communication skills. When management accountants can combine these skills with
technological knowledge and increased aptitude, they have the power to add further value to
their organizations.

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Section 4: The Big Picture of Data

The best way to begin is to learn the terminology surrounding data. The first term is
“architecture,” and just like when designing a building, the architecture is the overall structure
of whatever it is we’re trying to create. The next term is “solutions” because the only 100%
consistent aspect of any analytics project is that we are trying to solve some problem or answer
a question. “Solution architecture” may take many forms from a simple report performing
calculations once a week to an automated artificial intelligence (AI) ultra-high-frequency
trading application. “Patterns” are templates or guidelines that solution architects will reuse
frequently.

Architect a Solution

In our new data-focused terminology, we hope to architect a solution using an established

pattern. There are different types of solutions that may use different patterns and/or expertise.
At the highest level (a.k.a. “least detailed” or “10,000-foot view”), we typically group solutions
into domains.

Just as a building architecture may require domain solutions in landscaping, interior design,
plumbing, and more, an analytics solution architecture may include domains such as data
storage, data creation, and different business specializations. To architect effective analytics
solutions, we require knowledge and skills in multiple domains of business data.

High‐Level Domain Design Pattern

Next, we use the following high-level domain design pattern: data creation, data storage, and
business domain(s). The business domain may include a single business domain, such as
marketing, or many, such as marketing, supply chain, and finance.

Data Governance, a set of processes and policies that help an organization manage and
secure its data, is an integral part of every domain.

Section 5: Business Domain Pattern

What does the interrelation of data creation, storage, and business domains look like?
Consider a traditional business selling widgets directly to customers.

Data is created by customer activity such as purchasing widgets or browsing websites. Data
integration moves data generating application and into data storage. Raw data transactions
are cleaned and shaped with other data into an aggregate data store. Aggregate data is used
for descriptive, diagnostic, predictive, and prescriptive analytics by various business domains.
The business domains use the analysis to make business decisions on how to sell more
widgets. Business activity resulting from business decisions influences customer activity.

The entire point of this cycle is for the business to better influence the customer. This could
be through product design, marketing, support, warranty, shipping, inventory, etc. The
business exists to make decisions that result in value to its customers translated into profit.
Therefore, the goal of an analytics solution architect is to accelerate the cycle of customer
activity to business activity.

https://sfmagazine.com/post-entry/january-2019-leverage-technology-to-become-a-strategic-partner/

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Data Science

This is data science: the intersection of data, analytics, and business decision making. The
current state of data science is to accelerate the data-to-decision process.

The Management Accountants’ understanding of data science better facilitates the data-to-
decision process for their organizations.

Enhancing Analytical Capabilities Is Critical to Success

The Digital Age is upon us, and it brings with it challenges and opportunities for businesses.
Management accountants have the opportunity, and need, to develop their data and
technological skills so they can use advanced analytics and glean new insights from their data
for their organizations.

The collection, assessment, interpretation, and use of data are enabling companies to create
new business models and make existing ones more efficient. Most organizations now believe
that enhancing their digital and analytical capabilities is critical to their continued success and
survival and are leaning on management accountants to take the lead in facilitating this
strategic initiative.

As management accountants develop their skills and complete their repertoire of strategic
business competencies, they can share their holistic view of business and the interrelation
between financial and strategic business decisions to communicate the importance of creating
and establishing a data-driven organization.

Section 6: Data Driven Culture

There are four essential elements in establishing a data-driven organization. These include
data-savvy people, quality data, appropriate tools, and processes and incentives that support
analytical decision making. Organizations attempting to adopt leading-edge analytics often
face challenges in each of these dimensions. The result is an inability to effectively support
managerial decision making through the use of analytical technologies.

Much of the focus on implementation of advanced analytics has been on the tangible elements
of a successful data-driven organization (people, data, and tools). Less attention has been
paid to the fourth factor -- organizational intent. An organization committed to the goal of being
data-driven will work to develop the people, data, and tools needed to accomplish that
objective.

Resolve to Be Data‐Driven

Becoming a data-driven organization requires creating structures, processes, and incentives

to support analytical decision making. It requires the organization to resolve to be data-driven
and define what it hopes to accomplish through the use of Big Data and analytics. The top
leadership of the organization needs to describe how analytics will shape the business’s
performance.

Six Factors For a Data‐Driven Culture

While many organizations are striving to implement a data-driven culture, success isn’t
assured. Achieving this goal requires that certain elements be present.

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There are six key factors for successfully establishing a data-driven organizational culture.

Having the right tone at the top. Setting the right tone at the top is critical for most
organizational initiatives, and this includes developing a data-driven culture. In most
organizations, executives are championing the use of leading-edge analytics, although in
some companies the initiative is being led from the bottom up, with various departments being
first to embrace it.

In addition to championing the use of leading-edge analytics, executives in a data-driven

organization must consider ethics in the context of technology and analytics. While ethics is
not covered in this course, it is important for the executive team to incorporate ethics policies
for managing technologies.

Having strategies for the effective use of technology. The ability to use leading-edge
analytic techniques effectively is important for a variety of reasons. Companies whose decision
making is reactive to the competition are less likely to have developed strategies for the
effective use of techniques and technologies. Being reactive instead of proactive implies that
these organizations lack the ability to predict trends or to turn customer data into useful
insights that can be used to enhance the organization’s business.

Having a commitment to collecting and using data from both internal and external
sources to support analytics efforts. To harness the potential of leading-edge analytics,
organizations need to utilize a wide variety of data sources. This is especially true when it
comes to strategy development and execution. In this regard, about half of organizations use
data from both internal and external sources. Of concern is that the other half of organizations
are only using internal data, only using data to validate strategy post-execution, or (in a few
cases) not using data at all! Using a wide variety of data sources yields better insights.
Organizations that truly want to derive value from their data must be comfortable with
complexity and remain flexible enough to respond to what the data tells them.

Using both monetary and nonmonetary rewards to promote analytical decision making.
Slightly more than half of organizations use incentives to promote analytical decision making.
These can be monetary, nonmonetary, or both. Yet nearly half of organizations aren’t doing
so. This may be a mistake: The use of incentives is key to conveying the importance of
developing enhanced analytics capabilities throughout an organization. Those that do believe
in the importance of developing such capabilities are more likely to create the appropriate
culture by providing incentives to their employees.

Having a willingness to adequately provide resources to the analytics efforts.

Organizations often are facing resource challenges concerning the development of enhanced
analytics capabilities. By far, the most frequently cited challenge is the ability to find staff with
the necessary skill set. The next most common resource challenge is budget. A third
challenge, related to the previous two, is a lack of staffing resources and competing priorities.
Clearly, these four essential elements needed for companies to develop advanced analytical
capabilities are interrelated: data- savvy people, quality data, state-of-the-art tools, and
organizational intent.

Alignment of analytics efforts throughout the organization. Responsibility for analytics

can reside in various parts of an organization. It has been argued that CFOs should “own”
analytics as they are regarded as impartial “guardians of the truth.” Most companies seem to

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agree, with finance being an owner (although often not the sole owner) of analytics. Other
popular options include analytics being owned by IT, a dedicated analytics group, or
operations, or having each department independently maintaining its own analytics
capabilities. Of course, these options aren’t mutually exclusive, with a variety of possible
combinations, the most popular being analytics jointly owned by finance and IT.

The Benefits are Clear

The benefits of implementing a data-driven culture are clear. Organizations possessing such
cultures more effectively perform key business processes such as strategy formulation and
performance evaluation. In implementing such a culture, establishing processes and
incentives that support analytical decision making (i.e., organizational intent) is critical. When
deciding to venture along the path of implementing leading-edge analytics, evaluate the extent
to which the six factors discussed are present in your organization. By ensuring that they are,
you can improve the chances of successful implementation and achieving the competitive
benefits that come with being data driven.

Lesson 2: Making Sense of Data

Section 1: Introduction to Data

Big Data is top of mind for many finance leaders. The question is: How can we leverage all
this data to drive business success? How can we turn data into meaningful action? The
progression includes identifying key information from the data, turning that information into
knowledge, creating valuable insight from that knowledge, and taking action.

Phases of the Data Life Cycle

Data is an essential part of any enterprise. An enterprise that’s agile and innovative requires
an understanding of data as it flows through the organization, interacts within various
departments, and transforms itself. Though an international standard for the data life cycle
doesn’t exist, the following phases, in order, are identified as typical during data life cycle
management.

Capture. Business is surrounded by data, but an enterprise needs to capture it in order to

make use of it. Data capture occurs in three major distinct ways:

• Data Entry. Manual or automated entry of data into the data warehouse to create new
data values.
• Data Acquisition. Acquiring or transferring data from an already existing data source
or data warehouse.
• Connected Devices. Internet of Things (or IoT), or the interconnection of computing
devices enabling them to send and receive data, has will continue to transform the way
data is captured by making it real time and continuous as devices listen to and interact
with the environment and each other. These devices capture and transmit the data so
it can be stored.

Qualify. Have you ever wondered why month-/year-end close processes are prone to errors
or why reconciliations take such a long time? Inaccurate or incomplete data may lead to major

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problems later in the data life cycle. These problems may include critical business processes
being held up, bad decision making, or final reports running afoul of compliance because of
erroneous data values. In this phase, data is assessed for its quality and completeness using
a set of predefined rules.

The Capture and Qualify phases are traditionally seen as under the purview of the IT team,
which sets up the system architecture. But management accountants, with their knowledge of
accounting processes and the way data will be utilized in later phases, have the ability and
responsibility to envision the framework of the system in partnership with IT.

Transform. The advent of Big Data has led to enterprises being able to capture a seemingly
infinite amount of data. Couple this situation with IoT, and soon you can be drowning in data.
Thus, enterprises have to transform, synthesize, and simplify the data so it can be utilized by
functional departments. This phase is commonly called “analytical modeling” in the financial
world. A certain level of functional expertise is required at this phase as data from different
sources is linked together to find the intrinsic value hidden beneath.

Utilize. The final aim of data is to help enterprises make good business decisions, and, in
some cases, data itself is the final product or service of the enterprise. Either way, the true
value of data is unlocked in this phase, and the previous efforts made in data capture,
qualification, and transformation finally bear fruit. Management accountants act as business
partners during the Transform and Utilize phases. As business partners, we need to translate
the data values into business stories that help enterprise leadership understand the magnitude
of their decisions and their long-term impact.

Report. This phase relates to external reporting. Internal management reporting for decision
making is realized during the Utilize phase in the data life cycle. External reporting could
involve quarterly/yearly financial reports, financial data sent to other vendors for bids, and
other compliance reports. Reporting of data is a key phase of the data life cycle that is ripe for
automation. Since rules, definitions, and requirements for these reports either rarely change
or have slight changes year after year, automated processes designed by management
accountants help to create and publish these reports in a more efficient manner.

Archive. This is the beginning of the end for the data that the enterprise has spent a
considerable amount of time and resources on to unlock its value. Data archiving is the
transfer of data from an active stage to a passive stage so that it can be retrieved and reutilized
as needed.

Purge. The final phase of the data life cycle is the removal of the data (and any copies) from
the enterprise. It occurs in the data archive and is sometimes accompanied by a
communication both inside and outside the enterprise.

Financial compliance rules within an enterprise or those imposed by regulatory bodies

normally drive the Archive and Purge phases. And management accountants act as
custodians to ensure that these compliance rules are followed within the enterprise for
financial data.

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Section 2: Introduction to Data Governance

As users of systems, technology, and data, finance professionals are invested in the integrity
of our information and its sources. IT and data governance can provide the structure and rules
to ensure data accuracy and availability while managing the associated risks.

Every organization with shared data is concerned with data integrity. Data governance, a
specific sub-element of IT governance, parallels the capabilities of corporate governance and
IT governance at the data level. This can be as simple as a set of rules specifying what data
(for example system fields) is to be entered by whom, when, and from what source, to as
complex as you want (as an example multiple levels of data entry, audit, and control
structures).

Data Governance and the Data Life Cycle

Data governance helps an enterprise administer the data as it flows through the various
phases of the data life cycle discussed in section 1 of this lesson.

During the Capture phase, enterprises need to identify the capture points for the data and
define the data that will be captured.

As data enters the Qualify phase, the rules of data governance act as a check to ensure that
inaccurate data is identified, assessed for completeness, and secured.

At the Transform and Utilize phase, focus shifts toward adherence to transformation rules and
the legal utilization of the data according to regulatory standards for decision-making
purposes.

As the Reporting phase is all about showcasing data to external parties, data governance lists
the steps to take when inaccurate data is reported outside the enterprise.

Archiving data relies on a set of rules that define what occurs, as well as when and how. And
in the Purge phase, it’s critical to set a purge schedule for the data as per the retention period
requirements.

Why Data Governance is Needed

Effective and efficient data governance can facilitate powerful analytics and decision making
across an organization. Demand for advanced analytics is increasing, and, as previously
discussed in the course, so, too, is the expectation that management accountants will perform
the analytics. But how often have we heard of an analysis resulting in a business decision that
later proved problematic because of faulty data? As technology makes it easier for employees
to access data, write reports, and conduct their own analysis, data governance becomes an
even more important safeguard to ensure the integrity of underlying data. As businesses
become more data-driven, data governance provides the foundation for growth into predictive
modeling and automation.

Data‐Driven Culture

When asked, 99 percent of leaders of large organizations say they want a data-driven culture
to maximize the value of data through analytics. As we also previously identified, they aim to
make business decisions faster and more accurately through automation.

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Why emphasize culture? The limitation for achieving analytics maturity isn’t usually related
to data or technology but, rather, people’s reluctance to use data and technology to answer
business questions-in other words, using data analytics rather than intuition as a driver for
business decisions. A shift is needed toward a culture that trusts that these data-driven
decisions will be effective.

Governance Attributes

For this analytics process to function effectively, the data inputs (“raw materials”) must be
consistent and reliable for the information outputs (“finished goods”) to be relevant and
comparable. Relevant, reliable, comparable, and consistent are the four desired attributes of
accounting information. Effective governance means that data used in decision making is of
consistent quality and from reliable sources. Efficient governance leverages connectivity and
technology to enable the comparison of data from many different sources and to deliver
relevant analysis.

Governance Problems

Unfortunately, only about one-third of data-driven culture initiatives succeed in larger firms.
Often the reasons for failure stem from insufficient data governance. If an organization
suggests its data quality is insufficient to use for decision making, that signals ineffective data
governance. If the data can’t be accessed, that’s a symptom of inefficient data governance.

Ineffectiveness. “I think you forgot to adjust your dates for time zone…”; “I’ve heard ‘churn’
defined three different ways today…”; “We can’t do that analysis; we don’t have good data….”
All common phrases for emerging data-driven cultures who struggle with effective data
governance. Issues with data and analyses, from little mistakes in calculations to instability in
data sets, all build to create a culture of mistrust in data and, by extension, mistrust in any
decision based on that data. The root cause of these issues is often ineffective data
governance.

Inefficiency. Certain phrases signal inefficient data governance: “Will you email me that
database extract?”; “Why can’t I access that reporting database? There’s no way for me to get
approval?”; “It’s going to take more than a week to access?”; “I’ll just get someone to build out
a new data platform for my department.” Inefficient data governance is usually more difficult
to resolve than ineffectiveness. Sometimes it’s necessary due to regulations, e.g., open-
source language restrictions or the EU General Data Protection Regulation (GDPR); in other
cases, it’s a symptom of an organization failing to commit sufficient resources to data
governance.

Often the easiest way to govern a data set is to block access. But blocking access can create
inefficiencies: While no access means no one can compromise the data, it also means no one
can use it to improve the business.

Blocked Access. Often the easiest way to govern a data set is to block access. But blocking
access can create inefficiencies. While no access means no one can compromise the data, it
also means no one can use it to improve the business.

Nonconnected Data Sharing is also inefficient. If users are constantly getting data from File
Transfer Protocol (FTP) or email, then it will be difficult for them to create a report that updates

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automatically and impossible to automate decisions. Commitment to analytics governance

means giving people access to data in a way that facilitates analytics maturity to create further
value, even though that takes time.

Principles for Implementation

Efficient and effective data governance provides clear ownership and standards for data and
data processes to ensure data quality. Although many approaches exist for data governance
implementation, most share the following principles.

Accountability. There must be clearly defined ownership of, and accountability for, different
types of data. Interconnected data managed throughout the organization requires consistent
practices in order to maintain its effectiveness and value. In most organizations, data oversight
doesn’t reside within one department. Human resources is the keeper of employee-related
data, for example, while accounting maintains financial data. Shared governance brings
consistency by establishing organization-wide policies and procedures.

Standardization. Data is an asset and must be protected like one. Clear policies on access,
definitions, privacy, and security standards are needed. The committee must define the
policies, and each department head must ensure adherence. This approach will ensure that
the organization is in compliance with regulations, such as GDPR (General Data Protection
Regulation).

Quality. Analysis is a critical tool for decision making and is only as good as the data upon
which it relies. The quality of data should be managed from the time it’s captured. Good data
governance includes defining one set of data-quality standards for the organization and
establishing consistency in how that data quality is measured and recorded.

We live in a fast-paced world where management accountants are asked to provide insight
and foresight through analytics, often on short notice. Data governance helps ensure that our
data is readily accessible and accurate. That’s especially true in situations where data is
spread throughout disparate systems and departments. Often the analysis we’re asked to
perform relies on data that we don’t oversee. By coordinating with other data owners in the
organization, we can protect the integrity of data and spend more time on value-added
analysis than on scrubbing data.

Committee of Sponsoring Organizations

Standards for data and data processes to ensure data quality are outlined in various
frameworks. The Committee of Sponsoring Organizations’ (or COSO’s) mission is to provide
thought leadership through the development of comprehensive frameworks and guidance on
enterprise risk management, internal control and fraud deterrence designed to improve
organizational performance and governance and to reduce the extent of fraud in organizations.

The COSO Internal Control - Integrated Framework, is a globally recognized framework for
developing and accessing internal controls.

The purpose of the COSO Internal Control – Integrated Framework is to help management
better control the organization and to provide a board of directors’ with an added ability to
oversee internal control. Internal control enables an organization to deal more effectively with
changing economic and competitive environments, leadership, priorities, and evolving

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business models. The framework identifies five components that are of comprised of 17
principles.

The COSO Internal Control ‐‐ Integrated Framework

As a high-level overview of the COSO Internal Control - Integrated Framework, we’ll refer to
the COSO cube and two of its principles that can be applied to data governance. These
principles reside within the Control Activities and Information & Communication components
of the cube.

Principle 11 states “The organization selects and develops general control activities over
technology to support the achievement of objectives.” Ensuring an acceptable system of
internal control over systems and processes will protect stakeholders and the data integrity
itself. Management must carefully select appropriate control activities over the technology
infrastructure that help ensure data completeness, accuracy, and availability of technology
processing.

Principle 13 states “The organization obtains or generates and uses relevant, quality
information to support the functioning of internal control.” To achieve this, information systems
should capture internal and external sources of data, and process and transform relevant data
into information that is timely, current, accurate, complete, accessible, protected, verifiable
and retained. Information must be reviewed to assess its relevance in supporting the internal
control components.

Although we pointed out two principles from two different components within this COSO
Internal Control – Integrated Framework, factors relating technology must be considered
throughout all five components and seventeen principles to provide reasonable assurance of
appropriate controls. An effective system of internal control will demonstrate that all
components are present and functioning to the achievement of objectives throughout the
entire entity structure.

Section 3: Introduction to Data Analytics

Data analytics is the science of examining data with the purpose of creating actionable insight.
It gives you the ability to react quickly to an increasingly complex, volatile, and competitive
environment. Most organizations know that enhancing their analytical capabilities is critical to
their success and survival-helping them gain a competitive advantage or helping them
maintain their current market position by helping managers and organizational leaders make
better business decisions.

Data Analytics and Strategic Management

Data analytics must be anchored in the entire strategic management process: strategic
analysis, strategy formulation, strategy execution, and strategy evaluation.

It is all about quantifying business issues and making decisions with more accurate and fact-
based data.

Business analytics and business intelligence use data mining -- examining large databases to
generate information and extract patterns, statistics, and modeling software to support data-
driven business decision-making.

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Data Analysis Models

There are many data analytics models available including regression analysis, classification
analysis, customer segmentation, market basket analysis, and others.

Regression analysis is a statistical model used for obtaining an equation that best fits a set of
data and is used to show relationships between variables.

Classification analysis attempts to find variables that are related to a categorical (often binary)
variable.

Customer segmentation, also known as clustering, groups customers into similar clusters,
based on the values of their variables. This method is similar to classification except that there
are not fixed groups. The purpose of clustering is to discover the number of groups and their
characteristics, based entirely on data.

Market basket analysis tries to find products that customers purchase together in the same
“market basket.” In a supermarket setting this knowledge can help a manager position or price
various products in the store. In banking or other retail settings, it can help managers to cross-
sell (sell a product to a customer already purchasing a related product) or up-sell (sell a more
expensive product than a customer originally intended to purchase).

It is important to note that Artificial Intelligence and machine learning also play an important
role in performing data analytics.

Now you will be presented with an overview of how data analytics can be used to create value
in an organization.

Video: Value Creation Through Data Analytics

Video Transcript (Est. time: 3:44 min):

Technological advances in gathering and processing data are increasing at an unprecedented

speed. Data analytics includes the extraction and analysis of data using quantitative and
qualitative techniques to gain insights, improve predictions, and support decision making.

For management accountants, the ability to exploit this data through meaningful data analytics
is a critical component of the accounting and finance profession. In their evolving roles,
management accountants will be required to acquire enhanced skills in data mining, analysis,
and effective communication through data visualization. As business partners, management
accountants become storytellers, providing relevant hindsight, insight, and foresight to their
organization, effectively turning information into intelligence through data analytics.

Let’s take a few moments to review the key aspects of data analytics and their contribution to
the value creation within an organization. Value is added to an organization as the
sophistication level of the analytics being performed becomes more robust.

We begin by leveraging historical data of an organization to provide hindsight into what

happened. This type of analytics is known as descriptive analytics. Many accountants
leverage tools in Excel, such as pivot tables and graphing to perform descriptive analytics.
There are also many other tools in the market being used to perform this type of analytics.

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Although understanding what happened is very important, further hindsight explaining why
things happened is even more valuable. The type of analytics that help us understand why
things happened is referred to as diagnostic analytics. Tools often used to perform
diagnostic analytics may include Excel’s customer segmentation, what-if analysis, and multi-
variable regression. Here again, other software products in the market are also being used.

Up to now, we’ve defined analytics that provide hindsight. What if we could gain insight into
what is likely to happen going forward? Predictive analytics adds value to an organization
by attaining this type of insight into what is likely to happen. Accountants can access Excel
tools like exponential trend smoothing, and solver to perform predictive analytics. As software
sophistication continuously improves, the market will continue to expand upon product
offerings that provide this type of insight.

Taking the value added through analytics even further, Prescriptive analytics help
organizations attain foresight needed to decide what an organization should do or what actions
should be taken to create added value. Applying some of the predictive analytic tools from
Excel may also help in performing prescriptive analytics.

Finally, Adaptive analytics help further gain value by providing additional foresight into how
machine learning can help. As organizations continue to innovate new technologies with
artificial intelligence, more adaptive analytics will be applied.

Advances in technology and analytics is rapidly changing the role of the management
accountant, how their work is done, and which types of accounting functions are becoming
obsolete.

Embracing the changes brought on by artificial intelligence and further technological

achievements, will enable management accountants to play a more proactive role in providing
insight, transparency, and foresight as valued business partners within their organization.

Understanding what it takes to perform relevant data mining, value added data analytics and
effective communication through data visualization are critical competencies associated with
the future of the accounting and finance profession.

ABC Electronics Data Analytics

You’ve just heard about how management accountants use data analytics to make informed
strategic decisions and increase company value. Data analytics provide hindsight, insight, and
foresight for helping companies achieve their goals.

Let’s learn about how the five types of data analytics can be used to tackle a declining sales
problem using a fictional scenario.

Let’s find out:

• How the sales decline was identified and why it was problematic.
• What they learned about reasons for the sales decline.
• What options they had to choose from for addressing the problem.
• Which options they chose to meet their goals.

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ABC Electronics – Sales Decline Data Mining

ABC Electronics is a retailer of household electronics products including televisions,

refrigerators, washers and dryers, and more.

Through data mining, they discovered a decline in Brand C television sales.

ABC Electronics has an interactive dashboard that provides insightful visualization for analysis
and decision making. Take a moment to review ABC’s sales dashboard for their line of
televisions.

Data Analytics Phases

Use the interactive analytics value chart to learn more about how ABC Electronics made the
most of data mining and modeling to address the declining sales.

Descriptive Analytics

Descriptive analytics define a business problem. Raw data was cleaned, transformed, and
summarized. ABC then used this data to create their television sales dashboard. The
dashboard’s drill-down capabilities for descriptive information is how the Brand C sales decline
was identified. The dashboard revealed overall television sales was up 5% but Brand C sales
decreased 2%.

Diagnostic Analytics

Diagnostic analytics provides possible reasons for the business problem. It tries to find
correlations of the product’s activity using data.

In the case of ABC Electronics, Inc., diagnostic analytics tries to find possible reasons for the
sudden decline in the sales of Brand C televisions by searching for relationships between data
attributes and product activity. For ABC Electronics, attributes are factors that could have an
impact on sales include:

• Time of year (seasonality)

• New comparable TV from competitor
• Product reviews
• Product price
• Social media mentions

Statistical modeling looks at the relationship between the attributes and sales. Visually, the
more linear the relationship, the better the results.

What did ABC’s analysis find?

Reasons related to the attributes are:

• The decline happened in July and August, a typical slow sales period.
• The competitor’s product sells for less.
• Customer reviews gave average ratings

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Predictive Analytics

Predictive data analytics can provide insight about what might happen given the current
circumstances. This is done through building analytical models, such as regression or market
basket analysis, to compare with actual results.

Based on their analysis, ABC Electronics’s prediction is that Brand C sales will continue to
decline due to the attributes of new competitor product, pricing, and customer reviews. This
predicted decline will result in leaving ABC with twice as much inventory as desired.

Is that what happened during the next sales cycle?

The results from actuals in the next reporting period matched the prediction. Brand C sales
declined 2%.

With the prediction proven correct, the model will be adjusted by assigning higher weighted
scores to the attributes associated with the decline in sales.

Prescriptive Analytics

As we just learned, predictive analytics are a company’s attempt to foresee how changes they
make might address a business need. Taking it a step further, prescriptive analytics uses
complex modelling to suggest actions to take in order to achieve possible outcomes.

The accuracy of possible outcomes depends on two important factors: data quality and model
quality.

With the prediction of twice as much Brand C inventory than needed, what do you think ABC’s
best options are?

Two possible actions were identified:

1. Offer a 30 % discount which predicts sales will improve 10%.

2. Offer a package discount for purchasing a soundbar with the television because
analytics showed customers frequently buy a soundbar when buying the television.

Adaptive Analytics

Adaptive analytics is another resource to provide foresight about what might happen given
what has happened so far. Machine learning models incorporate actual results and
continuously adjust based on new data received.

Adaptive analytics collect Big Data into one central repository. Included in Big Data is
information related to sales, marketing, email, websites, and content management systems.
Machine Learning models use this data to make more accurate predictions.

Analytics at this stage are useful in validating the accuracy of predictions. For example, if a
prediction recommends a change in marketing strategy, adaptive data analytics tells whether
the change is working and how to adjust the model if it isn’t.

Adaptive analytics can also help find unrelated trends such as customers who recently
purchased homes and bought a television are also likely to buy five additional electronic
products.

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What did ABC Electronics do?

ABC electronics used adaptive modeling to build customer profiles based on customer
behavior data collected from web ads, emails, text messages, etc. Using the information from
these specific customer profiles, ABC Electronics will plan to offer personalized promotions
such as pricing discounts and package deals to increase sales and effectively reduce
inventory.

ABC will continue to adjust their analytical models as new actuals data is received. With
continuous monitoring and adjusting, ABC will be equipped to make the best use of the data
available for making effective strategic decisions.

Analytics Value at Your Organization

Time and more data will tell if ABC Electronics is able to reduce the excess Brand C inventory.

While thinking about your organization and data analytics, what information is already
gathered that can tell a story about a business need? Or what information is not gathered that
could be helpful? How can the types of data analytics help drive decisions in your
organization?

Data Analytics Competencies

According to IMA’s Management Accounting Competency Framework, within the “Technology

& Analytics” domain, data analytics competencies encompass extracting, transforming, and
analyzing data to gain insights, improve predictions, and support decision making. While the
required level of competency may vary, at a minimum it must include knowing what types of
analytical models are available and to what business problems they can be applied.

Beyond that, important, perhaps essential, skills include the ability to transform raw,
unstructured data into a form more appropriate for analysis (data wrangling), the ability to mine
large data sets to reveal patterns and provide insights, and the ability to interpret results, draw
insights, and make recommendations based on analysis. At the conclusion of this module, we
will begin to work with data sets and apply analytical models to begin making business
decisions.

Concluding Thoughts

No Longer a Human Endeavor

Accounting is no longer solely a human endeavor. Similar to what has already occurred in
manufacturing, transportation, and medical industries, robots are now performing previously
people-driven accounting and finance tasks, including transaction matching, variance
analysis, and reconciliations.

Exponential Growth

Technology is transforming the management accounting profession at an accelerated rate,

but management accountants should not be concerned about job security or possessing the
skills to adapt to their new roles in the digital age. RPA, AI, blockchain, and any other
technological advancement that contributes to the exponential growth of available data can
and should be properly leveraged to make strategic business decisions.

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Strategic Business Partner

When financial data is available within minutes, management accountants have the time to
serve as true strategic business partners and analyze and visualize the data so organizations
can respond more quickly to the marketplace, capitalize on innovation opportunities, ensure
continuous integrity, and, most importantly, uphold stakeholder and consumer confidence.

In the next module, we will focus on the development and practical application of data analytics
and data visualization for accounting and finance professionals.

Module 1 Wrap‐up

You have completed Module 1 of this course and should now be able to:

• Recognize the impact of technological advancements on the finance and accounting

profession.
• Describe the typical life cycle of data.
• Explain the impact data governance has on business and its stakeholders.
• Define the various types of data analytics and how each progressively creates value
within an organization.

Prepared by:

Donald P. Sam-it
Faculty, College of Accountancy
University of the Cordilleras

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