5 to Watch: Trends and Predictions Shaping 2017
Our profession took shape more than a century ago, about the time a Scottish-born scientist named Bell was inventing the telephone, two brothers from Ohio were figuring out how to take flight and Henry Ford was creating his horseless carriage.
To say that things have changed a bit since then would be a comedic understatement. We’ve transformed the phone into an omnipresent digital assistant, soared far beyond the boundaries of this planet and figured out how to make cars drive themselves.
As the world has changed, so has our profession. We are strong and relevant today, because we anticipate and adapt to the changing needs of the clients and businesses we serve. As chairman of the AICPA, it’s so important to me that we maintain a laser focus on what’s next – because it is coming at us faster than ever.
From my conversations with CPAs and CGMAs across the country and around the world I’d like to share five disruptors that I see shaping the business environment in 2017. I would love to hear from you, too. Let me know in the comments what you are seeing and anticipating in the New Year.
The World Economic Forum says we are entering a fourth industrial revolution that will fundamentally alter the way we live, work and relate to one another. Change is happening at an exponential pace, and “the breadth and depth of these changes herald the transformation of entire systems of production, management and governance.”
That might sound like hyperbole to some. And it is the case that many technologies are overhyped, especially in the early days. But I can tell you from what I see in my role at Oracle, the amount of innovation across all fields is staggering. Technology is at the top of my list for 2017, because it drives many of the opportunities and challenges we’ll see.
There are numerous technology trends I could highlight for the coming year – cognitive software, virtual reality, cloud computing – but I want to draw your attention to one statistic in particular. Next year, the number of smart devices like thermostats, fitness trackers, cameras and appliances connected to the Internet is expected to exceed 28 billion – that’s double the number from just three years ago.
Imagine the exponential growth in data at our fingertips – offering more insight into customer behaviors and business operations. Managing and making sense of that data, however, brings its own set of challenges. And it brings me to the next issue I expect will have a significant impact on 2017.
Consumers want to know that their data is safe. And investors want to know that organizations have appropriate safeguards in place to protect confidential information.
About 70 percent of connected devices contain vulnerabilities, according to HP, and 56 percent of business leaders report they wouldn’t be able to detect an attack. Breaches can have significant financial ramifications for organizations. The average total cost of a data breach is $4 million, which includes the loss of revenue due to customer attrition. Forrester, a research and advisory firm, predicts that we’ll see a Fortune 1000 company fail next year because of a cybersecurity breach and related fallout.
In its report on 2017 trends, Forrester sums it up like this: “The basic fabric of trust is at stake as CEOs grapple with how to defend against escalating, dynamic security and privacy risk.”
Trust is the cornerstone of our profession – and public and management accountants are uniquely qualified to lead in this area. Early next year, the AICPA will publish criteria for a cybersecurity attestation engagement that CPAs can perform to assist boards, senior management and other stakeholders as they evaluate the effectiveness of an organization’s cybersecurity risk management program.
We are also developing an attestation performance and reporting guide so auditors of an organization will be able to report on management’s description of their cybersecurity risk management program, as well as on the operating effectiveness of controls designed to mitigate and react to cyber risks.
One of the most striking data points I’ve seen recently is from a KPMG study: Two-thirds of CEOs say the next three years will be more critical than the past 50. And 4 in 10 will transform their organizations into significantly different entities by 2020.
Technology, again, is a significant driver as organizations contend with innovations that challenge – or enhance – their business models. You see it across the spectrum, even from very successful companies. Amazon is building a distribution system that could rival FedEx or UPS, while Google and its parent, Alphabet, are doing work with virtual reality for businesses and home digital assistants.
One way that organizations are transforming themselves is through new partnerships, alliances and acquisitions. We’re seeing it in our profession, too. As of the end of November, we tracked 121 mergers or similar transactions among public accounting firms. And 24 of them involved non-CPA firms.
Expect to see the trend of organizational transformation accelerate next year. Deloitte reports that 75 percent of 1,000 corporate executives and private equity investors it surveyed expect mergers and acquisition activity to increase in 2017 – and nearly two-thirds of those surveyed expect the size of those deals to be bigger. The top strategic driver: Acquiring technology assets.
The evolving political landscape will be another driver of transformation. The AICPA’s most recent Business and Industry Economic Outlook Survey found that 3 out of 4 executives expect the outcome of the U.S. elections to impact planning, budgeting and forecasting in 2017.
While there’s no way to predict exactly what will happen in Washington, we can be certain that transition in leadership will prompt changes. As Barry Melancon, AICPA President and CEO, noted last week, there’s the highest probability for major tax reform since the 1986 tax act. President-elect Trump and majority leaders in the House and Senate have been vocal about their intentions to revise and repeal existing policies in the areas of tax, health care, financial legislation and international trade. And some predict a more receptive regulatory environment for the mergers and acquisitions I mentioned above.
But it’s not just political transition in Washington that will have impact. Britain is expected to begin the process of exiting the European Union, which will have global implications for everything from trade policies to currency valuations. And there are key elections in France and Germany that will be closely watched to see what they signal for the future of the world’s largest single market and the populist movements that have upended politics in 2016.
Finally, I want to mention talent. You might have noticed in the special issue of CPA Letter Daily last week that that the most read article of 2016 was “5 things you should never say to millennials.” Well, just when you’ve figured out how to work with Millennials, you’ve got to get ready for the next generation.
In 2017, Generation Z – those born beginning in the mid-1990s – will begin entering the workforce, and by 2020 they’ll make up 20 percent of the working population. This is a group that has only known a world with the Internet and has come of age in an era of Facebook, Twitter and Snapchat. They typically have an 8-second attention span, are entrepreneurial – and they want to make a mark. More than half (60 percent) say they want to have an impact on the world, and 55 percent report wanting to start their own business.
I often say that I’m a Gen Xer who speaks Boomer. It will be important in 2017 that we begin to find ways to connect with this new generation, because we have so much to learn from each other. There is no doubt that young professionals who have been raised online can teach us a lot about meeting the needs of our future clients and customers.
In all of these issues, trends and predictions, I hope you see the critical role that our profession will play in advising, connecting, challenging and leading in the year ahead.
And you can be certain that no matter how the year unfolds, the AICPA will be here to support you with the tools and resources you need to meet the needs of clients and businesses you serve. In fact, we’ll be even better positioned to do so as we launch the new Association of International Certified Professional Accountants (“the Association”) that members approved earlier this year.
Launching in early 2017 and representing more than 650,000 current and future accounting professionals across the globe, the Association will allow us to be even more influential advocates for the profession and public interest. We will also usher in a new brand for the American Institute of CPAs to reflect the CPA profession’s continued strength and relevance in this modern age of business. Look for more details in January.
I look forward to meeting many of you in the coming year, and working together toward a bright future.
Kimberly N. Ellison-Taylor, CPA, CGMA, Chairman of the Board of Directors, American Institute of CPAs.