Keynote Address by Ms Indranee Rajah, Minister in the Prime Minister’s Office and Second Minister for Law, Finance And Education, at the ACCA Singapore Annual Conference, 24 May 2018 at Marina Bay Sands24 May 2018
Harnessing Digital Connections to Grow the Accountancy and Legal Sectors
Ms Helen Brand, Chief Executive of ACCA,
Ladies and gentlemen
1. Good morning. Thank you for inviting me here today to speak at ACCA’s annual conference.
2. In February this year, our Finance Minister in Budget 2018, identified three major shifts in the coming decade:
- a. First, the shifting global economic weight towards Asia. So Asia is going to be the place where the activities are going to happen;
b. Second, the emergence of new technologies; and
c. Third, the aging population.
3. For today’s purpose, however, I would like to focus on the second shift – the emergence of new technologies.
Accountancy and legal professions in the digital world
4. In 2015, father and son academics Richard and Daniel Susskind co-authored a book called The Future of the Professions: How Technology Will Transform the Work of Human Experts.
- a. In that book, they argued that technology threatens to render service professions obsolete, accounting and law included.
b. Perhaps humans won’t become obsolete, but certainly, in these professions technology will transform professional services.
c. As ACCA found in your report Drivers of Change and Future Skills, new technologies are already transforming accountancy. Over the next decade, we expect further changes.
- i. Smart software and systems will automate mundane manual work like bookkeeping and expense processing.
ii. Emerging technologies like artificial intelligence will also fundamentally change the way we do complex and multifaceted accounting work.
5. However, such changes will not render the accounting and law professions obsolete.
- a. There were mixed feelings, I think, when we first learnt about new technologies like artificial intelligence and robotics.
- i. We felt that these technologies would change the way we live, work and play.
ii. We also realised that these technologies would destroy jobs.
b. But today, we have started to adapt. Today, we are starting to leverage on these technologies to improve our business processes.
- i. In the accountancy sector, robotic process automation has been used to automate repetitive processes. For example, businesses in retail, e-commerce and hospitality have adopted Xero, an online accounting software that automates manual processes.
With Xero, retailers find that they can better manage their businesses such as tracking inventory and costs.
ii. With technology, professional accountants in business have moved up the value chain, from score keepers and, I dare say, bean-counters, to strategic business leaders.
iii. Similarly, in the legal sector, new technologies like lawyer-bots have also automated low value-added work for lawyers.
6. New technologies are reshaping Singapore’s economy. These technologies are a natural next step in the evolution of our industrial clusters. They are to be harnessed, and not feared.
- a. We won’t deny that with these technologies, many traditional job functions in the accountancy and legal sectors will change.
b. However, these technologies will not be capable of building relationships, of replacing all systems, or of replacing all staff. And when it comes to the human intricacies of the work that both the accountancy and the legal profession do, these technologies cannot do it all.
- i. For example, in 2016, professors at the University of North Carolina School of Law and MIT conducted a research to understand whether robots can be lawyers.
ii. Their findings show that technology can only speed up the work of lawyers and save costs for law firms. For now, robots cannot totally replace lawyers.
7. Taken together, the emergence of new technologies presents us with a fundamental question: “How can we harness the digital connections created by new technologies to grow the accountancy and legal sectors?” ACT to harness digital connections
8. In ACCA’s report Drivers of Change, you spoke of the need for service professionals to be more rounded, to embrace what you call as the Seven Quotients for Success.
- a. It is true with new technologies, technical expertise
per se will no longer be sufficient for accountants and lawyers to grow.
b. To become strategic business partners:
- i. Accountants and lawyers will need to be able to harness new technologies and data in your everyday work.
ii. You will also need emotional intelligence and vision to be able to draw insights from your data and offer valued judgements to your business partners.
9. I would also like to highlight three key qualities relevant to the professions: Adaptivity, Collaboration and Trust.
- a. These qualities have served the accountancy and legal professions well over the years.
b. As we transit into the digital world, these qualities remain relevant, in fact, not just relevant but essential, and will form the foundation for the accountancy and legal professions to effectively harness digital connections.
c. So let me touch a little on each in turn.
10. First, on Adaptivity.
- a. Over the years, accountants and lawyers have shown your ability to adapt.
- i. When the regulatory environment changed following the Enron scandal, accountants and lawyers adapted.
ii. When the business environment changed following the emergence of new technologies, accountants and lawyers also adapted.
b. Adaptivity will be increasingly important in tomorrow’s digital world.
- i. Tomorrow’s digital world will be one where the changes are rapid and many. Indeed, we are experiencing that now.
ii. The rapidly changing external environment places an increased burden on accountants and lawyers to adapt. Knowledge will need to be refreshed quickly. Skills will also need to be relearnt or acquired quickly.
c. To this end, I urge accountants and lawyers to continue to adapt and grow, so that you can continue to overcome all obstacles in your way.
11. Second, on Collaboration.
- a. The importance for collaboration is highlighted in the Report of the Working Group on Legal and Accounting Services.
- i. Today, collaboration among accountants, lawyers and people from other sectors is even more important as new technologies
have fundamentally altered our economic landscape; and the new economic landscape is one of interconnectedness.
ii. In this new economic landscape, accountants and lawyers need to collaborate with others in order to value-add.
iii. Let me highlight two examples of how accountancy and legal firms have collaborated to provide value-add.
iv. The first example relates to regulatory compliance. Collaborations between law firm (Allen & Overy) and accountancy firm (Deloitte) have led to MarginMatrix. MarginMatrix is a digital derivative compliance system that significantly reduces the time needed to draft contracts. With MarginMatrix, banks can reduce the time needed to draft contracts from about 3 hours to a marginal 3 minutes. This is a significant 60 times reduction in time needed.
v. The second example relates to data analytics. Collaborations between accountancy firm KPMG and McLaren have allowed KPMG to apply McLaren Applied Technologies, or MAT in short, to audit and advisory services. Since 2015, KPMG has been applying predictive analytics in its audits. With MAT’s predictive analytics, KPMG has been able to automate evidence gathering and the production of complex data reports. This saves time for KPMG’s auditors to provide more value-added work for their clients.
b. I am encouraged to hear that ACCA will be exploring the possibilities for collaboration between the accountancy and legal sectors at an upcoming ACCA and Law Society event next month.
c. I am also certain that the growing demand for infrastructure in Asia and ASEAN will present more opportunities for the accountancy and legal sectors to collaborate.
- i. We already have a strong pool of accountancy and legal firms with expertise in infrastructure planning and dispute resolution.
ii. Through further collaborations, I am confident that our firms will be able to help other organisations develop business cases, structure bankable packages and drive capital efficiency.
iii. Collaborations will thus allow us to seize opportunities to expand further in the infrastructure space.
12. Finally, Trust.
- a. Accountants and lawyers are in the business of selling trust.
b. Many in the audience today will remember the fall of Arthur Andersen in 2002.
- i. Arthur Andersen fell because it did something wrong.
ii. It also fell because it had lost the public’s trust. With the Enron scandal, the public could no longer trust Arthur Andersen to serve as an independent check on management’s financial statements. In short, the public could no longer trust in the work of Arthur Andersen.
c. In tomorrow’s digital world, trust will increasingly be an important element in the work of accountants and the lawyers.
- i. New technologies will automate many of our existing work processes.
ii. But, these technologies are black boxes. The average user will not know how these technologies transform inputs into outputs. The average user will also not know whether to trust the output from these technologies.
iii. As people who interpret the output of these technologies for users, accountants and lawyers will play a key role in enhancing transparency in tomorrow’s business environments.
iv. The public needs to trust in your work for accountants and lawyers to play this role. Without trust, confidence in the professions will quickly crumble.
d. So, to this end, I would urge accountants and lawyers to continue putting the public interest at the heart of your work, so that the public trust in you will remain unwavering.
13. To effectively harness the digital connections created by new technologies, accountants and lawyers will need new skills.
- i. However, as we focus on the new skills needed, let us not forget the three qualities that will help accountants
and lawyers to effectively harness the digital connections created by new technologies. So, let’s ACT – Adapt, Collaborate and earn Trust.
14. In conclusion, let me say that new technologies will present us with a suite of new challenges and opportunities. To harness digital connections and grow, we have to plan ahead. Indeed, like ACCA, we have to Think Ahead.
15. So, let me end by wishing you a very fruitful and successful conference. Thank you very much.