Stablecoins are now approved! But will they be used against China, Russia and beyond?

Wall Street Journal reported that the OCC has approved the use of stablecoins within the financial industry. Specifically:

"Banks are allowed to participate in public decentralized networks and use stablecoins in payment settlements, according to new guidance from a federal banking regulator.

The Office of the Comptroller of the Currency in a guidance letter this week said national banks and federal savings associations may use new technologies, including independent node verification networks—also known as blockchain networks—and related stablecoins, to perform bank-permissible functions."

The article also defined stablecoins as "a type of digital currency that aims to maintain a stable value and is backed by an underlying asset or a benchmark, such as the value of a fiat currency, or a basket of assets that could include investment securities and commodities. The OCC in its guidance said stablecoins can be used as a mechanism to facilitate payment activities, such as the payment of remittances."

Although things are expected to improve between China and the US with the incoming Biden Administration, the reality is that there is still a competitive rivalry between the two nations. 

As noted in Paul Vigna's and Michael Casey's Age of Cryptocurrency:

"Things really get interesting when the U.S. government issues a digital dollar. The dollar is already the world’s primary reserve and commercial currency, but this would give it an even bigger edge. That’s because people in countries whose currencies aren’t trusted or who are barred or restricted from buying foreign currencies—think China, Argentina, Russia—could now easily obtain the one currency that has long symbolized international stability. Whereas the international movement of paper dollars can be (somewhat) controlled with physical checks at border crossings and regulation of bank transfers, digital dollars would be far more footloose. They would invade other jurisdictions’ currency zones. If citizens of other countries can easily acquire dollars—by far the most sought-after currency in the world—and use them to buy almost anything, why would they need renminbi or pesos or rubles? In this scenario, other currencies become less sought after, the dollar more powerful. It is the ultimate expression of U.S. hegemony, and, for other governments, undermines their nation-state sovereignty." [Emphasis Added]

Foreign policy is but one consideration in driving the need for stablecoins. However, it is not one that is brought up often in these discussion and should be kept in mind.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

Data Tsunami: How big is the Data Deluge? (Part 1)

Was invited last year to speak about the Data Tsunami at the AICPA Engage conference, but I didn't quite make it there! Instead, I presented virtually. 

So, will be breaking out some of the topics that I will be discussing over a few blog posts. 

How big is the data tsunami?

Probably, the first thing that comes to mind is social data. The Internet truly unleashed the first torrent of the data tsunami. Google's search index alone is 100,000,000 GB. In terms, of social data we are looking at the following:

• Twitter: 200 billion tweets per year (Twitter)
• Facebook: 4 petabytes of data per day (WEF)
• WhatsApp: 65 Billion Messages per day (WEF)
• YouTube: 250 million hours per day (Variety)
• Apple: 50 billion podcasts downloads (Fast Company

It's interesting how the data tsunami encompasses print, sight and sound. This is of course lends itself to analytics, but we will discuss that in a future post.

In terms of organizational data, Walmart generate 2.5 petabytes of data per hour. According to American Banker, 12 million petabytes (per year) of data flows through the financial industry. In terms of manufacturing, 6,000 fan blades manufactured by Rolls Royce generates 3 petabytes. It gives an idea of how much data is generated by the millions of parts that go into airplanes, trains and automobiles.

In terms of medical data, Stanford published the following: 

“The sheer volume of health care data is growing at an astronomical rate: 153 Exabyte…were produced in 2013 and an estimated 2,314 Exabyte will be produced in 2020, translating to an overall rate of increase at least 48 percent annually.”

This obviously has tremendous privacy concerns. 

How big will the data tsunami get? 

According to IDC, "the collective sum of the world’s data will grow from 33 zettabytes this year  [2018] to a 175ZB by 2025". 

A couple of key contributors to this 'tsunami of data', will likely be the Internet of Things (IoT). 

IDC predicts that 40+ billion IoT devices will generate 79.4 ZB of data by 2025. The other generation of 'digital exhaust' will likely be autonomous vehicles, which according to Intel produce about 4 terabytes of data per hour. 

But the big question is so what?  

We'll take a look at this question in the next post. 

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.

 

CPAs to the Future: Why Data Governance?

In 2018, CPA Canada held the Foresight Sessions where they consulted CPAs and others how the profession should move forward. CPA Canada took a broad view of the topic and brought a diverse crowd of people to look at how things could unfold. There were a number of facilitated sessions that looked at a number of possible scenarios and how the profession could thrive in each of those scenarios. What I liked about the sessions was the diversity of thought. The environment was so open that attendees were even willing to talk about things like wealth inequality and its potential impact on the profession. 

So where did things end up? 

A report was published and the two key areas that became the focus where Value Creation and Data Governance. 

Before looking at where we are now, it is good to take a step back and look at the underlying need to re-examine the profession. The CPA profession was borne in a book-based world where knowledge went through a manufacturing process of sorts. Regardless of whether it is the accounting standards themselves or the actual financial statements, the idea was there was a sense of finality to the process. The Internet, and more specifically the hyperlink, changed that. Data, information and knowledge are now networked. 

It's not to say that the profession was unaware of this. 

As a CPA who got his start in the world of Audit Data Analytics back in 2000 (yes, 20 years ago, when this type of work was known as computer-assisted audit techniques). Back then, IT-focused CPAs like myself used to tools like Audit Command Language or IDEA  (sometimes referred to as 'generalized audit software'). This required the analysis of data largely for audit support. 

CPA Canada also published the Information Integrity Control Guidelines (authored by Efrim Boritz and myself), which looked at how controls and "enablers" would create information integrity. The project was designed to take a fresh look at the traditional dichotomy between "general computer controls" and application controls". For example, the publication also looked at controls specifically around content. 

Why Data Governance? 

The challenge I have found is how to succinctly articulate how CPAs can play on the dividing between business and technology.  Data governance probably is a good place to start. Even when you consider something more technical like a 'data scientist', a key component is to have business domain knowledge. Hence, to capture the future it makes sense to look at something that is beyond technology but rather data and information. After accountants have experience with data, but not configuring routers. Furthermore, as pointed out in this CPA Canada article "there is already a need for foundational standards of practice around all aspects of data governance and the data value chain".

Why are CPAs suited for data governance? 

I have always felt that CPAs have a solid foundation in understanding information. Through the FASB framework, we realize the trade-offs between relevance and reliability, as well as understanding the reality of what is needed to audit something. When looking at the work Efrim and I have done around information integrity, this was a key resource because it is unique in understanding the parameters of information. 

When teaching a class at Waterloo, I linked how this framework is now even relevant to social media companies. Google/YouTube, Facebook, and Twitter have all been "auditing" posts on their respective sites due to misinformation about COVID-19 or other matters. When covering this in-class, the concern I raised was around the "slippery slope". For example, does that mean all the other posts are "materially correct"? Such things illustrate how CPAs can add value when it comes to data governance.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.

 

'The Algorithm Made Me Do It': How Racist-Tech led an African-American man sleeping in a filthy cell

We've heard of Fintech, maybe even Regtech, but have we heard of Racist-Tech?

In the past few weeks, the US sees the largest protests in its history. I am not referring to the protests where armed protestors show up to state-capitals without much reaction. Rather, these are the protests that were in response to the death of George Floyd. George Floyd who died after a police officer kneeled on his neck (with his hands in his pocket) for eight minutes and forty-six seconds. These protests, in contrast, have been met with a strong reaction.

A related incident occurred a few months before Mr. Floyd lost his life.

As reported in NPR, Robert Julian-Borchak Williams was picked up by police by January 2020 and when he got to the station, he was surprised to the lack of resemblance between him and the pictures of the suspect.

The officer's response? "So I guess the computer got it wrong, too." 

Regardless, "Williams was detained for 30 hours and then released on bail until a court hearing on the case, his lawyers say."

(For more on the story, check out this video)

The story is chilling, to say the least.  The knee jerk reaction is to think of Skynet and dark AI. But is that really what's happening here?

The social unrest speaks to how the desegregation struggles of the 1960s have not totally succeeded. The challenge is that racism is systemic. Within the institutions that hold society together, the gothic systems that existed in the 1950s somehow still exist until today. Sure, it's illegal for prosecutors, judges and cops to be racist. But then how do we explain the treatment of George Floyd and Robert Williams? Is there is no overall monitoring provisioning to ensure that the desired equality is achieved? For example, good monitoring controls over a system would assess the outcomes to see if the desired outcomes are achieved. There was a case that tested this idea. In McClesky v Kemp, where the defence team provided Dr. Baldus's study that statistically proved that the African American is 4.3 times more likely to get the death penalty, the "big data" analysis was rejected and Warren McClesky was put to death by the state. (And yes it controlled for 35 non-race variables).

In other words, data analysis shows there actually is a problem. However, the courts essentially denied this reality and pretended everything is okay.

What does this have to do with Racist Tech?

It means that the systems and the data are biased. Racist Tech will naturally grow out of such systems. AI and predictive policing models that use data from the court system - also pretending everything is okay - will inevitably lead to people like Mr. Williams getting caught up in the criminal justice system. Compared to George Floyd he only had to spend 30 hours in a filthy cell. But during that time he would have no idea whether it was going to be 30 hours or 30 months, given how long it takes to exonerate the innocent.

I was once asked at a conference whether we can look forward to a future where AI takes over. My response was to point out the real issues is with the human that run the technology.  If I had to answer that question today, I would simply ask them to call Mr. William who knows that the nightmare scenario is here already.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.

Are we ready? COVID-19 Reopening woes and the new realities it brings

Ontario is cautiously moving ahead with plans to reopen the economy. 

Certainly, there have been snags along the way. Patrons of a park in Toronto were not social distancing. Also, a nail salon in the city of Kingston caused a spike in cases. But despite these issues, one can look to the neighbour to the South and realize that things can be much challenging. 

According to CNBC:

"Governors in Washington, California, Florida and Texas are walking back some of their reopening plans as coronavirus cases rise in more than 30 states across the U.S., according to a CNBC analysis of data compiled by Johns Hopkins University"

This is not surprising given the rise in COVID-19 cases with CNBC reporting an increase of "5% over the previous week in 37 states across the country". 

With that in mind, there are some lessons we can learn a few things when considering the challenges or re-opening as the pandemic continues to spread in society (without a vaccine or cure). Specifically, the Wall Street Journal reported on how the re-openings - albeit semi-temporarily - unfolded in Texas. Based on this article, they noted the following:

• Pandemic screening: Entering and exiting office buildings will not be as easy as it used to be. There will be some measures implemented to ensure that sick people don't make it into the office. For example, buildings will check people's temperature as they enter the building. 
• Best laid plans can go awry: Companies are using all types of means to determine whether people should go back to the office. Dell,  for example,  has "built its own digital tool to analyze more than a dozen data points, such as local cases and hospitalizations, to guide its decision". However, the pandemic, like many business continuity risks, expose the things in the process we take for granted. Consequently, caution is best when trying to going back to "semi-normal".  For example, some offices were shut down after re-opening for two weeks because someone had got COVID-19. 
• Waiting for an elevator a non-trivial dilemma: Who would have thought that elevators would pose to be a dilemma during a pandemic? Getting in a closed space is a problem. But also forcing people to wait for an elevator is a problem. Will workers "socially distance" while waiting or will they fill the time waiting with impromptu meetings with colleagues? 
• Public transport or carpooling is now a high-risk activity: The article points out that a company had sufficient parking spots for only a third of its employees. That is, they assumed others were not going to drive. But parking is not the only issue. Many of us who use public transit, use that time on the train to catch up on emails or get that deliverable out there. Consequently, stuck behind the steering wheel is not only stressful but also lost productivity.

What does this mean? 

Working from home is the new normal. And companies have made it work. For example, Aniket Sanyal, an engineer from Halliburton was able to drill oil wells around the world from the comfort of his own home. What did he need? In his own words: “I just needed a good internet connection”. Other jobs, whether it's balancing a trial balance or sending documents to the client, are a lot less complex. They can be easily accommodated in the world of cloud and conference calls. 

According to Jennifer Davis, senior vice president of global communications from Dell: “We are predicting within our company and, frankly, more broadly, that the future of work looks different and that more people will stay home permanently". The article also notes that "only 50% of its workers will ever go back to an office, even when the crisis passes". In other words, working from home is now the new normal. Think about it. Would anyone risk getting COVID-19 waiting for an elevator when they could avoid such a risk by working from home? 

Consequently, the pandemic and the risks it brings makes us re-evaluate whether we need to be onsite or whether we just need a good internet connection.  

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.

COVID-19 & Accounting firms: Will only the agile survive?

The impact of COVID-19 is impacting everyone, including accountants. As discussed in the last post, the crisis has made video calling normal to the point that people are experiencing fatigue. It speaks one of the adjustments people have had to make due to the "new normal"

But what is the wider impact on the profession? How are firms handling the COVID-19 Crisis?

Accounting Today published a survey, "The accounting profession and the coronavirus: The crisis in number" that gives some data as to where the accounting firms are at.

Economic Impacts: Bad News and the Good News

Not surprisingly, nearly three-quarters of the firms surveyed, felt that the pandemic was going to reduce their revenues. In terms of magnitude, 37% of those surveyed are predicting a 10%+ loss in earnings. The good news, however, is that most had not let staff go. Only 7% had laid off staff, while 4% were planning to do so.

The other interesting find is that the most popular service to come about due to this crisis was CARES Act Consulting, with 73% offering this service. The next closest was business continuity consulting at 36%. 

There were also some interesting finds around the tech front. 

• Working Remote: Over 60% of firms had challenges with closing their offices, with nearly half of those having some challenges with the "online approach". The survey found that only 10% had no remote capabilities. See the graphic below for more details
• Closing offices: Closely related to the previous result, only 13% fully shut down their office. The survey did not reveal why this was the case.  But if you can't work remotely, what other choice do you have? 
• Communications: Although more than half used traditional means of communication, 33%were looking at new forms of communication. 

https://www.accountingtoday.com/list/the-accounting-profession-and-the-coronavirus-the-crisis-in-numbers

CPA firms provide COVID-19 services free of charge
Many small businesses have been drastically impacted by the coronavirus shutdown. As reported by the Wall Street Journal, "about 20% of them had enough cash saved to operate normally for only two months if their revenue were to dry up. Among less financially secure companies, only 10% could operate normally on savings alone for two months". The survey found that 1/3rd of CPA firms are stepping up to help by not charging for COVID-19 related services. 

Agility in time of uncertainty

Virtual firms, like Live.ca, seem to have been well prepared for this pandemic. With no offices to speak of, the firm was online from day one. The firm was featured on this CPA Canada promotional video:

Being agile in times of adversity is key to success. Understandably, tech can be daunting for small firms. However, it is also daunting for small businesses. Consequently, the tech-savvy CPA firms are able to offer consulting services like business continuity planning. But before getting there, firms need to ensure that they have the underlying capabilities to be agile. For example, if the firm has limited capability to service clients remotely it not only reduces the ability to service clients but also prevents the firm from being viewed as adaptive by current and prospective clients.

That being said, it's a matter of will. With nearly three-quarters of the firms already offering CARES Consulting, just shows how agile firms can be when the mindset is there.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

Have you heard of Zoom Fatigue? Killing the commute is not all it's cracked up to be

We are all probably familiar with "Zoombombing" by now.  This is where nefarious hackers (FBI has a warning about this) or Australian comedians (like Hamish Blake) invade your Zoom calls.



But have you heard of Zoom Fatigue?

Well, according to the BBC, USA Today, and The Wall Street Journal (WSJ), it is real.

COVID-19 has forced a locked-down, requiring people to work from home. That is, those who are fortunate enough to work from home during this pandemic, can use Zoom, Skype or other video chat apps to conduct business as usual. Except there are challenges. As noted in the USA Today article:

"From having to focus on 15 people at once in gallery view or worrying about how you appear as you speak, a number of things may cause someone to feel anxious or worried on a video call. Any of these factors require more focus and mental energy than a face-to-face meeting might, said Vaile Wright, the American Psychological Association's director of clinical research and quality."

BBC echoes something similar:

"Being on a video call requires more focus than a face-to-face chat, says Petriglieri. Video chats mean we need to work harder to process non-verbal cues like facial expressions, the tone and pitch of the voice, and body language; paying more attention to these consumes a lot of energy. “Our minds are together when our bodies feel we're not. That dissonance, which causes people to have conflicting feelings, is exhausting. You cannot relax into the conversation naturally,” he says"

To mitigate these impacts, both articles suggest being judicious on what calls should have the video turned on. USA Today quoting Vaile Wright (see above): "Be thoughtful about how you're using Zoom calls. You probably don't need video chat for all your work."

The WSJ sees this new reality differently.

They looked at the premise that working from home would result in free time for people. One of the individuals they interviewed for the story, thought that they would learn how to crochet. That didn't happen. What they found instead was that the inability to physically separate oneself from the work environment has enabled an "always-on" mentality. We all know no one is going anywhere, so the default assumption is that you are available. This is both for work as well as non-work meetings. For example, another individual in the article noted that they had to maintain an online calendar for their social life just to manage things.

For me, it's the commute. It takes about 20 minutes to drive to the commuter train station, then about an hour on the train. Then another 10 to 15 minutes to walk to the office. What I hadn't fully realized until now is a couple of things. Over time I have learned to use that time productively. It was during these gaps in my day that I could catch up with audiobooks and podcasts.

But there was another thing that was surprising.

The changing of scenario from home to the car to the station to the streets of Toronto and then the office gave me a chance to take a mental break automatically. At each point in commute, I was refreshed. With life at home, you can just be stuck behind a computer. (I am fidgety, so I guess that helps!) My podcast and audiobook consumption has collapsed, but I am writing more blog posts :)

Is this what the future holds?

I think that after this is over, the mental barrier that some executives had against working from home will be reduced dramatically. Even prior to the COVID-19 shut down, I knew of a fellow Hamiltonian who worked at a start-up where everyone was online. There was no office to speak of. With this being the new normal, weighed with the cost savings may convince some businesses that it's worth it to abandon the office lease altogether. That being said, there will need to be some kind of periodic physical meetings. But that can be accommodated in free public spaces like parks.

We often see in futuristic scenarios, how someone rolls out of their bed, slips a microphone/earpiece into their ear and then starts working with the hologram downstairs. Who would have thought it would have taken a pandemic to bring this future closer.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else