Don’t get left behind

EBC Briefing on the digital economy

MARCH 2020 EBC Update / Text by Andrew Howitt

Are you ready for the digital economy?

This was the question posed at the first EBC Briefing seminar, a new series of quarterly events that will highlight the work of EBC committees. The session, held on 26 February, brought together experts from the organisation’s Business Fundamentals cluster who discussed the transformation taking place in their industries and noted potential challenges and opportunities for businesses here.

Michael Mroczek, president of the EBC, gave some background information on the digital economy by quoting a UN report.

“The digital economy continues to evolve at breakneck speed, driven by the ability to collect, use and analyse massive amounts of machine-readable information — digital data — about practically everything,” he said. “This digital data arises from the digital footprints of personal, social and business activities taking place on various digital platforms.”

He also noted that global internet protocol traffic, which reached 45 gigabytes per second in 2017, is projected to grow to more than 150,700 gigabytes per second by 2022.

In her talk, Ambassador of the EU to Japan Patricia Flor related some key points about the EU Commission’s new digital strategy. One major aim outlined in its report is to give the public and private sectors access to large sets of non-personal data stored within a European cloud, while safeguarding privacy and ensuring high standards of protection.

“The immense pool of non-personal data, created by the Internet of Things or by applications, could be put to good use by European businesses, and should be made available to European businesses,” she said. “The EU Commission will be looking at what regulatory framework to create for data sharing and data access.”

The financial reporting sector is experiencing a lot of positive changes thanks to digitalisation. According to Dirk Hermans, chair of the EBC Financial Reporting Committee, there are many solutions available on the market, some powered by AI, that are helping to make processes faster and more efficient.

“One area of focus is how quickly companies close the books before they can report,” said Hermans. “There’s now software available that can be applied, and companies can close the books much faster than they were able to before.”

Digitalisation in the tax sector is also set to have a significant impact on businesses here. Ryann Thomas, a member of the EBC Tax Committee, cautioned that as the Japanese government’s ability to analyse data improved, there could be more “cherry-picking” about which firms it chooses to audit.

“The Japanese government has spent a lot of money on building a system that will analyse taxpayer data, and we’re going to see them start to pick outliers — companies that are not providing the same kind of tax results that they see other players in the industry doing,” she said. “I think it’ll become important to understand how your tax profile looks relative to other firms, which you probably never really worried about in the past.”

Ulrich Kirchhoff, a member of the EBC Legal Services Committee, noted that Japan is considering a reform to its data protection regulation that will bring it more in line with the EU’s general data protection regulation. Firms will need to stay on top of any changes that are made.

“At the moment, there’s no obligation in most industries to make a breach notification under the Japanese regulations,” he said. “If it comes, your business needs to be prepared for that … Most companies have not yet created processes of what to do in those cases.”

The message from all the panellists was clear. If you’re not ready now to make the leap into the digital economy, a transformation already well underway, you will be left behind.   •