IMA Discusses Blockchain Utility for Management Accountants
[gpt3]rewrite
Mastercard, Amazon, Walmart and several other leading companies are embracing blockchain technology. The Institute of Management Accountants (IMA), a professional body of financial professionals, recently raised potential implications for the industry.
Blockchain education can be valuable for finance professionals
The IMA’s report published on 12 June 2023 states: “As blockchain technology expands into more industries, it will be important for accountants and finance professionals to stay knowledgeable about how blockchain can add value to their organizations. We must remember that blockchain adoption extends far beyond cryptocurrency and has been used to improve organizational efficiencies such as real-time access to financial reporting and other operational data.”
The document points to several areas where technology can improve operational efficiency for accountants. Real-time blockchain data can effectively enhance decision-making and risk management. Also, constant monitoring and instant audits would keep cyber-evils at bay.
Blockchain integration will naturally reduce operating costs in terms of redundancy in unnecessary data transfer and related costs. Data integrity can help further reduce these costs. The report notes that error tracking through the technology can eliminate time and effort to find errors. In addition to security, its tamper-proof nature can prevent changes to transactions.
Real-time data can effectively enable management to reduce risks associated with corporate compliance. Know your customer (KYC) and anti-money laundering (AML) compliance have become necessary tools for regulators to identify unethical practices, including terrorist financing, money laundering and more.
The authors of the report emphasized that ethical and governance risks are manageable. It mentions problems identified by Reid Blackman, author of Ethical Machines. Given the decentralized nature of the blockchain, intermediaries are banned from operation. Customers cannot complain to a specific authority as there is none. For this, the report suggests obtaining informed consent from users, while retaining non-blockchain solutions, given the situation.
Privacy is no longer under a person’s thumb, especially after events including the US National Security Agency (NSA) document leak by former data intelligence consultant Edward Snowden, the Facebook-Cambridge Analytica Data Scandal and more. The IMA report notes that major blockchains including Bitcoin (BTC) and Ethereum (ETH) are open to the public, pointing to an increased risk to users’ privacy.
The IMA suggests that accountants should go for private blockchains to reduce potential risk factors given the kind of data they handle. To tackle the null state problem, which arises due to the genesis block’s data being current, the report mentions proper monitoring, thorough training of individuals adding blocks, and auditing via a trusted third party.
A blockchain is usually governed by a decentralized autonomous organization (DAO), an organization that is managed using smart contracts in whole or in part. Different DAOs on different blockchains may have different governance structures. The report recommends, citing Reid Blackman, that accountants get hold of it to address potential legal, ethical, financial and reputational risks arising from it.
The technology is spreading its roots at full tilt
An increasing number of businesses are using blockchain for operations and payments. A survey conducted by Casper Labs, a software company, found that 87% of respondents plan to invest in blockchain. Interoperability, cynicism and limited developer knowledge remain obstacles to wider use.
Today, major companies including JPMorgan, International Business Machine (IBM), Abu Dhabi National Oil Company (ADNOC) and many others are using blockchain. Many people still use the term interchangeably with cryptocurrency. However, the use cases go beyond digital assets. Experts believe the technology will thrive even if virtual currencies fade into oblivion.
Anurag has been working as a founding writer for The Coin Republic since 2021. He likes to exercise his curiosity muscles and research deeply into a topic. Although he covers various aspects of the crypto industry, he is quite passionate about Web3, NFTs, Gaming and Metaverse, envisioning them as the future of the (digital) economy. A reader and writer at heart, he calls himself an “average guitar player” and a fun soccer player.
[gpt3]
