Author: Faith Ngwenya, Technical Executive, South African Institute of Professional Accountants (SAIPA)
“We need to recreate the traditional risk management process entirely if we are to sufficiently break down silos and become truly fluid,” our Institute’s Western Region Chairman Hashiem Salie once stated.
Reflecting on his statement, I believe there are two aspects to risk with which accountants must come to terms. First, with the many developments taking place in the profession, their own survival will depend on their ability to look past accounting as their primary service and create value for their clients as strategic partners.
Second, with greater competition, disruption and uncertainty across the market environment, businesses are turning to their internal and external financial officers for answers. In reality, they’re positioned as the best candidates to rewrite the rules of risk management and it therefore behoves them to take up the challenge.
The media is awash with articles about how Artificial Intelligence and Robotic Process Automation are taking over basic accounting functions, performing the same tasks with greater efficiency and at a lower cost. By no stretch of the imagination does this news signal the end of the profession, but it does herald in a future where the compilation, checking and formatting of financial data is no longer a key value proposition. Rather, the focus is moving to the practitioner’s interpretation of that information and their ability to transform it into practicable business strategy.
The silo accountants must therefore escape the notion that they are isolated to a limited set of activities and responsibilities. By looking beyond the numbers, they will recognise many areas to which their unique talents can be applied. At SAIPA, we believe that risk management and business rescue are two extended services that accountants should already be introducing to their clients. And this is just the start.
Preparing for expanded service
Why are accountants a company’s best strategic partner? Let’s draw a comparison between their thinking and that of production managers. When contemplating the purchase of a new machine, for example, production managers may see a means to rapidly complete their work in progress jobs and so clear their production queue. However, accountants are aware of the bigger picture. Not only do they consider the utility the machine provides but also what that utility means in terms of corporate financial goals, its profitability, maintenance costs, and even how else its funds could be used to realise a better return on investment. This expanded view of matters is what makes the accountant unique among the management functions and it is why they’re seen as business enablers.
However, risk management and business rescue both go further than just the finances of the business. It’s therefore imperative that the consulting accountant takes cognisance of risks in the macroeconomic environment, the market environment and the business environment. While many risks can be revealed from an organisation’s financial ratios, they cannot predict the effect of the CEO being unable to attend to their duties for an extended period. In this case, the risk must be thoroughly researched and a sensible succession plan should be developed.
This is also true in the case of NOCLAR (Non-compliance with Laws and Regulations), another kind of risk that companies face. A new international Code of Ethics clears the way for accountants to deal decisively with non-compliance with laws and regulations, even allowing them to report unresolved issues to the appropriate authorities without breaching client confidentiality. So, practitioners must address non-compliance even if it occurs outside their direct area of responsibility.
Proper risk management and business rescue require an intimate knowledge of the inner workings and unique traits of the client’s organisation. An accountant who prepares financials once a year will not be in a position to offer the best guidance. So, they must adjust their mindset and strive to build good rapport with the customer in need of these services.
Accountants are indeed in the best qualified function to revise the rules of risk management. They must, however, expand their horizons and look beyond the numbers.
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