As part of our series of articles exploring the trends most likely to shape technical areas of the profession over the next decade, we look at the impact on governance, risk and ethics
This article was first published in the September 2016 international edition of Accounting and Business magazine.
Good corporate governance is now widely accepted to be vitally important for creating market confidence and business integrity, enabling companies to access equity capital for long-term investment. It aims to improve shareholder value by achieving growth and profitability within appropriate risk and control boundaries, while balancing the need for organisations to be accountable to a growing range of stakeholders.
Professional accountants carry out a range of roles in relation to governance – for example, in external or internal audit, in managing risk and developing internal controls – while also abiding by professional and corporate ethical frameworks. These roles will continue to be vital for organisational success in future, according to ACCA’s research report, Professional accountants – the future, which draws on extensive feedback from ACCA members gained through workshops held across the world.
Responding to change
Interest in what makes for good corporate governance has been high since the 1990s. Financial fiascos and corporate failures such as Arthur Andersen and Enron in the US revealed the weaknesses in existing governance procedures and frameworks. Globalisation, economic volatility and the rise of data-driven stakeholder activism have only served to increase the focus placed on corporate governance and risk management.
Professional accountants in the governance field face many challenges as organisations and workforces become increasingly global and mobile. Individuals sometimes encounter a gap between ethical theory and reality. Professional accountants face particular challenges when working in countries where bribery and corruption are widespread or where local cultural traditions in relation to religion, ethnicity and politics can conflict with otherwise widely accepted governance practices.
Emerging frameworks for corporate social responsibility and integrated reporting might help close the theory-reality gap and help to improve corporate governance and risk management. The management of non-financial risk in areas such as strategy, operations, technology and reputation is also becoming more important for professional accountants. Individuals are expected to develop a broader perspective of risk, with ACCA’s research finding strong support for the Enterprise Risk Management (ERM) Framework of the US Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Developments in technology are also having an impact, changing the way that professional accountants can work by creating new opportunities for virtual collaboration and data analysis. At the same time, the spread of social media is supporting increased stakeholder engagement and activism, which needs to be monitored and managed. Virtual and crypto-currencies are also creating new challenges. For example, how should companies that accept bitcoin payments conduct compliance checks on the sources of the funds?
Planning for action
Participants in ACCA’s workshops believe that professional accountants in governance, risk and ethics-related roles will need new skills to meet the changing demands made of them. In general they will need to hone the technical and critical-thinking skills that underpin their professional scepticism.
Not surprisingly, corporate governance tops the list of areas where specialist skills are expected to be most important over the next five to 10 years. Individuals will need a sound understanding of what makes for good corporate governance both at the macro and company level. They will need to keep up with evolving codes and be able to apply best practice.
Competency in professional and corporate ethics will also be vital. ACCA workshop participants saw value in professional bodies embedding ethics throughout their syllabuses and in employers supporting the development of personal and corporate ethics through more on-the-job training and guidance.
Given the increasingly high-tech world, awareness of new technology and the capability to apply it will also be increasingly important to professional accountants in governance, risk and ethics-related roles. Expertise in business intelligence and data analytics could improve risk identification and mitigation, for example. The ability to use sophisticated graphics, video and other visual and interactive online tools could improve the reporting and presentation of important information.
Other key competencies considered of high importance over the next five to 10 years include communication ability (to help professional accountants manage relationships and balance conflicting interests), professional scepticism, critical thinking and the ability to take a global as well as a long-term and holistic perspective. Professional accountants in governance, risk and ethics-related roles are also expected to need expertise in establishing, maintaining and reviewing internal control systems for financial and non-financial risks and reporting, as well as a clear understanding of the role of board directors and committees.
Alongside the top 10 competencies, workshop participants identified multiple additional skills and attributes that professional accountants working in governance, risk and ethics-related roles will need to develop over the next five to 10 years. These include the ability to prioritise and simplify complexity, innovation, a more forward-looking perspective, presentation skills, engagement with stakeholders, legal skills and the confidence to challenge. They will also need to understand existing and emerging concepts of risk and approaches to risk management, keeping a particular eye on ERM developments.
'In the old days, you could set simple ethics rules that applied across your organisation. Now you have to develop a set of ethical core values that you can apply everywhere in the world.'
Arthur Lee FCCA, assistant president, CGN New Energy Holdings, Hong Kong
'As complexity increases, better ethical behaviour is needed and the principles come into play rather than the procedures around them.'
Rashika Fernando, director, enterprise project portfolio management office, CIBC, Canada
'The board of directors and board committees are where all policies are made and people are nominated. If the root structure goes wrong, the upper part cannot be sound.'
Marisa Wu, head of finance and senior VP, DBS Bank, China
'How ethics is handled has a bearing on the long-term sustainability of the company. A CFO, as risk manager, must understand how it affects the company.'
Yee Wing Peng FCCA, MD, Deloitte, Malaysia
'Things change, people change, values change and a lot of external factors affect a person. But when it comes to ethics, the profession needs a gold standard.'
Wayne Soo, managing partner, Fiducia, Singapore
Top 10 competencies in governance
- Corporate governance
- Risk management Professional and corporate ethics
- Technology awareness and application
- Communications Board directors and committees
- Professional scepticism and critical thinking skills
- Internal control, review and compliance
- Global perspective
- Long-term and holistic perspective