What are finance professionals and business leaders considering as they plan for the new normal in the recovery phase? Industry experts weigh in.
By Dr Jana Schmitz and Claire Grayston FCPA
In the last few months, the only certainty in business has been uncertainty. But even as we’re still stuck in at least partial lockdowns and social distancing measures may remain for an extended period, as work, gathering and travel restrictions are relaxed, the need to prepare for the post-COVID-19 world becomes more pressing.
Here are five things Australia’s industry experts are keeping “top-of-mind” as they ready for a new era.
Working remotely – the ‘new normal’ enabled by technology
If there is one positive to emerge from the COVID-19 crisis, it is the acceleration of the digital transformation that many organisations had already set in motion prior to the crisis.
There are plenty of examples of how both consumers and providers have embraced technology to keep economic activity possible, and there is strong evidence that many of these new technology-based ways of operating are here to stay.
This becomes clear when we consider how healthcare providers have rapidly migrated into telehealth, retailers have moved to contactless and online shopping and delivery and insurance companies have transitioned to self-service claims assessment.
The COVID-19 crisis provides a sudden glimpse into a future world, one that shows many organisations and consumers increasing the pace of technology adoption. Many organisations have swiftly rolled out technologies that enable remote working for the majority, if not all, of their workforce.
Will that adoption recede in a post-COVID-19 world, or will we move to a new digital status quo?
Shaun Steenkamp, finance partner at National Bank of Australia (NAB) explains that NAB equipped each employee with a laptop and remote access within days after the pandemic escalated.
“Companies that once planned to uplift their digital strategy in one-year cycles must now scale their initiatives in a matter of weeks or days.”
NAB’s immediate digital transformation serves a long-term purpose, adds Steenkamp.
“The way that technology was deployed in response to COVID-19 allows it to become a permanent solution allowing employees to permanently work remotely post COVID-19, if they choose to do so,” says Steenkamp.
“Once people get used to working from home, I expect the culture of working to change fundamentally. A very large part of the workforce is probably going to choose to remain working from home once we reach the stage when we can return to the office.”
With virtual meetings seemingly becoming the norm, working from home will become more and more routine among organisations such as NAB.
Audit technology – taking the digital leap
Before the crisis, several audit firms had already been moving towards adopting technology-enabled audit processes and employing digital client-platforms. Practically overnight, physical distancing and the lockdown have magnified the importance of the use of such technologies and platforms, particularly with regards to client engagement.
Supporting this observation, Peter Kerr, executive director of the Assurance Audit Services Group at the Australian National Audit Office (ANAO), says that data analytics and user-friendly dashboards are becoming more and more relevant.
“To an extent audit has already become an automated exercise,” says Kerr.
“COVID-19 just shows that the focus shifts from manual reconciliation to more automation. Technology fast-tracks audits through automated procedures.”
Mark Hucklesby, partner and national technical director of audit at Grant Thornton New Zealand, emphasises the client-side considerations.
“Let’s not forget that for audit technology to be useful – particularly in the current environment – both auditor and client need to be technologically up to date,” says Hucklesby.
“In other words, clients also need to have the technology in place to allow for data to be made accessible to auditors.”
While he emphasises the usefulness of audit technology in the current environment, Hucklesby questions how much of the audit can be done remotely in the future.
“Especially the first few steps of the audit, for example, walking through [the] client’s premises, counting inventory, speaking to client’s staff and assessing risk. I am not sure how that can all be done without being physically there.”
It would be interesting, he says, to conduct empirical research examining whether, during COVID-19, remote audits using audit technology were more efficient than traditional audits.
There is agreement among the CPA Australia External Reporting Centre of Excellence members that COVID-19 could prove to be a decisive turning point in the use of audit technology, particularly cloud-based audit software.
The new workforce – tech-savvy graduates are welcome
Several audit firms are now likely considering how the audit landscape may change permanently in the future and will alter their strategy. Those seeking to strengthen their position after the crisis will go beyond just adopting technological solutions: they will also recognise and act on the need to employ staff with digital skills.
Nick Walker, audit partner at HLB Mann Judd, emphasises that the efficiencies audit firms gain from implementing data analytics needs to be taken into consideration. He clarifies that new technologies will affect graduate recruitment in the long term – not necessarily by decreasing the demand for accounting graduates but by the need for graduates to have a certain skill set.
“There is more emphasis on that knowledge,” says Walker. “Data analytics, artificial intelligence and automation will shape the audit landscape.”
The increasing use of technology in the audit will reflect on the skill set needed for new hires but also existing staff. Inhouse training and professional development focused on technology skills are becoming more necessary.
Hucklesby refers to the “digital accountant” pathway for trainees initiated by Grant Thornton UK. Recognising the need to upskill graduates from an early stage, Grant Thornton UK introduced a pathway designed to develop technology, process and data audit skills alongside the traditional accountancy qualification program.
Part of the “pathway” trainee program includes learning modules covering data analytics and visualisation, cyber security, digital innovation and disruption, ethical and legal matters, and big data.
Hucklesby notes that this is an essential step to provide trainees with a strong understanding of the role technology and data play in the audit and to address the digital skills gap in the audit market.
Looking forward – staying ahead in the race against time
The COVID-19 pandemic has spread at an extraordinary and unprecedented pace and dealing with the uncertainty amid constantly changing conditions has become more important than ever before, says Steenkamp.
Client behaviour and business models will change, and the challenges associated with it will be greater than what we are used to.
“To handle those challenges businesses need to adopt a strategy that accommodates the extreme level of uncertainty which they are exposed to,” Steenkamp adds.
To lay the groundwork to deal with what may be permanent changes to businesses after the crisis, finance leaders are wise to act now. The reality for many companies is that their current budgeting processes may not have coped well with the crisis. There may be significant challenges in setting credible budgets as businesses and economies transition towards recovery.
Steenkamp notes that this will force a much more agile, real-time approach to resource allocation and budgeting.
“We need to apply a more timely, dynamic view, of the future instead of doing a monthly budgeting type of thing,” says Steenkamp.
“That cycle is now too cumbersome and not timely anymore.”
Steenkamp adds that NAB has already taken measures and adapted to the current situation: “Financial metrics across the bank change daily. What we have done now in some areas is to run a pre-forecast at a very high level twice a week,” says Steenkamp.
“That might only be 80 per cent correct but it’s enough to make immediate strategic business decisions. You don’t have to have everything reconciled or planned out to the dollar.
“You have to become very responsive and the monthly catch-up on business just simply doesn’t work in the current environment.”
Hucklesby and Steenkamp agree that being proactive rather than reactive is essential. Waiting for perfect answers can be counterproductive.
“Don’t let uncertainty bottleneck your decision making,” adds Hucklesby. He believes that updating and improving strategies continually by integrating new information as it becomes available will have to become an integral part of business, to which Steenkamp adds: “Fast-response time from a finance professional perspective is becoming increasingly important. Not just during the crisis but also following the crisis because there will be a lot of market opportunities for competitors to bounce in and for market share to shift rapidly.”
In short, resilience – the ability to absorb a shock and to come out of it better than the competition – will be the key to survival and long-term prosperity.
As lockdown restrictions ease, businesses will need to figure out how to operate in new ways, says Hucklesby.
“We will face high levels of unpredictability in the future. The worst you can do is to be paralysed by uncertainty and unpredictability. You cannot avoid uncertainty, but you can – to an extent – manage and control it,” says Hucklesby.
“A particularly good way of doing this is fully embracing scenario analysis.”
Developing scenarios for multiple versions of the future of the business and formulating adequate recommendations for actions for each scenario will help to decide on the right course of action.
“The point is not to develop detailed plans but rather to remain agile in forming strategic or even tactical responses,” says Hucklesby.
Steenkamp shares this view and adds: “Being on the fastest trajectory will become more important than having a detailed action plan because plans can very quickly become outdated.”
The aim of scenario analysis is not to discuss which scenario is most likely to eventuate, but rather to consider what looks plausible and to raise awareness among decision-makers.
Staying positive – finding the silver linings
From a business perspective, there are likely to be some positive outcomes. Although these will not necessarily compensate for the adverse economic impact, they are likely to shape our future thinking on how business practices evolve.
One of the silver linings is technology-enabled remote operations. Individuals and businesses are learning new ways to engage and operate remotely. If these practices remain after COVID-19, the workforce will become more flexible.
“The possibility to work flexible hours remotely is often critical to support employees at different life stages, such as parents with young kids,” says Steenkamp.
Another positive outcome may be that business leaders have gained a better understanding of what can and cannot be done outside traditional business processes. This particularly affects audits, of which some processes require direct face-to-face engagement between the auditor and the client, as emphasised by Hucklesby.
At the same time, however, we have seen that some clients appreciate the speed with which organisations move forward and change how they do things. In short, COVID-19 accelerating the pace of workplace innovation.
Indeed, as we are moving towards a post-COVID-19 world, businesses will realise that where they land is a matter of choice and countless decisions to be made. Developing different scenarios may make the decision-making process easier.
Views expressed by External Reporting Centre of Excellence members are their own and do not necessarily reflect the views of their associated organisations.
Dr Jana Schmitzis Policy Research Analyst at CPA Australia and Claire Grayston FCPA is Policy Adviser Audit and Assurance at CPA Australia