For some accountants, the challenges of 2020 are now the opportunities of 2021. Here are some of the trends that lie ahead.
By Engel Schmidl
Everyone breathed a sigh of relief when 2020 was over. Yet the reality is that 2021 holds its own set of challenges.
INTHEBLACK asked three senior CPAs with varied backgrounds and from different practice areas what they learnt from 2020 and how they plan to identify 2021’s risks and opportunities.
Lessons of 2020
COVID-19 severely disrupted many organisations, says Jonathan Ho FCPA, partner and head of governance and risk services and private enterprise, KPMG Singapore.
Ho says that while the pandemic has dominated board and management thinking globally, many organisations are still viewing COVID-19 as a singular risk event.
"They are viewing this risk in a ‘silo’,” Ho says.
“While this perspective is not inaccurate, organisations also need to consider the potential risk inter-linkages and interconnectivity stemming from this pandemic, to have a comprehensive assessment of the associated risks and how they will impact organisations.”
He says COVID-19 made organisations realise that they must look beyond narrow parameters such as size, location or industry type because risk events can easily spill from one area into another.
“We have seen how COVID-19 set off a chain of risk events globally, such as logistics and supply chain issues, reduced spending and investments, [and] unemployment as well as other macro-economic concerns for organisations worldwide.”
For Gavin Swan FCPA, owner and director of Absolute Accounting Services, a firm based on the NSW Central Coast with a predominantly small-to-medium enterprise (SME) client base, the biggest lesson from 2020 was to “be prepared and be prepared to call it early”.
“People were relying on your advice to pay their staff or not pay their staff, as the case may be. You really had to make a call. You couldn’t dither over anything.”
Swan says one of the first things he did when he realised the magnitude of the crisis was to gather his staff and firmly communicate to them that their jobs were safe.
“Before any government assistance was announced, I gathered them around the boardroom table and said, ‘things are looking grim, but I just wanted to let you know your jobs are safe’.”
That approach ensured his employees could focus on guiding clients through difficult times. He says 2020 reinforced that preparation was paramount to success, both for his firm and his clients.
“The definition of luck is preparation meets opportunity. I think we had a significant opportunity presented to us as a profession during 2020, and I think those [who] were prepared came out very well,” says Swan.
BlueScope Steel’s manager finance transformation, Stephannie Jonovska FCPA, says the COVID-19 crisis redefined her leadership thinking.
“Self-awareness. Being self-compassionate. Having that courage and bravery, being quite scared but doing something anyway because you’ve got to lead people in a really ambiguous environment.
“That connecting and caring is something that I probably didn’t think about 25 years ago when I started my career,” she says.
She says the uncertainty of 2020 encouraged leaders to find the resolve to make decisions even when they didn’t feel all the information was at hand.
“In the context of finance, it comes with the territory around being correct and being perfect. I think now there’s a real shift. We’ve learnt that we can make decisions with imperfect information. Taking that brave leap, being a bit scared but actually doing something is really important for our people.”
Ho says the next 12 months present a new set of challenges, ensuring organisations have the resources to deal with the evolving environment.
“There is a risk that organisations may not have the talent or staff with the right skill sets to chart the next growth chapter of companies in the new COVID-normal era.
“As companies grow their roots in the digital space, the workforce will need to harness different kinds of know-how and technical expertise, particularly among digital specialists.
“In many cases, this will require new staff recruitment or the retraining of existing employees.”
For Jonovska, the challenges of 2020 are now the opportunities of 2021. She and her team have put transformation at the top of their agenda for the new year.
“We’ve come out with a new strategy around transform, grow, deliver,” she says.
“With a new strategy, keeping that energy in this very fluid and disconnected environment has to be a focus for us. I think launching a strategy without getting 300 people in a room at once showcases that we can keep the energy up. But it takes commitment. Leadership commitment is probably the main thing.”
Swan says his experience over the past year has reiterated the crucial role CPAs can play in helping SMEs navigate risk. He says the economic landscape means frank and open communications are necessary between accountants and clients, especially as some companies face the reality of banks calling in loans and government support becoming less generous.
“For SMEs moving forward, they’ve just got to learn to adapt, to do things a little bit different in that we’re not all in the same boat. Our boats might be in the same ocean, but we’re all in slightly different boats, so people learn to adapt for that.
“Whether that’s engaging with their staff, clients, or customer base, it is different across the board, but nothing stays the same. The only certainty is change.”
Swan says accountants rose to the challenge of 2020 by understanding their role involved more than crunching numbers and ticking boxes.
“We’re trusted advisers. We’re not just filling out tax returns or saving tax for our clients. We’re involved in the whole decision-making process, whether that involves a review of cashflow or employing people or venturing into softer skill areas such as managing difficult staff or conversations about mental health.”
The risky business of 2021
When it comes to managing the myriad risk profiles facing organisations in 2021, Ho says risk management must be a shared responsibility.
“Risk management is everybody’s responsibility. We cannot see risk management as just another compliance exercise. We have to see it as a management tool. It is essential to get the senior management on board and set a clear ‘tone from the top’ for risk management to be effective and sustainable.”
Ho says implementing a structured process with guidelines to facilitate “risk thinking” among stakeholders will kickstart a robust risk management program.
“Another key element to build the foundations of risk management is to put in place a structured risk reporting framework to ensure that senior executives and stakeholders are provided with the right level of risk information to make informed decisions or to be able to ask the right questions.
“Once the risk foundations are established and stable, organisations can continuously streamline and improve the process, such as establishing early warning risk monitoring mechanisms, such as key risk indicators (KRIs).
“The more ‘risk mature’ organisations can deploy data analytics and automated risk management tools to augment the existing frameworks and processes.”
Ho says the dynamic nature of risk management makes it a continuous journey.
“I would caution organisations against doing too much, too fast but ensure that risk management is built and improved at a progressive and comfortable pace for the organisations and stakeholders.”
Ho, Swan and Jonovska all agree that after the seismic ruptures of 2020, it would be foolhardy to think that 2021 will be magically different. The business landscape has changed dramatically, but perhaps even more importantly, our collective sense of such crucial concepts as community, leadership, risk and trust has evolved.
New challenges will emerge, but so will opportunities.
For CPAs, that entails understanding how they can use their unique skills to help their companies and clients chart a path forward to a financially sustainable future in an age of uncertainty.