Over the last several decades the contribution of professional accountants to organisations and economies has transformed; from bean counters to strategy formulators and leaders. It may sound fantastical to suggest that professional accountants can solve all the world’s problems. However, guided by ethics, integrity and transparency, professional accountants have a lot more to contribute to finding the solutions than first meets the eye. UK-based accounting body ACCA’s members Jehan Perinpanayagam, Chief Executive at Infomate, Chaaminda Kumarasiri, Chairman at HCP, and Suren Rajakarier, a Partner at KPMG, joined a discussion on how the profession is uniquely positioned to drive change and address challenges.
Sri Lanka is in an economic crisis. In this context, what role can the accounting profession play?
In Sri Lanka and at a global level, accountancy is the language of business. It’s considered the connector of the global economy, and professional accountants are needed during an economic crisis more than during any other time.
One of the reasons for the crisis in Sri Lanka, or anywhere else where there is one, is the lack of strategic planning. Whether it’s in terms of infrastructure, policy, or any other area, it comes down to a lack of professional strategic planning. Financial literacy and the improvement of financial skills also underpin the sustainable development of any country.
Globally the accountancy profession is linked to national economic growth. There is research to prove this. The accountancy profession is also associated with improved living standards, essentially a higher number of accountants results in higher living standards for countries. Another piece of research concluded that more accountancy professionals are associated with higher GDP.
In that context, what Sri Lanka could do is reach out to the accounting profession, many of whose members work in the private and government sectors, together with other professionals, to come up with a sustainable strategic plan for the issues the country faces. Clearly, the accounting profession is in a better position to address issues of risk management on a sustainable basis.
Jehan: For a business, the priorities during a crisis are cash flow planning, managing risks, and also predictive analytics for forecasting the different scenarios and the solutions for those.
Accountants are uniquely positioned and trained in cash flow planning, and risk management. They often support the Chief Executive and the board in decision-making during crises.
Chaaminda: We need to understand that there is less room for error during a crisis. When you face a tight situation, the margin available to test things is narrow. At such a point you need a lot of data-driven decision-making. You can’t rely on your gut alone. Accounting can provide the basis for data and information that you now need for decision-making. That is number one.
Second, we also need competencies to forecast when the outlook is so uncertain. For example, look at the exchange rate. Everyone wants to know what’s going to happen to the exchange rate, and how they should then deal with it. How do you approach these risks and how do you also prepare yourself with a backup arrangement or alternatives.
Accountants are not just mere number crunchers. They’re also conversant in risk management and forecasting and these skills are in greater demand for decision-making now.
While we are surely facing a crisis here, do you think we can afford to let the sustainability agenda take a backseat? How do you reconcile the two, and how do you find space for sustainability initiatives in a climate such as the one we find ourselves in now?
Jehan: The natural tendency of businesses and chief executives is to just focus on the immediate because survival is the biggest challenge. But the fact, that people now realize, is that without sustainability if we don’t have a planet to live on, the value of a business is meaningless. I was listening to an expert on this and he was saying that if the temperature crosses the 1.5 degrees centigrade red line, nearly 30% of the global economy will be wiped out. We are facing a significant existential crisis. Accountants are trained to be strategic and to look at the long term. Being sustainable is good for business, even in the short term, it helps manage costs. Sustainability investments come with positive ROIs. It also helps retain your people and reinforces the factor of organizational purpose. Sustainability endears you to investors and customers. From every aspect, sustainability is good for business. It’s noteworthy that ACCA has hosted sustainability awards in Sri Lanka for many years, and they’ve included sustainability and ESG into the syllabus. ACCA is equipping our professionals to be able to advise businesses, CEOs and the boards on sustainability
How can accountants help the organisations they represent build trust to navigate the unfolding challenges?
Chaaminda: We need to appreciate that people who trust organizations do so due to the transparency of an organisation. Transparency and accountability are some of the key areas that accountants too focus on. How you may ask? When you bring objective information to the table, keeping out your biases, that is how.
We don’t see this transparency, especially in the public sector. Citizens are in the dark, they don’t know what’s going on. Even in the current situation, should we have had access to more information much earlier, the outcome could have been different. There would have been certain actions that could have been taken.
Accountants are trained, and they understand the challenges. When an accountant signs a financial statement, they take that responsibility. In turn that instils trust in the institution.
Suren: With ACCA the training for ethical behaviour commences with the students. As a profession, we’ve identified that trust is fundamentally important for accountants. That’s the aim of ACCA and any professional body. So I think accountants are probably best placed for building trust in an organisation.
Can you share some insights about how the profession and ACCA, in particular, contribute to building a culture of enterprise and innovation? Because enterprise and innovation too will have to play a greater role for the economy to emerge from the present crisis?
Jehan: If you look at the seven quotients of the future accountant that ACCA has researched and published including creativity and digital skills. The future accountant must be well equipped and able to innovate in a broad range of areas whether they be in robotic process automation, AI or machine learning. I was recently privileged to meet an ACCA member of the Global Council based out of Australia. He consults for businesses in finance transformation. He would look at elements such as the use of the ERP systems, how innovation can be built-in, how it can add value to the business and how the entire finance function could be transformed to world-class standards. If we look at Sri Lanka’s economy and the need for optimizing productivity, there is a real need to supercharge our productivity. It will add so much to the economy and the public sector. Sri Lanka has brilliant people. If we make it possible for more innovation in the public sector, as well as the private sector, our people will be able to add much more value. This is the transformation that the accounting profession can contribute to.
From a global perspective, what role does ACCA play to facilitate connections and support the government, businesses, and policymakers to shape better futures?
Suren: Its contribution is with the type of accountants we create. Some of the focus areas, in addition to technical skills, are good governance, ethical behaviour, looking after the public interest, and other skills whether it’s creativity, or digital readiness.
The professionals we train contribute to their organizations and by doing so contribute to their communities. When communities grow, that’s when our country grows. That’s the reason, a larger number of accounting professionals in a country contribute to higher living standards and higher GDP.
Most of ACCA’s members work in the private sector. The economic crisis is manifested quite clearly in the banking sector. How can accountants help navigate this challenge?
Chaaminda: The financial system is the backbone of an economy. Banks are intermediaries. If they aren’t able to play their role efficiently and effectively, there will be consequences for the entire economy.
During a pandemic period, banks were compelled to look after small businesses. We have to take care of the banks as well. Because without well-capitalised banks we will compound our challenges and our economic life.
Banks can now play a critical role in efficiently facilitating financial intermediation. Unfortunately, the current interest rate structure is not conducive to lending. If the regulator and the policymakers support the banking system to do their job, especially in facilitating economic activity at this time, we can rebuild the production capacity of the country. Banking can play a role in building that capacity. For that to work at scale there will have to be some facilitation.
Can the IT industry play a role to help navigate Sri Lanka’s economy?
Jehan: The IT-BPO industry is one of the top five export earners in Sri Lanka. It was one of the few industries that grew in double digits even during the pandemic. The vision for the industry is to earn $5 billion in export revenue by 2025. Currently, it’s just under $2 billion. We employ 115,000 people and the goal is to employ 200,000 people by 2025. So in terms of employment, value addition, export earnings, and also inclusive growth, the industry makes a significant contribution. Today, we have delivery centres across the island. In the BPM industry, 48% of the workforce is female. We also employ differently-abled people. So it has tremendous potential to create inclusive growth across the country, female employment, and bring foreign exchange.
And what about the private sector overall?
Suren: There are challenges in Sri Lanka. Let me just focus on the economic side. The private sector and accountants can inspire trust in capital markets to start with. Ensuring that companies are well-governed, risks are managed and business continuity strategies; all of these need to be looked at. Empowering confidence in our people is the other. Professional training, the kind of which ACCA provides, makes sure people have the right tools to contribute. What can the professionals do? Well, they should focus on managing risks, like inflation, the exchange rate risk, and managing risks of logistics and fuel and so on. Evaluating a proposal or a risk assessment is bread and butter for accountants. These are a few examples of how accountants can contribute to the country