ICAS President Bruce Pritchard CA on the role of accountants in the future of business
Questions around the future of business and work won’t go away as the clock strikes 2022 but, crucially, accountants will remain essential to finding the solutions, says President Bruce Pritchard CA
There are so many cliches that can be written about the time in which we’re living. Building back better, new normal and so on. But, despite the endless repetition of those phrases, there’s an element of truth to each.
That’s because, looking to the new year, many of the questions raised by the pandemic will persist. We are yet to settle on an accepted framework for hybrid working. Shortages of essential workers mean that economies are recovering in juddering fits and spurts. And investment that rushed into healthcare manufacturers and suppliers now needs to find a new home. There are some wider, continuing themes, too. Businesses must become truly sustainable, and stay ahead of advancing technology, if they are to retain their customers. And that’s all overlaid by an expectation of rising inflation and interest rates across much of the globe.
Each of these developments will influence the accountancy profession in some way. New ways of doing business require new forms of data and oversight – the areas in which CAs are expert. It is therefore incumbent upon the profession to evolve alongside, and often ahead of, the wider business environment. Going forward, we will be expected to help find answers to some of these big questions.
We’re currently seeing the effects of a shortage of essential workers. That includes an inability to get truck drivers to move fuel around the country, getting our food from farm to plate, and moving consumer materials from port to retail. A lot can be blamed on the lasting effects of the pandemic – including the “pingdemic” – but we’re seeing a shortage of labour that would have ordinarily come from Europe. Those things will inevitably normalise, but we can expect to see aspects of short-term pain and short, sharp shocks to the economy in 2022.
We can already see the warning signs of higher prices. The greatest level of concern is around stagflation. If you’ve got inflation in a stagnant market, it becomes very hard for the economy to naturally break out. We’re seeing prices rising on everyday goods and services, which isn’t demand led. That’s a source of potential worry because it can start to snowball. If it does, it is essential that government strikes the right balance of fiscal policies going forward. The danger is that you get into higher levels of fiscal intervention by government, followed by higher levels of taxation to pay for the fiscal intervention, compounding the initial issue of stagnation.
It’s essential that businesses aren’t making empty promises on sustainability, as they’ll find themselves isolated from the investment community and their customer base. It’s about deep-seated change in the DNA of the business. And there is going to be much more pressure in the next 12 months.
Business also has to be accountable on sustainability. And that involves the work of audit. There are some big questions. Most importantly, how can auditors not only audit the business’s numbers, but also be able to give some sort of assurance on its CSR position? To help business become more sustainable, we will need to begin providing answers very soon.
The pandemic accelerated digitalisation and it’s unlikely we will ever go back. Critically, everything done in a digital environment is creating data. And as things get smarter, the interaction and multiple touch points around data become more exciting. The next big area to tap into is using different data points to validate the same underlying set of facts. Instead of an audit senior looking at a bank statement and another member of staff ticking off invoices, technology could validate an invoice for materials purchased by independently confirming that they were received. The future applications of this technology are mindboggling. We just have to make sure that, as a profession, we keep pace.
The available capital in the market has migrated. At the beginning of lockdown, a lot of money moved into healthcare, creating a boom. Now that the pandemic seems to be quieting, capital is moving again. Its flux makes it difficult for companies to work out where they will attract their investors. It’s also changed the cost of capital for certain sectors of the economy. But it’s worth emphasising that these are normal cycles for investment. Going forward, those looking to invest in the healthcare sector, for example, will no longer be generalists and retail investors – they’ll be the specialist funds, and they’ll be back to looking for something unique.
The pandemic has internationalised some forms of work. It has opened a pool of talent that many firms didn’t have access to before. That level of mobility is having an impact on staff costs. It’s become a supply-led market and staff are able to dictate their terms. Many employees have choices they simply didn’t have before the pandemic. And employers have to re-examine their offering to see if it is still up to the task of making them attractive – whether that’s related to compensation or working practice. Remote workers were able to mould their own working life during the pandemic. And many of them decided that they rather liked it.