Tag Archives: ACCA Cymru

Accountancy & Accounts, Research

Risk cultures can make or break banks, reveals new report ACCA

  • 2023 banking collapses exposed weaknesses in risk governance that ultimately led to failures
  • Accountancy professionals should work collaboratively to raise risk awareness, promote new insights, and influence organisational culture and behaviours
  • ACCA UK members share their insights and experiences of risk culture in the workplace

 

A new special report by ACCA, the leading global professional accountancy body, examines the impact of risk cultures in the banking industry and how financial institutions can learn from what went wrong in the lead up to the banking collapses of 2023.

The report, Risk cultures in banking: Where next? sheds new light on the pressing need for the banking sector to adapt and innovate risk governance and culture. A key finding of the report was that finance and accountancy professionals should lead an image change around risk culture, framing it as something that allows many good opportunities to happen, rather than only mitigating bad things.

The report further suggests that factors of human behaviour currently do not have enough bearing when it comes to risk cultures in banking. Understanding the role of human behaviours when it comes to risk culture is complex, but with effective leadership, policy and management, many of the operational issues that have the potential to become much bigger problems can be mitigated earlier.

Head of risk management and corporate governance at ACCA, and author of the report, Rachael Johnson, commented: “The 2023 banking collapses underlined the importance of transparency in preventing operational losses and reputational risk at banks. A strong risk culture supports this, ensuring trust in information for resilience and prudent risk taking.

“Accountancy professionals can act as risk super-networkers, aiding teams in informed decisions and sharing knowledge. By sharing stories, they can raise risk awareness, promote new insights, and influence organisational performance, which is what effective risk cultures are all about.”

The report speaks to multiple ACCA members about their experiences of working within banking industries and attitudes towards compliance and the understanding of risk. Through discussion, the evidence highlighted that a lack of dialogue between banks and regulators underpinned many of the issues around building effective risk culture.

Rather than there being unwillingness to change how risk culture is approached and managed, the issue instead appears to be how to make a risk culture successful. The key issue from the UK members spoken to in the report appears to be one of disconnect between senior decision makers and those looking at the operational data, as well as being on the ground amongst staff and understanding their behaviours and attitudes.

An ACCA member who is an investment manager in the UK compared the accumulating operational risk losses at banks ‘like trying to extinguish forest fires’. He commented: “The fines and reputational damage in banking have been enormous in recent years. It is as if we know something needs to change about how we quantify these risks but, as an industry, we are not doing enough about it.”

Another ACCA UK member added: “We see time and time again that boards and senior management are more concerned with quarterly earnings and do not pay enough attention to strategic risks and how fast they materialise into something very costly.”

 

The role of behavioural factors in risk culture is a key takeaway from the report. It discusses the dynamics of risk being more about human behaviour than mathematical models or process design flaws, and it includes 10 action points for banks, highlighting how stronger partnerships between risk, support units, and accounting functions can make a profound difference.

Visit ACCA’s website for more information.

 

Climate, FInance, Wales

Global accountancy body in net zero first as profession steps up drive for sustainable future

ACCA (the Association of Chartered Certified Accountants) has become the first global professional accountancy body to have its net zero targets verified by the Science-Based Targets initiative.

 

The achievement highlights ACCA’s commitment to a sustainable future and is part of its larger focus on equipping and upskilling the accountancy profession across the world to drive the changes needed in businesses and organisations to achieve this.

 

Helen Brand, chief executive of ACCA, said: “The SBTi applies independent testing to net zero targets in line with climate science, and we’re delighted that it has recognised our approach and targets. It’s a great step forward on our journey to net zero.

 

“The accountancy profession has a critical role to play in driving good business decisions and best practice that will create more sustainable businesses and a better, greener future for all.

 

“We’re working hard to drive this transition through our 773,000 members and future members in 181 countries and our work to influence policymakers. And it’s important that we apply best practice in our own operations.”

 

ACCA is targeting a 50% reduction in carbon emissions by 2030 and net zero by 2045, using science-based best practice.

 

The Science Based Targets initiative (SBTi) drives ambitious climate action in the private sector by enabling organisations to set science-based emissions reduction targets. It brings together experts to provide organisations with independent assessment and validation of targets.

 

Find out more about the role of accountants in sustainability.

Economy & Jobs News, Finance News, Wales

Global economy set for slow growth, high uncertainty for 2024, says ACCA chief economist

  • ACCA’s review of the current global economy suggests 2024 will be beset with risks and challenges
  • Slow growth, geopolitical risks, lagged impact of monetary tightening in 2023 and businesses approaching with caution are likely to shape

 

 

An inaugural annual economic prospects report by ACCA examines the outlook and major risks for the global economy and key countries. The report, 2024 Global Economic Outlook: Slow Growth High Uncertainty, sets out the key events to watch in a year packed with elections; examines three trends to watch closely; and interviews chief financial officers (CFOs) from across the globe.

 

Jonathan Ashworth, chief economist at ACCA and author of the report, said: “The global economy looks set to grow slowly once again in 2024, and the risks are skewed to the downside. The lagged impact of past monetary tightening could lead to an even more pronounced slowing in growth, and geopolitical risks remain very heightened. The busy political calendar, with elections scheduled in around 60 countries, including the US, the UK, India, and the European Parliament, adds a sizable extra degree of uncertainty and potential volatility.”

 

Ashworth added: “It could be risky for central banks to declare imminent victory in their battles against inflation” but suggested that: “Upside risks to the global economy in 2024 could perhaps come from continued rapid improvements on the inflation front, which could pave the way for quite an early and significant easing of monetary policy by central banks.”

 

But he warned that “this could risk sowing the seeds of higher inflation in 2025 and beyond.”

 

In addition to monitoring the usual ebb and flow of economic data, Ashworth suggested watching three key trends this year:

 

  • Further backsliding by governments on policies to achieve the green transition
  • Signs of rising geo-economic fragmentation
  • Developments with artificial intelligence (AI).

 

Ashworth said: “The first two could be particularly impacted by political developments through the year, and we will be watching for early signs that wider AI adoption is beginning to provide a much-needed boost to productivity growth in economies.”

 

Meanwhile, caution was the watch word from CFOs given the challenging global economic backdrop and the geopolitical developments and elections in many countries. Some businesses were naturally less impacted by cyclical economic developments, but a number were impacted by, or at risk from, structural changes related to trade, and supply chain issues. Most were experimenting with AI and other technologies in their businesses, while some noted the difficulty in attracting talent given the changing ways of working.

 

Read the full report here.

 

Please visit ACCA’s website for more information.

FInance, Finance and Banking, Wales

ACCA welcomes proposals to strengthen auditor reporting requirements on breaches of law and regulations

  • ACCA backs FRC proposals to allow auditors to focus on laws and regulations that are most likely to have a material impact on the financial statements.

 

ACCA (the Association of Chartered Certified Accountants) is backing FRC proposals to enhance auditor quality and foster users’ confidence in financial statements.

 

The FRC – the UK’s accounting regulator – is proposing enhancements to existing requirements. This would strengthen auditor requirements to detect and report material misstatements from non-compliance with laws and regulations, and to clarify instances auditors should report such breaches, and other significant matters, to the relevant regulators.

 

The FRC says updating ISA (UK) 250 and ISA (UK) 2X0 will enhance the usability and informativeness of the audit and provide greater assurance to users of financial statements that potential material misstatements have been properly assessed by the auditor.

 

Jessica Bingham, policy and insights lead, (EEMA & UK), ACCA, said: “Enhanced requirements for auditors to consider and address relevant laws and regulations will promote transparency and accountability, ultimately bolstering investor and stakeholder confidence.”

 

ACCA welcomes FRC’s acknowledgement that auditor’s responsibilities cannot be open-ended in terms of identifying and determining compliance with all laws and regulations relating to the entity.

 

To assist, the FRC is introducing a more robust risk assessment process. This will help auditors identify those laws and regulations that have, or may potentially have, a material effect on the financial statements.

 

However, Bingham adds: “ACCA asks that the FRC carefully consider the risk that in practice the impact of the updated requirements could be to shift workload from management to the auditor.”

 

The FRC is proposing switching from a procedural approach to an outcome-based approach, using risk focused assessment for the identification and assessment of relevant laws and regulations.

 

ACCA says this gives flexibility and discretion to auditors, allowing them to exercise comprehensive professional judgement to identify the likelihood and materiality of misstatements.

 

While acknowledging resource issues, ACCA is calling for ISA (UK) 2X0 to apply eventually to listed entities as well as public interest entities.

 

Bingham said: “We recognise the need to avoid burdening those with limited resources but believe that the proposed application material for ISA (UK) 2X0 appears to be a valuable asset for auditors, offering practical guidance on identifying and addressing suspicions of non-compliance.”

 

The revised ISA is set to come into effect for audits of financial statements for periods commencing on or after 15 December 2024.

 

Visit ACCA’s website for more information.

Accountancy & Accounts, FInance, Finance and Banking, Finance News, Wales

58% of SMEs cite rising costs as top concern for 2024 in new research

  • Challenges in talent acquisition, cost management, and ESG reporting emerge as the three top hurdles for SMEs in 2024.

New research from ACCA (the Association of Chartered Certified Accountants) highlights the pressing challenges and strategic innovation opportunities for small and medium-sized enterprises (SMEs).

The study, SMEs: Business challenges and strategic innovation opportunities, reveals three main challenges: escalating costs, workforce and talent management, and the evolving ESG (Environmental, Social, and Governance) reporting agenda.

Aleksandra Zaronina-Kirillova, head of SME at ACCA, says: “As we enter the new year, SMEs are grappling with a wide spectrum of challenges, but our findings are also a clarion call for SMEs to embrace strategic innovation. By addressing these challenges head-on, SMEs can unlock new growth avenues and strengthen their market position.”

The report emphasises the need for tailored strategies that can help SMEs navigate the evolving business landscape successfully, including embracing innovation, optimising resource management, and staying ahead of regulatory changes.

Key findings include:

  • Cost pressures and the economy: SMEs face significant increases in utility prices and supplies, with 58% of businesses highlighting higher costs as their top concern. A quarter of respondents said utility prices had surged by over 20%. This significant challenge underscores the need for effective cost management and innovative financial strategies.
  • Workforce and talent management: The study revealed a notable rise in job vacancies and challenges in filling specific roles. Increased job vacancies for professional workers were reported by 31% of businesses, and 14% were unable to find suitable candidates for clerical workers, technicians, and service and sales workers. This calls for a renewed focus on talent acquisition, skill development, and retention strategies.
  • SMEs and the ESG agenda: Nearly 50% of SMEs are now required to provide ESG information, highlighting the growing importance of sustainable practices. However, the report identifies a gap in the ability to generate and manage this data, presenting both a challenge and an opportunity for SMEs. Less than 45% of those surveyed said they had received training in how to effectively collect ESG data, leading to a lack of universal framework and metrics for reporting.

Zaronina-Kirillova added: “In these testing times, SMEs must pivot towards innovative strategies to navigate the complexities of cost pressures, talent retention, and sustainable practices. Our research not only identifies the critical hurdles but also offers a roadmap for SMEs to emerge stronger and more agile.”

The roadmap within the report recommends the adoption of digital technologies, enabling SMEs to streamline operations, reduce costs, and enhance productivity. It also emphasises the importance of embracing sustainable practices, not only as a regulatory compliance measure, but also as a strategic move to attract new business and customers.

It also encourages SMEs to develop and retain top talent through continuous learning and development opportunities.

In this rapidly evolving landscape, the role of accountants, especially those in small and medium-sized practices (SMPs) can be pivotal. Accountants are not just financial stewards but strategic advisers who can guide SMEs through complex challenges such as managing rising operational costs, navigating new regulatory requirements, and implementing effective ESG practices.

Accountants’ expertise in financial management and strategic planning is crucial for SMEs to optimise resources, identify cost-saving opportunities, and ensure compliance with evolving regulations.

To access the full report please visit ACCA’s website.