Chartered accountants have a significant impact in the organisations and societies they serve because of their ability to see trends and decide on the best course of action. They are also a critical part of the governance landscape, with many contributing with direct accounts or assuming governance positions.

In December 2022, the Institute of Directors New Zealand (IoD) released its annual list of the top five issues impacting governance professionals; the issues are closely aligned to the challenges impacting chartered accountants.

The list is intended to prompt discussion of the demands from an increasingly complex operating environment, rather than be considered comprehensive. It provides a platform for discussion where potential opportunities and future strategic challenges may arise and CAs may support good decision-making.

The myriad issues facing CAs and directors include global forces such as the COVID-19 pandemic still surging around the world, the ongoing and significant impact of climate change, the short- and long-term implications of transformative technologies, and the ever-shifting and increasing consumer and community expectations.

This then leads into consideration of diversity, equity and inclusion issues that are increasingly linked to many organisations’ social licence to operate.

“Board members are in continuous learning mode. In a director sense, this means transforming from ‘know it all’ boards to becoming ‘learn it all’.”

Issue 1: climate-change transformation

The good work undertaken by Chartered Accountants Australia and New Zealand in both submissions and information awareness means this issue will be no surprise. At the most basic level, accountants support the effective allocation of capital in keeping with a broader social licence, with significant social implications for perceived greenwashing. Organisations providing details of social and environmental action, while well intended, may be regarded as just telling a ‘good story’ without the underpinning of appropriate accountability mechanisms.

The global Taskforce on Nature-related Financial Disclosures has released a beta reporting framework that looks at how to identify, assess, manage and disclose nature-related dependencies, impacts, risks and opportunities. Standard setters in both Australia and New Zealand have responded, along with support from CA ANZ, which has this baked into the strategic roadmap to 2025.

What do accountants need to do?

Aside from familiarity with the standard requirements, CAs should support the organisational strategy, most notably by ensuring the kinds of issues prompted by the incoming standards are integrated into organisational decision-making and aligned to organisational strategy. Is change required to business models as a result of climate-related risks or reductions in emissions?

By far the most important aspect for a CA is to know your numbers: what is your organisation’s current greenhouse gas emission level and what are your future projections

Issue 2: shared value

CAs perform a significant role in both decision-making and accountability. Central to both is the notion of how value is shared, albeit not necessarily within the sphere of influence at an individual level.

The shared-value approach aims to strengthen organisational sustainability and ultimately benefit society. Organisations that are perceived to be socially irresponsible can suffer acute losses in customer and stakeholder support, and in value. This translates into a range of touchpoints such as retaining staff in a tight labour market.

Lessons from past economic and societal shocks suggest there is value in retaining talent, as far as possible, even in the face of severe financial and economic downturns (such as the 2008 Global Financial Crisis and the pandemic).

More specifically, issues of authentic organisational purpose, fair pay, gender and other pay gaps, health-and-safety performance, workforce diversity and attention to modern slavery (in addition to other supply chain issues) loom large in a constrained labour market.

What do accountants need to do?

CAs typically occupy privileged positions where they can see across a variety of organisational touchpoints, such as the supply chain, or any significant gaps on what different ethnicities or genders might be paid. This visibility enables CAs to act as an important connection between the policy and organisational strategy, and what the data points are actually indicating.

Issue 3: financial resilience

The world is a volatile and uncertain place. Market disruptions are continuing locally and internationally. There is the prospect of a global recession. The outcome of the Russia–Ukraine conflict remains uncertain. Major powers are retreating from international trade and there is ongoing volatility in foreign exchange markets.

Reading the broader landscape and translating this into modelling or scenarios to prompt value-add discussion is a critical role – it’s the difference between organisations being able to respond positively or being impacted.

The standard good accounting housekeeping applies in times of deteriorating economic conditions; balance sheets need to be strong in these circumstances. Specifically, higher cash holdings can help smooth the ups and downs in funding and costs that may arise. The flexibility cash gives can also help financial sustainability over the medium term.

What do accountants need to do?

Read and translate the landscape for senior leaders in the business and lead the conversation of what this means. Ensuring the lead indicators are still aligned to organisational strategy is important and communicate this to appropriate people when they are not. Once again, accountants have significant organisational visibility and perform a critical role of financial translator when fact patterns don’t mesh with broader organisational discourse.

Issue 4: digital reality

Organisations need to deal with short-term and ongoing cybersecurity threats. Cybersecurity is a significant focus internationally. The unstable international environment and growing threats from countries, and other players, means there are significant cyber threats in both Australia and New Zealand. Despite this, in the IoD’s Director Sentiment Survey 2022, directors reported their boards being confident their organisation has the capacity to respond to a cyber attack or incident (54% in 2022, down from 60% in 2021).

Taking a longer-term view, it is questionable whether enough attention is being given to digital developments, including artificial intelligence, the metaverse, cryptocurrencies and decentralised autonomous organisations.

What do accountants need to do?

CAs by virtue of their training have a familiarity with data, the systems that hold it and the consequences if protocols are not adhered to. Ensuring the rest of the organisation shares the view of how important the digital future is and the risk profile of not getting it right is critical.

Where digital transformation is underway, CAs must ensure the measurements and information being provided to the board are sufficient. In a similar way, the quality of information and even scenario modelling of different pathways around digital risk may convey necessary urgency and magnitude of both risk and opportunity.

Issue 5: board agility

Board agility is all about ensuring boards lead with courage, develop trust and build dynamic capabilities. While not all accountants are in governance positions the same concept applies, as many are still key for the accountability frameworks and organisational strategy. Conceptually, the need for increasingly agile, innovative and quick decision-making remains.

The responses to the pandemic forced this to some degree, and many thought that permanent changes would occur in the ways boards operate. A 2021 international survey for the Global Network of Directors Institutes found 89% of directors had been able to effectively govern through the pandemic to that point and 34% were planning to alter their operating model. Directors anticipate and confront challenges, including considering better tools to support decision-making, by learning and seeking additional input.

Seeking external input includes new sources of information and greater use of outside expertise in scenario planning, strategy and risk management, all of which will be essential for new climate-change reporting requirements. This needs to be accompanied by improved information tools and objective analysis.

Board members are in continuous learning mode. In a director sense, this means transforming from ‘know it all’ boards to becoming ‘learn it all’. Such a transformation is essential, given the increasing complexity of the environment in which boards and their organisations are operating. Similar logic can also be applied to CAs.

What do accountants need to do?

CAs should commit explicitly to a culture of continuous learning and inclusivity of diverse experiences, expertise and insights on evolving topics.