INVITATION TO COMMENT · creation requires responsible organizations to direct their strategies and...

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INVITATION TO COMMENT

Guide for Commentators

This Consultation Paper, Competent and Versatile: How Professional Accountants in Business Drive

Sustainable Organizational Success, aims to (a) increase awareness of the important roles of

professional accountants in business, and (b) generate debate on what professional accountants in

business need to do to meet the needs of their employing organizations.

IFAC’s Professional Accountants in Business (PAIB) Committee would like to receive comments on

all matters addressed in this Consultation Paper and is particularly interested in comments on the

matters set out below:

Discussion Questions

1. Does the paper fairly and usefully represent the diverse roles and domain of professional

accountants in business? Please suggest ideas on how we can enhance the paper to become a

useful tool in (a) creating awareness of the important roles professional accountants play in

creating, enabling, preserving, and reporting value for organizations and stakeholders, and (b)

identifying how IFAC could assist its member bodies and associates in enhancing the

competence of their members.

2. What additional tools could IFAC develop to assist its member bodies and associates to

promote and communicate the roles of professional accountants in business to various

audiences, including employers, governments, and regulators?

3. Do you agree with the drivers of sustainable organizations that lead to long-term sustainable

value creation, as identified in Part 2 and described in Appendix 2? If not, what alternatives

would you suggest?

4. Would IFAC member bodies and associates find it useful for an international competency

framework to be developed, covering the roles and domain of professional accountants in

business defined in this paper?

5. How would a competency framework be best structured? Could the competences be usefully

structured using the eight drivers of sustainable organizations, and would it be practicable to

use the description of the key expectations placed upon professional accountants in business in

Part 4?

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Comments are requested by November 30, 2010. Comments may only be submitted electronically

through the IFAC website (www.ifac.org), using the “Submit a Comment” link on the Exposure

Drafts and Consultation Papers page. Please note that first-time users must register to use this feature.

Professional Accountants in Business Committee

International Federation of Accountants

545 Fifth Avenue, 14th Floor

New York, New York 10017 USA

Copyright © September 2010 by the International Federation of Accountants (IFAC). All rights

reserved. Permission is granted to make copies of this work to achieve maximum exposure and

feedback provided that each copy bears the following credit line: “Copyright © September 2010 by

the International Federation of Accountants (IFAC). All rights reserved. Used with permission of

IFAC. Permission is granted to make copies of this work to achieve maximum exposure and

feedback.”

ISBN: 978-1-60815-071-7

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IFAC PAIB COMMITTEE

CONSULTATION PAPER

COMPETENT AND VERSATILE

HOW PROFESSIONAL ACCOUNTANTS IN BUSINESS DRIVE SUSTAINABLE

ORGANIZATIONAL SUCCESS

CONTENTS

Page

Chairman’s Foreword .......................................................................................................................... 5

Overview .............................................................................................................................................. 6

Part 1: Who are Professional Accountants in Business and Where Do They Work? ....................... 8

Part 2: Drivers of Sustainable Organizations ...................................................................................... 13

Part 3: Positioning Professional Accountants in Business for the Future .......................................... 15

Part 4: How Professional Accountants in Business Drive Sustainable Performance ......................... 18

Appendix 1: Megatrends and Emerging Issues Driving Change in the Business Environment ....... 32

Appendix 2: A Closer Look at the Eight Drivers of Sustainable Organizations ............................... 34


HOW PROFESSIONAL ACCOUNTANTS IN BUSINESS DRIVE SUSTAINABLE ORGANIZATIONAL SUCCESS

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Chairman’s Foreword

Global recognition of professional accountants as business leaders and strategic partners in building

long-term sustainable organizational success is the vision and central tenet of IFAC’s proposed

Professional Accountants in Business (PAIB) Strategy (available at www.ifac.org/PAIB). To achieve

this vision, IFAC needs to collaborate effectively with its member bodies and associates to promote

and contribute to the value of professional accountants in business. As the strategic plan describes,

there are two key complementary activities to pursue:

1. Increasing awareness of the important roles professional accountants play in creating, enabling,

preserving, and reporting value for organizations and their stakeholders; and

2. Supporting member bodies in enhancing the competence of their members to fulfill those roles

by facilitating the communication and sharing of good practices and ideas.

Competent and Versatile, How Professional Accountants in Business Drive Sustainable

Organizational Success, provides both IFAC and its members and associates with a resource to

enhance the perception of professional accountants in business. It explores the roles that they

perform, and invites consideration of the possibility that this perception might be further enhanced

through development of an international competency framework.

This Consultation Paper builds on the PAIB Committee’s 2005 paper, The Roles and Domain of the

Professional Accountants in Business. However, this new approach provides an objective analysis of

the expectations placed on professional accountants in business by their employing organizations in

the context of a rapidly changing business environment. The analysis is based upon eight drivers of

sustainable organizations, which we believe are widely recognized attributes of organizations well

positioned to achieve sustainable success over the long-term. An employer based view of the

expectations of professional accountants in business is a demand-driven response to understanding

the future roles and expectations placed on such professional accountants.

Highlighting the breadth of roles and characteristics of professional accountants in business and the

expectations that will be placed on them going forward is intended to be useful in communicating to

employers, professional accountants, governments and regulators. Individual professional accountant

members might also find the approach useful in making their colleagues and employers aware of the

scope of their competence, expertise and potential contributions to driving sustainable organizational

success.

I believe this paper is an important contribution to improving common understanding within the

accountancy profession and beyond of the work of our colleagues who work in business and public

service. It will be a better contribution if it is improved through the insights of as many interested

parties as possible. So I strongly encourage IFAC member bodies and associates to respond to the

discussion questions above. I also encourage feedback from beyond the profession. Please help us to

identify how this work can be best exploited to communicate with various audiences, including

employers, governments and regulators. If the perception of professional accountants in business in

your jurisdiction is not as it is described in this paper, I invite you to consider what actions need to be

taken to change the perception and to enhance the recognition of your members and students.

Roger Tabor

Chairman, Professional Accountants in Business Committee

September 2010



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Overview

This Consultation Paper examines the expectations placed on professional accountants in business

(sometimes known as management accountants or finance professionals) and how they create,

enable, preserve, and report sustainable value for their employing organizations in a rapidly changing

economic and competitive environment.

Examining the future roles of professional accountants in business through the lens of organizational

sustainability, and what is required to deliver economic, social, and environmental performance, this

paper aims to help IFAC and its members and associates to increase awareness of the important roles

professional accountants play in driving sustainable value creation. Such an approach will also assist

in ensuring the acquisition and development of required professional skills and competences among

professional accountants in business.

Future expectations governing the way professional accountants in business should support the

development of sustainable organizations are analyzed in light of the emerging challenges affecting

the economic environment, and the eight drivers of sustainable organizations. These drivers have

been identified to form the context of considering (a) how professional accountants should support

their organizations, and (b) the professional skills and competences they will need. This is a demand-

driven response to understanding the future roles and expectations placed on professional

accountants in business.

Sustainable development and the sustainability of organizations have become mainstream issues for

politicians, consumers, and business leaders. From an environmental and social perspective,

sustainability issues are transforming the competitive landscape, forcing organizations to change the

way they think about products, technologies, processes, and business models. From a financial

perspective, the primacy of shareholders as owners and maximizing wealth creation for this

constituency is being challenged, particularly where it has become evident that their short-term

financial interests can be incompatible with their long-term viability. Long-term sustainable value

creation requires responsible organizations to direct their strategies and operations to achieving

sustainable economic, social, and environmental performance. It also requires incorporating wider

stakeholder perspectives and issues into decision making.

Ensuring that organizations pursue sustainable business models and development practices will

require radical changes in the way they do business. Achieving a sustainable future is only possible if

organizations recognize the role that they can and need to play. Effective action by the accountancy

profession and professional accountants to better integrate and account for sustainability is an

essential part of the response.

Governing bodies and business leaders should be focused on the long-term sustainability of their

organization, and they should be confident that their business models will deliver this. Professional

accountants in all types of organization have a significant role in framing business models,

challenging conventional assumptions of doing business and redefining success; encouraging and

rewarding the right behaviors; ensuring that information flows to support decisions; and ensuring that

monitoring and reporting performance go beyond the traditional ways of thinking about economic

success.



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Highlights

Part 1: Clarifies who professional accountants in business are and where they work. This section

includes a description of the four generic roles that they perform as creators, enablers, preservers and

reporters of value, and examples of their roles and responsibilities across conformance and

performance dimensions.

Part 2: Identifies and summarizes the key features of the eight drivers of sustainable organizations,

which are used in Part 4 of the document to organize the expectations placed upon professional

accountants in business. These drivers were defined in light of an analysis of the overarching forces

of change in the business environment and are explained in Appendix 2. The drivers were also

identified by drawing on various sources, including The CIMA Business Success Wheel and

management and quality frameworks, such as the European Foundation for Quality Management and

(US-based) Baldrige National Quality Program.

Part 3: Positions professional accountants in business for the future by highlighting the professional

skills and mindset that will be required of them. This section focuses on the mindset that will be

required, which extends beyond what is taught and tested in a professional education program.

Part 4: Details the expectations of professional accountants in business based on the activities they

will need to perform to support sustainable and successful organizations. The activities are captured

under each of the eight drivers identified in Part 2.

http://www.cncima.com/uploads/docs/eng_cimadifference.pdf

http://ww1.efqm.org/en/Default.aspx

http://www.baldrige.nist.gov/



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Part 1: Who are Professional Accountants in Business and Where Do They Work?

Worldwide, more than one million professional accountants work to support organizations in

commerce, industry, financial services, the public sector, education, and the not-for-profit sector in

making them more successful and sustainable. They are a very diverse constituency, and can be

found working as employees, consultants, and self-employed owner-managers or advisers in

commerce, industry, financial services, the public sector, education, and the not-for-profit sector.

Within organizations, many professional accountants are business leaders in a position of strategic or

functional leadership, or are otherwise well placed to partner with colleagues in other disciplines to

create long-term sustainable value for their organizations. Business leaders typically perform in

director and management roles, while strategic business partners support and participate in decision

making and direction at various levels of the organization.

What Roles Do They Perform?

Professional accountant roles can broadly be categorized as creators, enablers, preservers, and

reporters of sustainable value for their organizations in two key dimensions:

A Performance Dimension

As creators of value in organizations, by (a) taking leadership roles in governance, strategy,

and performance management, and (b) overseeing the allocation of resources to ensure long-

term sustainable value creation. Examples of job roles within which value creation is a key

activity include chief executive officer (CEO), chief financial officer (CFO)/financial director

(FD), treasurer, or other executive director role.

As enablers of value in organizations, by influencing and supporting those who make

decisions, and challenging assumptions and conventional thinking. Examples of job roles

within which enabling value creation by others is a key activity include business unit

controller; business, financial, or performance analyst; management accountant; and cost

accountant. In other words, these are professional accountants who will typically assist and

guide managerial and operational decision making and implementation of strategy as business

partners.

A Conformance Dimension

As preservers of value in organizations, by identifying, prioritizing, managing, and controlling

strategic and operational opportunities and risks. Examples of job roles primarily dedicated to

the preservation of value include director of governance or operations, risk, and business

assurance manager, financial risk manager, compliance manager, and internal auditor.

As reporters of value in organizations, by (a) measuring performance, capturing financial

transactions and non-financial measures of performance, and (b) preparing high-quality

business and financial reporting to stakeholders, including investors, customers, employees,

regulators, and suppliers. Examples of job roles within which reporting on value is a key

activity include group controller, head of reporting, investor relations manager, and financial or

management accountant.



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These examples of positions are not limited to the aspect of the role they illustrate here, and a

professional accountant in business might perform elements of all four dimensions within one job

function. This is particularly so in leadership positions: for instance, within the role of chief financial

officer, some elements will focus on creating value (e.g., strategy development and striving for

growth); some on enabling value (e.g., supporting the governing body and senior management in

making decisions and facilitating the understanding of performance of other organizational functions

or units); some on preserving value (e.g., mitigating strategic risk and implementing effective internal

control systems, and asset management); and some on reporting value (e.g., ensuring relevant and

useful internal and external business reporting). Professional accountants in highly specialized roles

in areas such as tax planning also typically operate across various dimensions, as will those in small-

and medium-sized enterprises who usually perform multiple roles (see Part 3).

Figure 1: The Domain of Professional Accountants in Business



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The domain of professional accountants in business (Figure 1) spans the four roles as well as

capturing how the roles align to the internal working of organizations, represented here by describing

the widely used management (Deming) cycle steps: plan, do, check, and act.

The performance and conformance dimensions are derived from IFAC’s International Good Practice

Guidance, Evaluating and Improving Governance in Organizations. The principles in the guidance

support an appropriate balance between conformance and compliance on the one hand, and business

performance, and value enabling and creation on the other. The professional accountant in business

plays a key role in both these dimensions and in optimizing the balance between the two (see

“Balancing Performance and Conformance Responsibilities”).

Balancing Conformance and Performance Responsibilities

Conformance responsibilities include providing assurances to senior management and boards as

to whether:

Strategic, operational, and financial risks are effectively identified, prioritized, managed and

controlled, mitigated, and reported

The organization is working effectively and efficiently in achieving its strategic and

operational goals and objectives

The systems generating financial and non-financial information are working within

prescribed standards of accuracy and reliability, and such information reflects the true

sustainable performance of the organization

Management’s fiduciary responsibilities, such as external financial reporting, fraud risk

management, and adherence to governance codes are being carried out

Performance responsibilities focus on strategy, value creation, and sustainable resource

utilization, and include:

Helping organizations make sustainable strategic decisions, implementing appropriate

strategies, and evaluating their ongoing relevance and success

Understanding the organization’s appetite for risk and its key drivers of sustainable

performance

Identifying critical points at which the organization needs to make decisions, and supporting

these with relevant insight and analysis

Allocating resources efficiently and effectively to achieve strategic goals and objectives

http://ifac.org/Store/Details.tmpl?SID=12338661001638577&Cart=12392156381085701



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Characteristics of Professional Accountants in Business

The professional designations for accountants around the world vary,1 but among the most common

are Chartered Accountant (CA) or Certified Public Accountant (CPA), Chartered or Certified

Management Accountant (CMA), Expert Comptable, and Contador Público. Although the

professional designations differ, professional accountants around the world share the same

characteristics.

The distinguishing mark of the accountancy profession is its responsibility to act in the public

interest. To do so, a professional accountant:

Meets the standards of a professional, defined as having skills, knowledge, and expertise tested

by examination and continuous development in a structured and monitored context; is

committed to the values of integrity, objectivity, professional competence and due care,

confidentiality, and professional behavior (via a code of ethics); and is subject to oversight by a

body with disciplinary powers; and

Is recognized as an accountant, defined as belonging to a recognized accountancy body and

upholding professional standards and approaches in the discipline of recording, analyzing,

measuring, reporting, forecasting, and giving advice in support of the drivers of sustainable

organizations identified in Part 2.

These characteristics underlie being a professional accountant in business and qualify him or her to

manage the drivers of sustainable organizations.

The Needs of Society, Financial Markets, and Organizations

The financial and economic crisis starting in 2008 and the uncertain path to recovery for many

countries is of overwhelming significance for governments, regulators, and financial markets—

likewise, for public and private sector organizations and the professional accountants they employ.

The crisis and its aftermath bring into focus significant challenges, most notably:

Moving to a model of sustainable economies and corporate responsibility where organizations

pursue more sustainable strategies and actions and take into consideration a broader range of

stakeholders;

Balancing compliance requirements with the need to drive organizational performance and

remain competitive within an increasingly global economy; and

In some jurisdictions, the need for significant and rapid reduction of government expenditure

and debt, and increased accountability and transparency in governments.

The current uncertainty puts into the spotlight those core issues that need to be addressed to foster

sustainable economic growth. These include (a) more effective governance, regulation, and

oversight, as well as (b) more effective political and organizational infrastructures and processes to

minimize the risks associated with globalization and to ensure inclusive growth,2 particularly in

1 See the various professional designations among IFAC’s membership. 2 See World Bank definition of inclusive growth.

http://www.ifac.org/About/Membership.php

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTDEBTDEPT/0,,contentMDK:21870580~pagePK:64166689~piPK:64166646~theSitePK:469043,00.html



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emerging economies. Long-term sustainable success requires responsible organizations to direct their

strategies and operations to achieving sustainable economic, social, and environmental performance.

The charting of a new course from crisis to recovery presents an opportunity to position the global

accountancy profession and professional accountants as organizational and financial navigators,

contributing to the implementation of measured and effective responses to help foster sustainable

economic growth.

This will require IFAC, working in partnership with its members, to ensure that the education,

training, and continuing professional development of professional accountants in business remains

aligned with the changing needs of organizations as employers of professional accountants.



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Part 2: Drivers of Sustainable Organizations

Clarifying and promoting the roles, activities, and professional skills of professional accountants in

business needs to be done (a) within the wider context of understanding the attributes of high-

performing sustainable organizations, and (b) with an appreciation of the emerging trends and

developments in the business environment.

The eight drivers of sustainable organizations provide the framework for understanding how the

global accountancy profession needs to support the development of professional accountants in

business so that they can help organizations achieve sustainable value creation. The drivers are:

Customer and Stakeholder Focus

Effective Leadership and Strategy

Integrated Governance, Risk and Control

Innovation and Adaptability

Financial Management

People and Talent Management

Strategy Execution

Effective and Transparent Communication.

These drivers represent what organizations need to do to achieve and sustain high performance and

success. They are core elements of every organization striving to be truly sustainable over the long

term. The drivers were defined in light of an analysis of three megatrends:3 globalization,

complexity, and technology, which futurists and business commentators highlight as influential

overarching forces of change. The megatrends are described in Appendix 1 and highlight the main

long-term trends and forces influencing organizations, whether in the private, public, or not-for-profit

sectors. These trends bring opportunities and challenges to the business environment and drive (a)

change in organizations’ strategies and structures, and therefore (b) the nature and location of the

activities of finance functions.

Because, collectively, these drivers will determine the long-term success of organizations, they are

used in Part 4 as the basis of defining the key future activities of professional accountants in business.

They are summarized in Figure 2 below, and described in more detail in Appendix 2. Although the

drivers are not hierarchical, the first driver reflects the overriding need for all organizations to be

customer and stakeholder focused. The underlying premise is that an organization’s sustainability

will first depend on satisfying its customer and key stakeholder needs, with which all other aspects of

the organization can be aligned.

3 Megatrends means a general shift in thinking or approach affecting countries, industries, and organizations.



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Figure 2: Drivers of Sustainable Organizational Success



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Part 3: Positioning Professional Accountants in Business for the Future

The ability of professional accountants in business to help drive sustainable value creation will

depend on (a) gaining a range of professional skills, (b) a particular mindset and attitude, as well as

(c) undertaking certain activities based on the drivers of sustainable organizations identified above.

This paper focuses on establishing the expectations placed on professional accountants in business in

terms of the activities they will need to undertake (explored in Part 4), thereby extending beyond the

knowledge and skills that will be taught and tested in a professional education program. This section

highlights the professional competences and mindset needed by professional accountants in business.

The performance of a professional accountant in business derives from the acquisition of professional

skills and competence, as well as the demonstration of a mindset that represents an attitude of mind

and a way of thinking that governs the way professional skills are applied in practice.

Acquiring Professional Skills

International Education Standard 3, Professional Skills and General Education,4 usefully defines a

list of professional skills for professional accountants:

Intellectual skills;

Technical and functional skills;

Personal skills;

Interpersonal and communication skills; and

Organizational and business management skills.

These professional skills are part of the set of capabilities required by professional accountants to

demonstrate competence. These capabilities include knowledge, skills, professional values, ethics,

and attitudes. The standard classifies a list of required skills (not exhaustive) under the five headings

above, and recognizes that not all these skills will be fully developed at the point of professional

qualification. Professional skills will be partly acquired during initial qualification and training, but

will need to be developed and honed throughout a career, often by performing different roles within

an organization and by undertaking continuing professional development and education.

The Mindset of Professional Accountants in Business

Gaining experience in different roles will also help with the acquisition of a mindset that

differentiates the most successful professional accountants in business. Employers are demanding a

broader range of professional and general business skills, which, if developed, improves the

versatility of the professional accountant in business. In addition, with experience, the most

successful professional accountants in business can typically also be characterized by a distinctive

attitude, outlook, or way of thinking. In this paper, we call this the “mindset” of a professional

accountant in business. Mindset encompasses an instinctive focus on financial performance and the

strategic allocation of resources in pursuit of organizational goals, supported by an analytical

4 Issued by the International Accounting Education Standards Board.



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approach based on evidence. It facilitates the deployment of financial navigational skills that permit a

successful course to be charted for the organization, by overcoming organizational challenges and

proactively identifying opportunities. It also incorporates a resolve to challenge flawed analysis and

unsound, or unethical, decisions. The mindset complements formally taught skills, but cannot easily

be examined or regulated. The professional accountant’s mindset will need to embrace:

Professionalism and ethical behavior

Professional accountants should uphold high ethical standards in accordance with the Code of

Ethics for Professional Accountants,5 which requires accountants to encourage an ethics-based

culture in an employing organization that emphasizes the importance that senior management

places on ethical behavior (see paragraph 300.5 of the Code). Therefore, professional

accountants in business can support an organization’s code of conduct and ethics through their

own behavior and actions.

IFAC’s guidance on Defining and Developing an Effective Code of Conduct for Organizations

highlights the important role that professional accountants play in driving and supporting

organizational ethics and fostering a values-based organization. By applying a values-based

approach, rather than relying only on written policies and rules, they can promote a culture that

encourages employees to internalize the principles of integrity and to “do the right thing” by

allowing them to make appropriate decisions given specific circumstances.

Professional judgment

Professional accountants in business carry out their roles in different modes, including

directing, influencing, evaluating, and informing. Furthermore, the vast range of circumstances

and situations that can arise in organizations of any type, industry, and size renders detailed

prescription of rules ineffective for guiding management decisions. Therefore, the quality of

professional judgment exercised becomes a differentiating factor for high-performing

professional accountants in business. This includes having a healthy professional skepticism

that relies on seeking evidenced-based decision making and challenging “received wisdom.”

Organizational and environmental awareness

As integrators, professional accountants in business can (a) link functional disciplines and

organizational units, as well as (b) facilitate a common and unifying perspective on an

organization’s business model and key success factors in relation to changing circumstances

and environmental factors and trends. To play the role of integrator requires professional

accountants in business to be cognizant and knowledgeable of other disciplines, such as

technology, people and project management, and managing and measuring non-financial

activities and performance, such as a carbon footprint. They should also be able to reconcile the

big picture with the detailed aspects of operational performance.

5 Issued by the International Ethics Standards Board for Accountants.

http://web.ifac.org/publications/international-ethics-standards-board-for-accountants

http://web.ifac.org/publications/international-ethics-standards-board-for-accountants

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Being comfortable dealing with change, uncertainty, and complexity

The professional accountant in business will have to apply professional skills to exercise

rational, disciplined, objective, and rigorous analysis and judgment to often ambiguous and

imperfect information. This will involve facilitating processes and behaviors that ensure high-

quality useful financial and non-financial information to support governing bodies (boards),

management, and other decision makers. Professional accountants in business will need to (a)

show an ability to provide timely and accurate management information efficiently, and (b)

combine business and financial expertise to inform decision making. Furthermore, given the

complexity of international financial reporting standards and the gap between how information

is reported externally and internally (for management), the ability to integrate internal and

external reporting to give a useful picture of performance to all stakeholders is vital.

Large Versus Small- and Medium-Sized Organizations

The career and developmental path for professional accountants in business varies depending on the

type of organizations for which they work. In larger organizations, professional accountants in

business may pursue a range of roles to acquire specialist and generalist skills. Sometimes referred to

as a T-shaped professional, such an individual will have broad generalist finance knowledge and

strategy skills, complemented with a deep technical specialty in, for example, profitability analysis

and cost management, risk management and analysis, or financial reporting.

Professional accountants working in small- and medium-sized organizations will usually perform

multiple roles applying a broad range of skills, and will often act as generalists. Recognizing that

professional accountants play an important and varied role in such organizations, the PAIB

Committee published interviews with 10 senior-level accountants on their experiences in mid-sized

enterprises (MEs), titled The Crucial Roles of Professional Accountants in Business in Mid-Sized

Enterprises. The interviews provide an insight into the unique challenges that MEs confront and how

professional accountants can help to address these challenges:

(a) Professional accountants are enablers of MEs’ performance. They provide crucial contributions

to streamlining business plans; installing and improving management information systems;

implementing process improvements; mitigating risks; strengthening relations with banks and

investors and attracting capital; and other activities that enable the current and future success of

their companies; and

(b) Professional accountants operate as generalists in MEs. Although they specialize in finance and

accounting management activities, they serve as an integral part of the management team and

fulfill a wide variety of responsibilities beyond the finance and accounting discipline. They

should be able “to wear many different hats and juggle many different balls at the same time.”

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Part 4: How Professional Accountants in Business Drive Sustainable Performance

It is the thesis of this paper that the principal expectations of professional accountants in business are

derived from the activities they will need to perform to support the development of sustainable

organizations. Key activities are highlighted below under each of the four broad dimensions of the

roles professional accountants in business play: creators, enablers, preservers, and reporters of

sustainable value.

The format of the presentation is to, in relation to each of the drivers (a) summarize the required

activities of professional accountants in business, (b) provide a context, and (c) capture the key

expectations for professional accountants in business by role.

A summary of the key expectations for professional accountants in business is in the matrix at the

end of Part 4.

Each driver can be quickly accessed via the hyperlinks embedded in the diagram below (ctrl-click).







Strategy Execution

Effective and Transparent Communication

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Driver 1: Professional Accountants Driving Customer and Stakeholder Focus

To successfully drive (changes in) customer and stakeholder focus, professional accountants in

business need to:

Support an organization in its efforts to engage customers and stakeholders, and to facilitate

an understanding of how they view the organization and its performance

Develop in-depth knowledge and understanding of the critical drivers of customer and

stakeholder value6

Align the role of the finance function with wider organizational efforts to deliver customer

and stakeholder value

Context

A sharper customer and stakeholder focus is vital to achieving sustainable success and is

facilitated by globalization and new technologies that, for example, (a) allow greater

decentralization, where decision making is close to the customer, and (b) facilitate greater

innovation by fostering collaborative relationships in a global network of strategic partners and

alliances. On the other hand, increased complexity means that organizations need to direct their

attention to many issues, which can easily cloud their view of changes in customer and other

stakeholder needs and necessary adjustments to their business model.

Professional accountants in business need to be a part of the effort to meet customer7 and other

stakeholder needs, and supporting their organizations in aligning all (other) drivers of sustainable

organizational success towards achieving increased customer and stakeholder focus. They should

also be positioned to work in partnership with other organizational functions to address

complexity and access customer insights. This will help to identify what customers want and

define value from their perspective, to ensure the cost-effective delivery of relevant products and

services.

Exactly how professional accountants help to nurture a customer-focused organization depends

on their position in an organization. At a leadership level, they should be positioned to help

foster a strong link between business strategy, governance, and sustainability, so that

organizations can ensure that customer and stakeholder focus goes hand in hand with the

objective of achieving sustainable value creation. In other positions, professional accountants, for

example, identify, understand, and monitor groups of customers and stakeholders to provide

appropriate decision-oriented information on changing customer and stakeholder needs.

A sharper focus on the internal customer is required, especially as organizations can increasingly

be seen as networks of customer-supplier relationships. Professional accountants in finance

functions have to fully support other functions, such as innovation, sales, and operations, and

6 Stakeholder value is defined in the International Good Practice Guidance, Evaluating and Improving Governance in

Organizations. 7 In the public or governmental sector, customers might be referred to as public service users.





20

proactively adapt their services to the changing needs of internal customers and help them in

their efforts to create value for customers.

Key Expectations on Professional Accountants in Business

As creators of value As enablers of value As preservers of value As reporters of value

Facilitate a focus on

sustainable value creation

by ensuring a strong link

between strategy,

governance, and

sustainability to support the

delivery of value to

customers and stakeholders

Ensure organizations make

sustainable customer- and

stakeholder-focused

strategic and operational

decisions, implement

appropriate strategies, and

evaluate their ongoing

relevance and success

Monitor and ensure that

organizations effectively

and efficiently achieve their


targets and goals

Effectively communicate

how value is delivered to

customers and stakeholders

to internal management and

operations and, where

appropriate, within external

reporting, such as the

annual report

Driver 2: Professional Accountants Driving Effective Leadership and Strategy

To successfully drive (changes in) leadership and strategy to achieve sustainable value creation,

professional accountants in business need to:

Provide ethical and strategic leadership

Evaluate strategic options with respect to the organization’s risk profile and appetite, and

recommend optimal strategies

Effectively articulate strategy and business case(s) for pursuing strategic options, and establish

a strong business case to highlight how improved environmental and social performance can

translate into enhanced business performance

Support the strategic planning and implementation process with insight and analysis of the

organization and its environment, and by understanding the information and decision needs of

internal customers of the finance function

Context

Experienced professional accountants should be in a position to provide ethical and strategic

leadership in executive (C-suite) positions and senior management roles. This will involve (a) adding

value through setting the tone in the organization, (b) participating in strategy and planning to chart a

course for the organization, as well as (c) providing information and analysis and maintaining

strategic control and financial navigation to ensure execution of strategy. Professional accountants in

business should play a part in the key areas of strategic leadership: strategy (what do we want to

achieve?); values and attitudes (what do we stand for?); and the business model (how do we organize

to create, deliver, and capture value—economic, social, or other?).

They should also be positioned to influence the way their organizations integrate governance and

sustainability into their objectives, strategies, management, and definitions of success. Facilitating

sustainable organizations and ensuring sustainable value creation will involve professional

accountants in business in:



21

Challenging conventional assumptions of doing business, identifying risks, and seizing

opportunities;

Redefining sustainable success so that it is relevant in the context of the organization;

Establishing appropriate performance targets;

Encouraging and rewarding the right behaviors; and

Ensuring that information flows to support decisions and to monitor and report performance go

beyond the traditional ways of thinking about economic success.



Set strategic direction by

defining a value proposition

that takes advantage of the

organization’s strengths and

weaknesses, and being

aware of the critical points

at which an organization

needs to make strategic

decisions

Frame key questions and

issues for consideration,

and providing managerial

and operational decision

makers with relevant insight

and analysis

Identify, prioritize, manage,

control, and mitigate


risks within the context of

the adequacy of governance

processes and practices

Provide management, as

well as external

stakeholders, with analysis

and insights on drivers of


Driver 3: Professional Accountants Driving Integrated Governance, Risk and Control

To successfully drive (changes in) integrated governance, risk and control, professional accountants

in business need to:

Provide leadership on how risk and control integrates with leadership, strategy, and

governance to ensure both compliance and performance

Integrate governance, risk management, and control into the strategy, operations, and

stakeholder communications of the organization

Link effective governance, risk management, and control with ethical leadership, so that risk

and control failures do not arise out of poor governance or unethical behaviors and practices

Evaluate and improve governance, risk and control methodologies, systems, and processes in

line with social, environmental, and economic changes.

Context

Professional accountants in business should be positioned to perform significant roles in integrating

and fostering close links between governance, risk management, and control so as to ensure that they

are not dealt with in functional silos. As integrators, professional accountants should be able to

ensure that control systems and processes support the delivery of the wider strategic objectives of an

organization, helping to identify opportunity and risk, as well as providing (internal) control over

financial reporting.



22

Current terminology often refers to integrating governance, risk, and compliance (GRC), and is

increasingly associated with technology and how it can ease the burden of organizations of managing

and sharing information and dealing with risk and controls, given the sheer complexity of their

operations. The rising interest in the convergence of governance, risk, and compliance focuses on

better integration of policies, procedures and processes, and technology (systems) to minimize risk

exposure and comply with external and internal regulations, policies, or mandates. However, this

perspective (a) can inhibit reaching the ultimate objective that governance, risk and control will be

used to advance organizational objectives and execute strategy, and (b) can also mask the importance

of the behavioral factors that create sustainable value creation and ethical performance, such as

culture and values.

The role of professional accountants in business in evaluating and improving governance, risk and

control systems is a key theme of IFAC’s International Good Practice Guidance, Evaluating and

Improving Governance in Organizations, which emphasises that governance, risk and control

activities should be directed not only to meeting the demands of regulatory compliance

(conformance), but also to supporting the creation of value for stakeholders (performance).

Governance, risk and control, if effectively integrated, should result in an enterprise-wide control

system that:

Supports executives/managers in moving an organization forward in a cohesive integrated and

aligned manner to improve performance, while operating effectively, efficiently, ethically, and

legally within risk-taking tolerances; and

Integrates and aligns activities and processes related to planning, risk management,

policies/procedures, culture, competency, internal audit, financial management, monitoring,

and reporting.

Examples of poorly integrated governance, risk and control are provided in the analysis of the drivers

of sustainable value in Appendix 2.

In respect to risk management, professional accountants in business need to play a leading role in

ensuring that enterprise risk management forms an integral part of an organization’s governance

system and is delivered by line management. Professional accountants in business are increasingly

looked on to take the lead on risk management, in particular by orchestrating a common view on an

organization’s risk profile. Therefore, they should be seen to be able to facilitate the identification

and communication of the organization’s risk appetite and risk capacity, and to help to balance the

avoidance of risk with seizing opportunities in accordance with an organization’s risk appetite. In

encouraging an integrated enterprise approach to risk, professional accountants in business can also

ensure that risks are viewed and managed in a more holistic way, so that individual risks are not

assessed and dealt with in isolation, or in a linear, unconnected way.

Specifically in relation to (internal) control, professional accountants in business should help to

ensure that controls are embedded in processes with clear lines of accountability, rather than relying

on the adequacy of assurance from outside the process. Professional accountants in business should

also be able to document and demonstrate business processes and how owners are managing the

various risks and applying appropriate controls.

http://intranet.ifac.org/Pubs-Details.php?PubID=12338662261638630&Category=Professional%20Accountants%20in%20Business

http://intranet.ifac.org/Pubs-Details.php?PubID=12338662261638630&Category=Professional%20Accountants%20in%20Business



23



Facilitate an understanding

of an organization’s

appetite for risk and deliver

aligned and effective

governance, risk and

control practices to achieve

a balance between

conforming with rules and

regulations and driving

sustainable organizational

success

Implement enterprise risk

management and control as

a strategic activity and an

integral part of an

organization’s governance

system, as well as into all

other decision-making

processes in the

organization

Evaluate policies,

procedures, and processes

to manage governance, risk

and (internal) control

systems, including control

objectives that support the

delivery of an

organization’s mission and

strategic objectives, in

accordance with an

established risk appetite

Provide management, as

well as external

stakeholders, with

information on the

organization’s opportunities

and risks, and the

performance of its

governance, risk

management, control

processes, and systems

Driver 4: Professional Accountants Driving Innovation and Adaptability

To successfully drive (changes in) innovative and adaptive capability, professional accountants in

business need to:

Assess how to approach managing and measuring the impact of innovation activities

Facilitate the implementation of revised working methods, processes, and systems to support

new products/services or approaches to their delivery

Identify and facilitate the role of the finance and accounting function in supporting innovation

and research and development (R&D), including incentivizing behaviors to support an

adaptive capability

Context

Professional accountants in business should be able to support innovation in both the finance

function as well as in the wider organization, whether in relation to the way of doing business, or to

product or process.

In the wider organizational context, professional accountants in business should participate in

measuring, reporting, and evaluating innovative and adaptive performance and in improving the

innovative and adaptive capability of the organization.

As business partners, professional accountants can also be involved in and support each of the key

stages of innovation development, including innovation and opportunity selection, concept and

design definitions, product realization, and required production and service support. They should also

be able to manage the change management aspects of product and process innovation and change,

obtaining the buy-in of users where needed. In this regard, professional accountants will be expected

to ensure that new developments are properly researched, meet user requirements, and are thoroughly

tested and successfully implemented and embedded within the organization.

Within the context of the finance function and accounting innovations, professional accountants in

business should be able to adapt to changing circumstances, and to deliver innovative approaches to



24

finance and accounting structures and processes, whether it be in relation to (a) delivering shared

services or outsourcing, (b) providing expert services (e.g., tax, risk management, merger and

acquisitions, and due diligence), or (c) providing financial leadership and support to the wider

organization. Regarding new accountancy innovation and adoption: tomorrow’s management

accountants should endeavor to understand the different opportunities innovations offer. This allows

them to shape the design and use of the innovation for their own organization. Making sensible

choices about which innovations to pursue, and driving those choices to the implementation stage, is

likely to become a key role for management accountants. This role might well stretch their technical

capabilities, but will also require an understanding of the broader (e.g., social and behavioral) issues

involved in implementing those innovations.8



Manage innovation in the

finance and accounting

function to facilitate its

development, and to

support its input into

developing an

organization’s other

innovation and R&D

activities

Participate in the evaluation

and improvement of

processes and incentives

that facilitate and nurture

innovation and adaptability

Implement measures of

innovation that objectively

assess their financial and

non-financial impact and

identify possible areas of

improvement

Report on innovative

capabilities and results and

the impact of R&D

investment, and on future

plans and priorities in

relation to R&D and other

innovation activities

Driver 5: Professional Accountants Driving Financial Management

To successfully drive (changes in) financial management, professional accountants in business need

to:

Establish appropriate financial strategies and objectives, and a business and financial planning

process to deliver an organization’s strategic objectives

Evaluate financial implications, capital requirements, and expected returns of strategic options

Ensure the efficiency, integrity, and effectiveness of processes and systems in financial

reporting, and manage changes to financial reporting standards

Context

Financial management and navigation are, and will continue to be, at the core of what many

professional accountants do in organizations. The main activities of professional accountants should

continue to include:

8 Risk Manager or Risqué Manager, The New Platform for the Management Accountant, Baldvinsdottir G., Burns J.,

Nørreklit H., and Scapens R.

http://www.cimaglobal.com/Documents/Thought_leadership_docs/Changes%20in%20the%20accounting%20profession/cid_ressum_risk_manager_risque_manager_apr2010.pdf



25

The provision, analysis, and interpretation of information to management for formulation

of strategy, plans, decision making, and control;

Performance management through cost determination and financial control, budgeting, and

forecasting; and

Corporate finance, including establishing financial objectives, capital planning and

budgeting, working capital management, raising finances, and financial risk management.

The application of these roles will be no less important in the public sector. The Chartered

Institute of Public Finance and Accountancy (CIPFA’s) report, The Role of the Chief Financial

Officer in Public Service Organizations, also includes a principle on the role of the public sector

CFO in driving good financial management: The CFO in a public service organization must lead

the promotion and delivery by the whole organization of good financial management so that

public money is safeguarded at all times and used appropriately, economically, efficiently, and

effectively.9

Executive and independent board directors, in particular, need finance staff to provide clear and

concise information to support decision making and understanding of risk. To gain trust in their

abilities as both business stewards and as partners, professional accountants will need to

understand the needs of a range of decision makers at various organizational levels to provide (a)

value-added analysis, (b) high-quality advice that promotes solutions, and (c) interpretations of

financial issues and impacts.

A strong finance function underpins quality financial management, and will continue to involve

professional accountants in business who can deliver (a) effective and efficient enabling finance

operations (transaction processing, planning and budgeting, financial and business reporting,

financial and fraud risk management, etc.), and (b) wider business support to the organization in

the form of high-quality management information and decision support and financial leadership.

Effective financial management will also involve identifying disconnects and failures across

functional interfaces and process streams that detract from customer focus, hinder service

delivery, and increase operating costs. Professional accountants in business will need to be

prepared to look beyond their traditional departmental functions and targets and work effectively

with other support functions to learn about the effect of their actions on the overall support

services required in the organizational whole, and how it might affect the delivery of customer

and stakeholder value without waste (i.e., minimizing non-value-adding activities).

9 CIPFA also provides a public financial management process architecture and a whole system context for financial

management in the public sector that underpins the delivery of public services and helps achieve sustainable social

outcomes.

http://www.cipfa.org.uk/international/consultation.cfm

http://www.cipfa.org.uk/international/consultation.cfm

http://www.cipfa.org.uk/panels/finance_director/download/Role_CFO.pdf

http://www.cipfa.org.uk/panels/finance_director/download/Role_CFO.pdf



26



Understand and interpret

the financial health of

organizations and play a

leadership role in

developing and

implementing a financial

strategy to deliver an

organization’s strategic

objectives

Support directors,

management, and

operations in understanding

the financial health of

organizations and progress

in delivering financial

objectives, and providing

the information and analysis

needed to improve


Examine systems that

generate financial and non-

financial information and

ensure that they are

working within prescribed

standards of accuracy and

reliability, and that such

information realistically

reflects the performance of

the organization

Provide a detailed

knowledge of financial

reporting standards to

ensure that they are

correctly applied

Driver 6: Professional Accountants Driving People and Talent Management

To successfully drive (changes in) people and talent management, professional accountants in

business need to:

Support the development of human resource and talent management strategies and policies

focusing on skills requirements, career development, and retention of critical staff (whether in

the finance function or the wider organization)

Manage the finance function and its performance, including the quality of “business

partnering” to the wider organization, and how it is perceived by customers of finance and

accounting

Understand how a talent management program and specific human resource policies and

activities can apply to the finance function, for example in relation to ensuring adequate

recruitment, retention, developing future finance and business leaders, effective succession

planning, meeting future skills requirements, and recognizing high-performing employees and

teams

Context

Professional accountants working as business leaders and managers will need to be able to deploy

people and talent management strategies, especially to retain critical staff and to engage talent. This

will also involve (a) exploiting new technologies to engage talent and expertise outside the

organization, and to stimulate collaboration and partnerships across organizational boundaries, and

(b) ensuring the alignment of incentives of all employees and collaborators with the accomplishment

of the organization’s strategic and operational objectives. Professional accountants working in

smaller organizations without human resource departments will often be expected to undertake

strategic and operational people management activities.

The development of the finance function to better support the wider organization to fulfill its

business objectives and to provide adequate stewardship and challenge (of flawed analysis and

unsound, or unethical, decisions) also requires leadership, talent management, and human resource



27

policies and practices that support (a) hiring and retaining critical finance staff, (b) succession

planning, (c) the development of competence and skills of individuals and teams, and (d)

empowerment of finance staff. Greater empowerment of the finance function could also require a

clear mandate from the board and senior management to encourage a culture of scrutiny and

challenge, and to deal with cultural issues, such as a cultural reluctance in some offshore locations to

challenge experts and those in authority.

Professional accountants in business should be positioned to manage their own career path

development, as well as to manage the development of others when in managerial positions. A part

of this will also be designing reward structures and incentives to (a) encourage desired behavior, (b)

nurture the potential of key staff, and (c) foster a long-term view of sustainable value creation.



Participate in identifying

and implementing people

and talent management

strategies and policies for

the wider organization and

the finance function,

including the alignment of

incentives

Focus individual and team

development on enhancing

generalist skills, including

an understanding of

business context and

priorities, providing high-

quality management

information and analysis

and “business partnering” to

gain trust within wider

organization

Ensure a questioning

mindset capable of

identifying risks and

opportunities and serve as

promoters of integrity,

transparency, and expertise

Report on how

organizational investments

in human capital

development lead to the

generation of shareholder

and stakeholder value

Driver 7: Professional Accountants Driving Strategy Execution

To successfully drive (changes in) strategy execution, professional accountants in business need to:

Implement performance management and measurement approaches and systems, including

establishing performance metrics in light of strategic and operational goals and objectives, and

evaluating performance against these

Identify operational performance gaps for process and supply chain improvement so as to

provide products and services with zero defects, on time, and at target cost

Link different parts of the finance function so as to ensure high-quality internal financial and

business management reporting feeds into effective external communications to stakeholders

Context

Professional accountants in business should be placed to manage financial and non-financial

resources and performance through the understanding of strategic goals and objectives and the

drivers of stakeholder value.



28

As well as being able to implement frameworks and systems for measuring progress towards the

achievement of strategic goals and objectives, professional accountants in business should also be

positioned to design and implement process measurement and reporting systems, providing adequate

information and analysis to support operational feedback and continuous improvement activities.

Achieving operational excellence will continue to involve helping to ensure that products and

services are delivered with zero defects, on time, and at target cost. This will involve the strategic

deployment of management approaches, such as lean (total quality) management and Six Sigma.

Professional accountants in business should be in a position to use and advise on these management

approaches, as well as on the application of advanced management accounting tools, such as process

analysis, strategic and operational cost management, and resource consumption accounting.

Implementing performance measurement frameworks and systems to help foster a common view on

performance, and providing information that non-accountants find useful and understandable at an

operational level, involve being organizationally aware and attuned to the needs of others.



Manage resources and

performance through

understanding the drivers of

shareholder and stakeholder

value and aligning

individual and

organizational goals and

objectives and rewards to

these drivers

Support implementation of


performance management,

measurement, and reporting

systems and processes

Review strategic and

operational performance

gaps for process and supply

chain improvement and

ensure that processes and

controls to detect and

prevent fraud are put in

place

Design and implement

performance-driven

strategic and process

measurement and reporting

systems, and provide

adequate information and

analysis to support delivery

of performance insights

Driver 8: Professional Accountants Driving Effective and Transparent Communication

To successfully drive (changes in) effective and transparent communication, professional

accountants in business need to:

Implement business communications that respond to the expectations of stakeholders and

connect business and financial reporting to all the drivers of sustainable organizations

Evaluate and improve financial and business reports and enabling systems and processes,

particularly to capture wider non-financial measures of social, environmental, and economic

performance

Prepare financial statements and business reports in compliance with standards and regulatory

requirements by efficiently managing and adapting financial accounting and other

performance measurement systems to respond to current and future developments



29

Context

Flowing from their responsibilities in providing (a) financial leadership and navigation, (b)

performance management and measurement, and (c) the recording of financial transactions,

professional accountants in business have to support organizational transparency and credibility

through reporting and communication with internal and external stakeholders about strategy, its

execution, and performance of their organizations. This role will take on ever greater significance as

globalization, complexity, and technology increase the number of stakeholders and their information

needs. The enlarged social, environmental, and economic footprint of many organizations causes a

greater demand from various stakeholder groups for accountability information. Furthermore,

organizations and their operations are not only becoming increasingly more complex, but also have

to deal with more complex rules and regulations. This challenges their ability to report and

communicate in a concise and understandable way. These developments have led to increasingly

voluminous, complex, and compliance-focused business and financial reports.

And to add to the challenges, regulators and standard setters across jurisdictions have often acted

independently of each other, meaning that many organizations are confronted with multiple sets of

compliance and reporting requirements. Professional accountants in business should be placed to

support their organizations by implementing better approaches and emerging techniques such as

short form reports, XBRL, and video streams to better meet stakeholders’ demands. Professional

accountants in business will also be expected to take the lead in helping investors and stakeholders

understand historical, current, and potential performance by providing clear messages and narratives

to explain an organization’s strategy, execution, and performance.



Prepare high-quality

business and financial

communication and

reporting to enable

managers, investors, and

stakeholders to make an

informed assessment of the

organization’s performance

and prospects

Support transparent

communication and

reporting internally and

externally with material

information and analysis

and effective presentation to

investors and other

stakeholders, while at the

same time ensuring that

financial statement

presentation fairly

represents an organization’s

performance

Internal audit of

information systems and

processes, as well as the

performance information

itself, so as to ensure

objectivity both in fact and

appearance

Capture financial

transactions and non-

financial measures of

performance, and prepare

high-quality business

reporting to stakeholders,

including investors,

customers, employees,

regulators, and suppliers



30

Summary of the Expectations Placed Upon Professional Accountants in Business

IMP

AC

T O

F M

EG

AT

RE

ND

S

Roles Creators of value Enablers of value Preservers of value Reporters of value

Drivers of Sustainable Organizations

↓

Typical job titles:

Executive director

CFO/FD

Controller

Director/Head of strategy and planning

Change management lead/coordinator

Typical job titles:

Business unit controller

Manager of finance and accounting department

Management information/ analysis department manager

Financial or performance manager/analyst

Typical job titles:

Risk and business assurance manager

Governance and compliance manager

Internal audit department/ business assurance manager

Typical job titles:

Head of financial or business reporting

Financial/performance analyst

Investor relations manager


Facilitate a focus on sustainable value creation by ensuring a strong link between strategy, governance, and sustainability to support the delivery of value to customers and stakeholders

Ensure organizations make sustainable customer- and stakeholder-focused strategic and operational decisions, implement appropriate strategies, and evaluate their ongoing relevance and success

Monitor and ensure that org-anizations effectively and efficiently achieve their sustainable strategic and operational targets and goals

Effectively communicate how value is delivered to customers and stakeholders to internal management and operations and, where appropriate, within external reporting, such as the annual report


Set strategic direction by defining a value proposition that takes advantage of the organization’s strengths and weaknesses, and being aware of the critical points at which an organization needs to make strategic decisions

Frame key questions and issues for consideration, and providing managerial and operational decision makers with relevant insight and analysis

Identify, prioritize, manage, control, and mitigate strategic and operational risks within the context of the adequacy of governance processes and practices

Provide management, as well as external stakeholders, with analysis and insights on drivers of sustainable value creation


Facilitate an understanding of an organization’s appetite for risk and deliver aligned and effective governance, risk and control practices to achieve a balance between conforming with rules and regulations and driving sustainable organizational success

Implement enterprise risk management and control as a strategic activity and an integral part of an organization’s governance system, as well as into all other decision-making processes in the organization

Evaluate policies, procedures, and processes to manage governance, risk and (internal) control systems, including control objectives that support the delivery of an organization’s mission and strategic objectives, in accordance with an established risk appetite

Provide management, as well as external stakeholders, with information on the organization’s opportunities and risks, and the performance of its governance, risk management, control processes, and systems


Manage innovation in the finance and accounting function to facilitate its development, and to support its input into developing an organization’s other innovation and R&D activities

Participate in the evaluation and improvement of processes and incentives that facilitate and nurture innovation and adaptability

Implement measures of innovation that objectively assess its financial and non-financial impact and identify possible areas of improvement

Report on innovative capabilities and results and the impact of R&D investment, and future plans and priorities



31

IMP

AC

T O

F M

EG

AT

RE

ND

S

Roles Creators of value Enablers of value Preservers of value Reporters of value

Drivers of Sustainable Organizations

↓

Typical job titles:

Executive director

CFO/FD

Controller

Director/Head of strategy and planning

Change management lead/coordinator

Typical job titles:

Business unit controller

Manager of finance and accounting department

Management information/ analysis department manager

Financial or performance manager/analyst

Typical job titles:

Risk and business assurance manager

Governance and compliance manager

Internal audit department/ business assurance manager

Typical job titles:

Head of financial or business reporting

Financial/performance analyst

Investor relations manager


Understand and interpret the financial health of organizations and play a leadership role in developing and implementing a financial strategy to deliver an organization’s strategic objectives

Support directors, management, and operations in understanding the financial health of organizations and progress in delivering financial objectives, and providing the information and analysis needed to improve sustainable value creation

Examine systems that generate financial and non-financial infor-mation and ensure that they are working within prescribed stan-dards of accuracy and reliability, and that such information realistically reflects the performance of the organization

Provide a detailed knowledge of financial reporting standards to ensure that they are correctly applied


Participate in identifying and implementing people and talent management strategies and policies for the wider organization and the finance function, including the alignment of incentives

Focus individual and team development on enhancing generalist skills, including an understanding of business context and priorities, providing high-quality management information and analysis and “business partnering” to gain trust within wider organization

Ensure a questioning mindset capable of identifying risks and opportunities and serve as promoters of integrity, transparency, and expertise

Report on how organizational investments in human capital development lead to the generation of shareholder and stakeholder value

Strategy Execution

Manage resources and per-formance through understanding the drivers of shareholder and stakeholder value and aligning individual and organizational goals and objectives and rewards to these drivers

Support implementation of strategic and operational performance management, measurement, and reporting systems and processes

Review strategic and operational performance gaps for process and supply chain improvement and ensure that processes and controls to detect and prevent fraud are put in place

Design and implement performance-driven strategic and process measurement and reporting systems, and provide adequate information and analysis to support delivery of performance insights


Prepare high-quality business and financial communication and reporting to enable managers, investors, and stakeholders to make an informed assessment of the organization’s performance and prospects

Support transparent communication and reporting internally and externally with material information and analysis and effective presentation to investors and other stakeholders, while at the same time ensuring that financial statement presentation fairly represents an organization’s performance

Internal audit of information systems and processes, as well as the performance information itself, so as to ensure objectivity both in fact and appearance

Capture financial transactions and non-financial measures of performance, and prepare high-quality business reporting to stakeholders, including investors, customers, employees, regulators, and suppliers



32

Appendix 1: Megatrends and Emerging Issues Driving Change in the Business Environment

Globalization

The globalization of trade, resources, operations, products and services, economic cycles, and capital

markets, has been one of the motors for socio-economic development and the creation (and

destruction) of wealth. In an increasingly globalized world, products can be produced anywhere,

using resources located anywhere, by a company situated anywhere, and selling anywhere.

The interconnectedness of increasingly global markets presents opportunities and challenges.

Challenging issues for organizations, governments, and international organizations include the need

for (a) more effective governance, regulation, and oversight, as well as (b) more effective political

and organizational infrastructures and processes to minimize the risks associated with the

globalization process.

Two significant global issues will impact organizations and markets and hence the role of

professional accountants in business. The first is the diffusion of economic power in the global

economy across a wider range of regions and countries, underpinned by the deployment of

information technology, greater economic openness, and the growing size and reach of multinational

companies.10

The second issue is sustainable development, and in particular climate change, which

has now become a defining issue of our era. With this increased attention has come an increased

demand for reliable decision-making information.

The quest for sustainable development is already starting to transform the competitive landscape,

which will force companies to change the way they think about products, technologies, processes,

and business models.11

Increased social, environmental, and economic pressures will also force

organizations across the globe to better meet demands for more transparency, ethical commitments,

and improved approaches to delivering governance, risk and internal control structures and

processes.

Complexity

Complexity drives a multitude of challenges. A growing world population demands new, better,

faster and cheaper products and services with ever more choice and options. This all adds to the

complexity of the economic cycle and the need to implement strategies more quickly and efficiently.

Speed to market, short product lifecycles, narrower profit windows, and fragmentation of mass

markets into niche markets (mass customization) bring significant changes to management

philosophies, structures, strategies for success, and performance and financial management.

This increased economic activity creates all kinds of governance, safety, environmental, and social

side effects that society wants to keep in check. Complexity can also result from a low-trust

environment between business, governments, and the wider public, and is likely to get worse when

10 Accenture, Strategies for achieving high performance in a multi-polar world 11 Why Sustainability is now the key driver of innovation, Harvard Business Review, September 2009

http://nstore.accenture.com/IM/PDF/accenture_MultiPolarWorldFinalReport.pdf

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social, environmental, or economic conditions deteriorate. This potentially leads to greater

expectations and regulation unless adequately addressed by organizations and markets.

Complexity is best tackled with a talented and empowered workforce. Information and knowledge

drives innovative answers to complexity, and where it is shared and leveraged is more likely to lead

to speed, innovation, and greater competitiveness. Creative problem solving in multi-disciplinary

teams is essential to economic viability, and protecting the environment and operating in a socially

responsible way.

Regulators and standard setters will also have to accept their responsibility for tackling complexity.

Shifting from more to better and evidence-based regulation and oversight would enable organizations

to more effectively and efficiently create stakeholder value and to properly account for how they are

doing so. In addition, global convergence of standards and regulation, as well as global coordination

of oversight could also help reduce complexity and the cost of business.

Technology

High-speed technological forces continue to create an environment where rapid pace of innovation is

critical to success. Technological evolution opens up new dimensions for further growth with a

constant stream of new products and services, delivered via new development, production,

marketing, and distribution methods. In organizations, technology allows greater decentralization

where decision making is close to the customer and public service user. It also facilitates greater

innovation by fostering collaborative relationships among a network of strategic partners and

alliances.

Improved information and communication technology enables access to greater business intelligence

that drives management insight into customers and public service users and market dynamics. As

greater complexity increases the amount of data held by organizations, analytical and decision-

making capabilities will feature more than ever. Good decisions will, as ever, be rooted in insightful

analysis supported by professional judgment.



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Appendix 2: A Closer Look at the Eight Drivers of Sustainable Organizations

The eight drivers of sustainable organizations have been identified by drawing on the megatrends in

Appendix 1 and various sources, including The CIMA Business Success Wheel and management

and quality frameworks, such as the European Foundation for Quality Management and (US-based)

Baldrige National Quality Program. Such management and quality frameworks enable organizations

to improve overall performance, define what they do, and explain why they do it.

Although it is not the purpose of this analysis to provide a definition of organizational success and

sustainable performance, it is likely to be strongly connected to achieving sustainable value creation

in the longer term or, in the public and not-for-profit sectors, desired and affordable policy and social

outcomes. Long-term sustainable success requires responsible organizations to direct their strategies

and operations to achieving sustainable economic, social, and environmental performance.


A company must create value for customers to create value for shareholders and stakeholders, and

can only do so without neglecting the expectations of other stakeholders. Customer focus is an

organizational orientation toward satisfying the needs of potential and actual customers. Customer

focus and aligning an organization with the market is a precursor to sustainable performance.

Similarly, in the public and not-for-profit sectors, sustainable performance is strongly linked to

meeting stakeholder expectations and the quality of delivery to service users. Achieving customer

and stakeholder focus involves ensuring that the whole organization, and not just front-line service

staff, puts its customers and key stakeholder groups first.

Sustainable organizations share a common feature in that they configure all activities, from the

planning of a new product or service to its production and fulfillment, marketing, and after-sales care,

around the customer and public service user. In every sector, this can be aided by (a) practicing good

customer relationship management, (b) maintaining a customer and stakeholder relations or

engagement program, and (c) ensuring that all functions, including finance and accounting, are

geared to supporting customer-focused decisions. In a public sector context, a broader view will

include clarifying the desired outcomes of various stakeholders, including processes and capabilities

required to deliver these outcomes to public service users.


The major attributes of sustainable organizations derive from effective and respected leadership,

which in turn enables coherent and focused strategy and execution. Effective leadership relies on a

deep understanding of (a) customer and stakeholder needs, (b) the organization’s capabilities to

generate the required products and services, as well as (c) the opportunities and threats that stem

from its competitive environment. Above all, effective leadership and strategy focuses on sustainable

value creation over the long term. In decision-making processes, this means that long-term

consequences of decisions should be taken into account, including how they impact operations,

customers, employees, and the reputation of the organization.

Effective leaders articulate vision and strategy, and put into place key enablers of performance,

including strong corporate values, ethical culture, and organizational structures and processes to

http://www.cncima.com/uploads/docs/eng_cimadifference.pdf

http://ww1.efqm.org/en/Default.aspx

http://www.baldrige.nist.gov/



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execute the organization’s strategic goals and objectives. Effective leadership creates an environment

in which an organization possesses an ability to learn, and to put into practice what it has learned

more quickly than its competitors to deliver customer and stakeholder value.


Governance, risk and control are key elements in enabling sustainable organizations, as well as

enhancing investor and wider stakeholder confidence. IFAC’s earlier Enterprise Governance case

study research highlighted that failure was attributed to four key governance aspects:

Culture and tone at the top;

Dominant CEOs with unfettered power;

Insufficient oversight and independent challenge from boards of directors; and

Inadequate risk management and control systems.

Ultimately, sustainable value creation will depend on how well organizations can integrate their

governance, risk management, and control systems in all their activities. Stand-alone or ill-conceived

governance, risk management or control systems usually lead to higher costs and sub-optimal

performance. Examples of poorly integrated governance, risk and control are:

(a) Compliance- or conformance-focused governance: A focus on conformance covers issues such

as board structures and roles and executive remuneration. However, the performance of an

organization requires focus on strategy and value creation. Good governance on its own cannot

make an organization successful.

(b) Risk management as a separate function or process: Risk management cannot be outsourced at

either the strategic or operational level. Boards are responsible for risk oversight, and senior

management is responsible for integrating oversight and risk management across the

organization. Line management should deal with risk as part of their roles and responsibilities

and within the context of the risk appetite and tolerances set by management. Risk

management and internal control systems should be linked and not treated as silo activities.

(c) Internal control overly focused on financial reporting: Although providing control in relation

to financial reporting is important to detecting and preventing fraud, effective control systems

should link to the wider organizational risks to help an organization exploit opportunities and

manage strategic and operational risks.

Sustainable organizations integrate effective governance structures and processes with performance-

focused risk management and control systems in all their activities. Fostering good governance is

more than a compliance exercise; governance should permeate all facets of the organization, so that it

becomes part of an organization’s “DNA.”12 Sustainable organizations focus on structure and

process as well as culture, competency, and systems to support effective governance structures.

12 See IFAC’s IGPG on Evaluating and Improving Governance in Organizations.

http://www.ifac.org/Store/Details.tmpl?SID=10770463423295840

http://web.ifac.org/publications/professional-accountants-in-business-committee/international-good-practice



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Sustainable organizations have an innovative and adaptive capability to meet changing market

demands. They continually innovate their products and services, and adapt their structure, processes,

and systems to changed circumstances.

Innovation can be (a) incremental, allowing for continuous improvement in products/services and

processes supporting delivery, or (b) disruptive, where the innovation changes the nature of the

market and competitive forces. Given the globalization, complexity, and technology trends

highlighted in Appendix 1, organizations are faced with delivering a rapid pace of customer-focused

innovation and adapting continuously to changed circumstances.

Specific opportunities are becoming prominent, for example, the so-called “green” economic

development, which will depend on delivering innovative solutions to current sustainability

challenges. By treating sustainability as a goal today, early movers will develop knowledge and

competence that rivals will be hard pressed to match. That competitive advantage will stand them in

good stead, as sustainability is an integral part of effective innovation and adaption. (Why

Sustainability is Now the Key Driver of Innovation, Harvard Business Review, September 2009).


Sustainable organizations will always have strong financial management underpinning their

decisions and performance, taking into account the opportunities and threats that stem from increased

globalization, complexity, and technology. The financial health of a company supports investment in

future growth and is important in supporting wider social and community goals (i.e., to support

employment and government tax revenues, etc.).

Effective management of financial performance objectives that is based on achieving sustainable

economic growth helps to ensure long-term sustainability. Sustainable organizations ensure that

financial strategy and navigation support long-term economic viability rather than focusing on short-

term earnings performance.

Such organizations have well-developed planning and forecasting at an organizational level, as well

as for specific business processes. A deep understanding of and insight into historical, current, and

potential performance forms the basis of developing strategy and setting credible stakeholder and

market expectations. Confidence in articulating where an organization is going financially helps

improve access to capital and confidence of stakeholders. Effective financial management also

involves delivering financial leadership in tax and treasury, cost and profitability improvement,

mergers and acquisitions, and raising finance and capital.


Organizations that retain and attract talent tend to outperform competitors. According to Watson

Wyatt Human Capital Index®: Human Capital As a Lead Indicator of Shareholder Value, superior

human capital practices not only are correlated with financial returns, but also are a leading indicator

of increased shareholder value. Sustainable organizations typically treat people and talent

management as a strategic function and key value driver to their organizational success. It has taken

on greater importance over recent years because, in many markets, skilled labor is in increasingly



http://www.watsonwyatt.com/research/resrender.asp?id=w-488&page=1

http://www.watsonwyatt.com/research/resrender.asp?id=w-488&page=1



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short supply. Globalization and technology not only open up access to new talent, they also increase

global competition for such resources.

People and talent management are also significant success factors in the development of financial

leadership and the finance function. The accountancy profession has been impacted by globalization

and the growing economic interdependence of countries, creating an increasingly competitive market

for the services of professional accountants. Enhanced global and regional mobility has created a

transient global finance workforce that puts pressure on an organization’s recruitment and retention

capabilities. Ensuring that finance functions have the right people with the right skills, organization,

motivation, and empowerment will be crucial in managing the uncertain times ahead (Talent and the

finance function, Cutting through the complexity, PricewaterhouseCoopers).

Strategy Execution

Sustainable organizations will generally have a clear focus on key drivers of organizational success

that is widely shared throughout the organization and its key stakeholders. Such a focus is achieved

by cascading strategies downwards into operational and tactical plans. Sustainable organizations are

disciplined in ensuring that (a) resource allocation decisions align with strategic direction, goals, and

objectives, and (b) performance measurement and reporting systems measure progress towards the

achievement of strategic and operational objectives.

To better support decision making and performance measurement, sustainable organizations will

have decision processes and enabling information management and technology to support insightful

financial and non-financial performance information (measures dealing with customers, internal

processes, employees, and suppliers) and analysis. This business intelligence provides insight into the

key drivers of shareholder and stakeholder value, and allows for better alignment of accountability

for results, and rewards and recognitions. Performance insights will also support operational

excellence and help to ensure that products and services are delivered with zero defects, on time, and

at target cost.


Effective stakeholder engagement involves managing stakeholder expectations in a way that does not

compromise the long-term sustainability of the organization. This involves a systematic and carefully

planned approach to engaging and dialoguing with various stakeholders. Investor relations and

business reporting, particularly through effective management commentary and narrative reporting,

are opportunities for management to provide investors and other stakeholders with the (a) longer-

term prospects for an organization, as well as (b) a rationale and explanation for its vision, strategies,

and results. Sustainable organizations tend to excel in their reporting in terms of readability,

usefulness, and relevance.

http://www.pwc.com/us/en/financial-services/publications/talent-management-finance-function.jhtml

http://www.pwc.com/us/en/financial-services/publications/talent-management-finance-function.jhtml

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