“It’s not the load that weighs you down, it’s the way you carry it,” wrote author C.S. Lewis.
He made a good point. Anyone in finance today will be familiar with that sinking feeling when yet another new piece of financial regulation, compliance legislation, or reporting standard is announced. As finance leaders, most of us are used to it by now. Change is constant, increasingly complex, and in the main, completely non-negotiable. IFRS is the latest example.
It’s not as if the International Accounting Standards Board is deliberately trying to make our lives harder. Quite the opposite. They’re doing a good job ensuring that we have globally suitable financial standards – which is in everyone’s interest. But as CFOs, the adherence and implementation of these new reporting standards lies squarely at our feet. First and foremost, we have a responsibility to ensure that we fully understand what’s being asked of the organization before we then attempt to deliver it.
It’s easy to lose sight of the bigger picture and knock-on effects of each new standard in a wider business context. Take IFRS 15, for example. It’s easy to assume that IFRS 15 has implications only for changing accounting and reporting methods. Not so. As if those things weren’t already complex and challenging enough in their own right, IFRS 15 also impacts associated business processes, as well.
A recent Oxford Economics study found that 87% of finance leaders are increasingly involved in strategic decisions outside of finance, directly affecting organizational performance. It’s a point worth stressing because it’s critical to have both a laser focus on the latest regulation or newest accounting standard, as well as the bigger-picture view of the type of flexibility that will be required to accommodate it in other parts of the business.
If we take the IFRS 15 example further: It will impact how you engage with customers and how you structure deals, and it will require changes to the business rules embedded in your systems. Such changes may create new risks, which will also require new or updated controls. In my own preparations, I’m also ensuring that we train and update our sales teams, so they are familiar with what we can and cannot do in terms of revenue recognition.
Remember to take a step back and look at the bigger picture with each new required change. Before you jump in to address IFRS reporting requirements (or any other new piece of legislation, for that matter), join the dots and look at the wider-reaching consequences for the business. Then ask yourself if your existing regulatory framework has the flexibility to cope with what’s required. Flexibility and agility are now mainstays for finance and must be “baked into” any governance framework. Without this, things will become very painful very quickly. And as soon as you comply with current changes, more will be around the corner, and their implications may be wider still.
As CFOs, we don’t need to boil the ocean all at once. But we do need to look beyond the boundaries of just the finance department to ensure that we have the necessary flexibility and agility within our regulatory framework to accommodate the far and wide-reaching implications for the whole organization.
This article originally appeared in FEI Daily and is republished by permission.