Creating the environment for progressive innovation
January 18, 2011
The New Year is always the time to reflect on the past and plan for the future. Unfortunately few of us have a clean sheet on which to pen an entirely new future, but it's always useful to think the unthinkable before we jump back on the tread mill of life.
It's difficult to predict what 2011 has is store but I suspect here in the UK as in other parts of the world it's going to be another year of re-adjustment brought about by the state of the economy and changes to the norms we have come to take for granted. I had the pleasure of spending some time in Japan before Christmas and had the opportunity to reflect on how Japanese society and business has come to terms with a low growth decade. I joked that perhaps the Japanese experience was something all of us in the western world needed to understand and learn from - "success and happiness with no growth."
Sitting here in the accounting profession I see 2011 as a watershed year, a year of changed norms. It's the year the profession will start to feel the impact of regulatory change coming out of the credit crunch. While some in the profession may be fearing the worst, I am cautiously optimistic. The reason I believe this is that in my 33 years in the profession I have never before experienced so many change agendas in play at the same time, nor have I sensed the strength of desire for the profession to move ahead on a more progressive agenda.
Here in the UK we have some really interesting progressive thinking coming out of BIS around narrative reporting. (BIS consultation - summary of responses on narrative reporting). We have the ongoing work of the International Integrated Reporting Committee (IIRC) and more recently the consultation from the FRC entitled "Effective Company Stewardship - Enhancing corporate reporting and audit".
I'd particularly encourage you to read the latter paper and, if nothing more, consider the recommendations on page six. Regardless of your views on the specific recommendations no one could suggest the FRC is sitting on its hands. It must be commended for pushing the reporting and audit agenda forward - let's hope the process of consultation can move this agenda forward in a constructive and meaningful way.
As an innovator, the most significant and interesting point is hidden away on page 20. It’s the reference made to the potential formation of an "financial reporting lab". A place where new reporting models and concepts could be explored, tested and tailored (without liability) to enable greater innovation in the market. What a brilliant idea and, as the FRC acknowledges, the inspiration of a colleague Alison Thomas.
I hope this idea survives the consultation process as I believe it could have a transformational impact on the future of reporting and assurance, as today there is little incentive for change given the way regulation impacts the behaviours of all those involved in the reporting system. So for those of you who are interested in the health and relevance of reporting I'd encourage you to get behind this idea. It might be unorthodox and new but that's what change demands.
As always, please send me your views and comments on this exciting period of innovation.