As leaders, we are continually challenged to anticipate changes in the environment and adjust strategies to seek out new opportunities. Environmental scanning creates an opportunity to weave together the past, present and future. It is the foundation of strategic planning.
Over the past decade the following critical factors have emerged:
- The impact of economic globalization
- The thinning of interprovincial trade barriers
- Greater fiscal literacy leading to greater fiscal accountability
- The ongoing challenge of building confidence in corporate governance
- An aging population
- The reality of a shared federal-provincial jurisdiction in Canada, adding complexity to professional regulation and oversight
Specific to the accounting profession, it was clear that our profession would be faced with:
- increased oversight and litigation
- a greater concentration of firms
- changing demographics
- increased competition
- technology innovations which challenge traditional fields of practice
- a more educated client base
To face these challenges, CGA-Canada’s 2006 strategy identified the need to be flexible and responsive to change, to have a clearly defined CGA brand, and to have an education program highly adapted to business realities.
The Current Environment
How relevant are these factors to the 2010 professional and regulatory landscape? It’s important to note that no singular event will have changed the recent state of the world more than the emergence of a world-wide recession of late 2008 that left no country untouched. After an extraordinary period of strong economic stability and growth, the world’s largest and most developed economies faced a severe recessionary period with associated business failures, belt-tightening and rising unemployment.
As the global economies have slowly emerged from this dramatic recession, economic growth has resumed but at a much slower pace. Meanwhile, emerging economies such as Brazil, Russia, India and China are expected to have a strong effect on the global economic recovery and hence a greater global influence.
The impact of globalization and economic inter-dependency has also severely tested the vulnerability of local economies to deal with restrained credit access and the ensuing recession.
Over-exuberant investors, weak underwriting standards, unsound risk management practices, increasingly complex financial products and excessive leverage all combined to create vulnerabilities in the global economic system. Major underlying factors included inconsistent and insufficiently coordinated macroeconomic policies and inadequate structural reforms.
The G20 recognized that while financial markets and regulatory regimes are foremost the responsibility of national regulators, financial markets are global in scope and require intensified international cooperation. In addition to taking steps to stabilize the financial system, G20 leaders also used various fiscal measures to stimulate domestic demand and improve economic stability.
Meanwhile, financial market reform is moving ahead albeit slowly, with the aim of strengthening transparency and accountability, enhancing sound regulation and reinforcing international cooperation.
In late 2008 the International Accounting Standards Board and the Financial Accounting Standards Board created the Financial Crisis Advisory Group to consider financial reporting issues arising from the crisis. There will undoubtedly be many unfolding accounting and auditing standards-related issues to emerge from this process, which our profession must address.
The Canadian Situation
In Canada there have been encouraging signs of economic recovery in the early part of 2010. However a robust and sustained Canadian recovery for the medium term has not yet been fully assured. Indeed, recent indications from the Bank of Canada suggest that the global recovery will be slow and that countries should not give way to complacency.
Canada’s domestic banking and housing sectors are in relatively good shape. The federal government will continue to keep a tight rein on discretionary spending and will continue to cut back on programs and services deemed superfluous. Canadian export volumes may continue to be depressed by the strength of the Canadian dollar.
How Does This Affect Our Profession?
For professional accountants, two issues emerge. First, it is possible that the value of accountants will increase in challenging economic times as they become sought after professionals and business advisors. Second, the evolving regulatory landscape could affect the manner in which accountants are regulated and how they conduct their affairs.
Countries remain concerned about the heavy concentration of audit firms and an increasing gap between the large and the mid-tier audit firms. Some believe that removing ownership restrictions and allowing other players to invest in audit firms might alleviate the problem. But there is also concern that such a relaxation of ownership and control could reduce audit quality and pose a risk to auditor independence.
Supply and Demand for Professional Accountants
The 2009 IFAC Global Leadership Survey of accountancy leaders found that demand for accountants’ services will remain high.
A vast majority of respondents to the IFAC survey found that protecting the profession’s reputation, addressing the needs of SMEs and SMPs and the ongoing education/ development of professional accountants were the most important issues.
The Competitive Landscape
Domestic competitors have acknowledged in their strategic plans that they face an environment of declining numbers, standards overload, intense competition, erosion of market share, exposure to legal liability and fragmentation within the profession.
There are other competitive factors influencing our professional marketplace. Individuals holding such designations as internal auditor or certified government accountant are increasingly recognized by governments. The MBA designation continues to receive significant recognition. Yet, as economies contract and unemployment levels rise, individuals will continue to look for opportunities to upgrade their skill set. Meanwhile, CGA continues to maintain a strong competitive position in the marketplace with healthy growth and presence.
Regulatory Developments
Accountability will continue to be a watchword, and will extend beyond the public sector to private entities. Sustainability reporting will become the norm. Governments will look unfavourably on professions that continue to be closed to competition or which restrict access. The recognition of internationally educated professionals will continue to evolve. Barriers to trade and services will be reduced or removed. Governments will play a larger role than in the past related to perceived failings of the private sector. Consumers will expect intervention when matters of health or safety are concerned.
In conclusion global events are unfolding at an unprecedented pace. CGA-Canada and its affiliates have successfully built a strong, highly recognized and successful accounting designation. It is on this sound platform that a strategy for the future will be built.
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