Management Accountants: Helping Companies Course Through Business Uncertainties

9

At the beginning of the year, the global business community was looking forward to a return to growth and stability. But 2022 has brought with it challenging macroeconomic and geopolitical conditions, which in turn have led to high inflation and interest rates, disrupted supply chains, and caused economic uncertainty. In fact, many economists have forecasted a soft recession. 

According to Dennis Whitney, CMA, CAE, CFM, Senior Vice President, Certifications, Exams, & Content Integration at IMA, businesses are once again facing a complicated set of challenges, struggling to grow revenue and maintain reliable supply chains. Long-term plans have been postponed as enterprises become more conservative and focus on conserving cash flows and cutting costs. This is exactly what was borne out by the recent Global Economic Conditions Survey (GECS), carried out jointly by IMA® (Institute of Management Accountants) and ACCA (the Association of Chartered Certified Accountants). In the Middle East region, confidence in the economy declined significantly in the second quarter of 2022, but confidence has stabilized somewhat in the third quarter. High energy revenues, and increases in new orders, employment, and capital expenditure, justify this balancing out of confidence. The region’s prospects look relatively strong, provided oil prices can be sustained. However, the volatility of oil prices and global political uncertainty highlight the need for insightful financial management, managing costs while investing in the future.

In the Middle East, CEOs are already under pressure to drive their regional transformation while delivering sustainable outcomes. The profession is witnessing interchanging economic conditions and an ever-widening range of threats and uncertainty. Companies are facing a multitude of challenges in the current landscape as they chart a course of growth while maintaining market competitiveness, as regional governments tweak their agendas to a more sustainable model. For the senior leadership team, challenges include tighter fiscal discipline and a greater need for diversification. CEOs are channeling their energy towards a growth agenda and new business models.

Keeping these dynamic and ever-changing scenarios in mind, today more than ever, management accountants are essential for guiding businesses through challenging macro-economic periods of volatility. These professionals, by virtue of their training, combine in-depth technical expertise in accounting and finance with the capacity to think strategically and be true business partners. Let us look at three fundamental competencies that management accountants bring to the table: 

Equipped to carry out the most crucial job in uncertainties – Risk Management

In business, it is prudent to be risk averse before calamity strikes. Consequently, businesses must take a proactive approach to monitor and manage enterprise risk in all its manifestation – be it cyberattacks or a global pandemic. Fortunately, the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Enterprise Risk Management Framework provides management accountants with a clear direction on enterprise risk management (ERM). COSO was created to help organizations become more fraud resistant and IMA is one of COSO’s five co-sponsors.

The primary accountability of ERM falls, not surprisingly, on management accountants, as they frequently have the best visibility into a company’s finances, operations, and supply lines. To assess non-financial risks across the firm, they collaborate cross-functionally with departments like IT, HR, and sustainability and create a comprehensive risk framework by taking all relevant/potential hazards into consideration. Risk management is focused on risks, of course, but also on opportunities and how to manage the risk surrounding those opportunities. This aligns well with another important competency, strategic decision making.

Providing an innovative approach to strategic decision making

Management accountants are trained to identify and evaluate opportunities that will add value to the company. That involves not just quantifying the financial aspects of decisions (ROI, cash flow, net present value, etc.), but also working with senior leadership to evaluate business opportunities in the context of organizational strategy. Having a strategic mindset and technical analytical skills is increasingly important at a time when companies and organizations need to be resilient, adapting quickly to changing business realities. It also necessitates broader abilities, such as business acumen, interpersonal skills, and the capacity to build rapport with upper management. Finance teams led by management accountants are better able to see possibilities for value creation and the risks associated with achieving those opportunities’ objectives. Professional management accountants, CMAs for example, assess the costs and advantages of developing a new product, purchasing another business, implementing a radical innovation, or partnering with a company abroad.

Best suited to carry out performance management

Evaluating the success of strategic initiatives is imperative and management accountants are best suited to assess the success of growth opportunity investments and determine which ones merit additional investment, and which ones should be abandoned with resources being deployed elsewhere. Tracking sustainable company KPIs and informing stakeholders are crucial tasks for management accountants. Performance management is a set of evaluation tools that help management look back so that they can better plan for sustained success in the future.

The verdict is very clear. Companies that realize the relevance and strategic value of management accountants are more likely to gain a competitive advantage over those that do not. Navigating regulatory minefields in addition to operational and strategic challenges, these organizations are therefore more likely to deliver sustainable value for shareholders and drive economic growth. For those that have not recognized management accountants as business partners, the time is now!