Rethinking risk: New approaches for accountants

Michele Wucker, Author of The Grey Rhino

We are all too likely to ignore the obvious things in front of us. We always look at risks — grey rhinos and Black Swans — but they may be potential areas that we have not looked into as well. That is a risk. The whole point of the grey rhino is that you've got a choice: some people ignore it and some people don't.

Merina Abu Tahir

You're more likely to ignore it than you want to admit. And the people who can admit that vulnerability actually have so much more power.

In this moment, we are all living through the biggest crisis in our lifetimes. We have a global health crisis with the pandemic, we have an economic crisis, and we also have a business crisis. And as we all know, after every crisis, the awareness and scope of risk management changes.

We are not dealing with risk, we are dealing with uncertainty. It's not a question of which of a limited number of outcomes will take place — it's a question of not knowing what the range of potential outcomes is. And therefore we cannot assign probabilities to those, because we don't even know what they are.

I think we have an ocean of emerging risks here, and we've just got to keep ourselves safe.

Sanjay Rughani

I try to get people to think about how you create urgency and not panic. It's like — if certain building blocks aren't there, there are still things that you can do, so that when the right moment comes, you've got a solution.

As an accountant, you are able to see the entire spectrum of the business because you look into the entire financial performance, and you can provide insights and aid in the formulation of the organisation's strategy. If accountants can understand the business better and provide unique solutions to where they were, that is an area where they can add the most amount of value.

Shahid Qureshi

Integration of known financial and non-financial elements would be my best advice for all the boards that are out there listening to us.

Accounting and finance professionals really understand what drives business performance, but we really have to go beyond financial statements that reflect the performance of the past and be much more forward-looking.

Coronavirus this year really helped people understand that yes, we really do take our eyes off the ball when it comes to obvious things. I don't care how many levels of defence you have — even if you bring in external ones — they all fall down if the weakest one isn't competent. We've seen that spectacularly in recent years, with major organisations completely crashing and burning.

In some respects, we are really blessed that we went through the 2007–2008 banking crisis, because if we hadn't learned from that and built up the risk management of capital and liquidity reserves in our banking system, we would right now be having another crisis on our hands — a banking crisis — and that would be a much deeper hole.

There's just so much reskilling that needs to happen in the world we're looking at. There are implications around mental health — a pandemic is not easy, it's not anticipated. We are keeping people at home; they're not used to staying home. Human beings are social connectors.

There were a lot of people writing articles on how climate change is related to pandemics — whether they want to or not, banks are really starting to think long and hard about what exposure they have to climate risk through their customers, and embedding that in some of their risk modelling. But also thinking harder about their role as a perpetrator, and what contribution they're making to the climate emergency.

Each one of us, I say, has what I call a risk fingerprint — and that's true not just for individuals, but for companies and for countries, as I've seen so much in the whiplash between the US and China. Part of it also has to do with collectivist versus individualist thinking. When you think about risk, you're not just thinking about risk to yourself, but to your family and to your community. Your working environment has become very challenging — there is a lot of uncertainty.

Israel Opio

A good accountant should be able to prepare predictive analytical reports, which CEOs can use to make good decisions for the future.

Being a professional accountant, we are trained on professionalism and ethics, and we are bound by our professional bodies' code of ethics in these areas. That sound grounding gives accountants an edge in a career in risk management.

I think in a world where trust has become vulnerable, the role of the accountant is even more necessary. The accountancy profession is having an exciting rebirth.

Professor Mervyn King, Chair, King Committee on Corporate Governance, South Africa

It will be dealing with value creation, and the lead in the C-suite will be the accountant, who will be the true change-maker.

I see opportunities for both companies and accounting and finance professionals. It's going to need a mindset shift — not just from traditional linear thinking to a more complex model, but also from the Black Swan "no accountability, we never saw it coming" mentality to this grey rhino mentality: yes, here are things that we see coming, let's hold ourselves and others accountable for doing something about them.

James Lam

We are powerful — what we put out, our sustainable reports, are going to be very critical.

I have high hopes for 2021. I believe that will be the year where, especially in Poland, capital and financial market participants will start incorporating non-financial criteria into their decision-making. What we say is: the accountant of the future is the one who thinks about planet, people, purpose, and then finally profits.

I would suggest thinking about incorporating more scenario analysis, more storytelling. It's a good time to use our brains and analyse risk on different parameters, and make this a bigger reality.