The ERM way to accountancy

CAs must focus on building their Enterprise Risk Management skills.

CAs must focus on building their Enterprise Risk Management skills. | Photo Credit: Freepik

The global economy has gone through a turbulent time in the last few years, with financial crises, trade wars, and rising economic protectionism. The growing use of technology has added to the complexity and created a tectonic shift in business operations, communication, and security leading to new challenges that include societal, political, economic, and cyber risks.

Beyond conventional roles

As a result, the role of a Chartered Accountant (CA) has also moved from traditional financial reporting to strategic decision-making. CAs are entrusted with guiding organisations through risks and helping build robust and resilient businesses. Consequently, many CAs are now focusing on building their Enterprise Risk Management (ERM) skills.

Today, CAs often work across a range of risk-related functions from risk consultancy to enterprise-wide risk management advisory and risk-based audit. Even in a traditional role, their functions often overlap with typical risk management functions, such as ensuring legal compliance. The widening ambit of a CA’s role comes from the shift in financial reporting towards integrated reporting, which includes non-financial data on organisational performance, strategy, governance, and its future prospects. Increasing globalisation and interconnectedness of business functions mean that financial reporting cannot be conducted in isolation, and include critical information from different domains, thereby providing a more accurate picture of organisational risks.

For investment accountants, the emergence of ESG (Environmental, Social, Governance) factors plays an even more vital role. This is seen as the most sustainable form of wealth management and requires accountants to develop competency in risk assessment and compliance. For instance, cross-border transactions require careful consideration of currency fluctuations, ethnic factors, the regulatory landscape, and the political environment. ERM qualifications offer a holistic approach in understanding, evaluating and managing these risks.

Cyber risks

With the Internet playing a vital role in every aspect of business, there has been a rise in cyber-attacks and data breaches. In 2021, one study showed that there had been a marked increase in Account Take Over posts (a form of identity theft) in India. Therefore CAs need to be aware of mitigation strategies to ensure a robust risk reporting framework.

Even traditionally, an accountant’s work revolved around compliance and financial risks. While the ICAI syllabus includes risk management at Intermediate and Final levels, the need of the hour is to go beyond basic competency to in-depth expertise.

As the role of CAs transforms rapidly, expertise in Enterprise Risk Management will help strengthen skillsets and open opportunities in risk consulting and allied fields. As organisations seek to strengthen and build resilience post-COVID, qualifications such as those in ERM will help CAs upgrade their offerings in tune with the changing global scenario.

Hersh Shah is CEO, India Affiliate, Institute of Risk Management, and Abhay Mehta is President, BCAS.

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Printable version | Feb 13, 2022 7:12:48 am |