Trust, risk and culture needed at the forefront of the FRC Code says Association of International Certified Professional Accountants.
London – The Association of International Certified Professional Accountants (the Association) - the unified voice of the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) - has published its response to the UK Financial Reporting Council’s (FRC) review on revising the UK Corporate Governance Code.
In its response, the Association has called on the FRC to improve viability reporting in relation to risk management, while also suggesting other improvements around trust and the role it plays in driving value for businesses.
In the Association’s view, the FRC should place particular emphasis in the Code on the importance of the risk assessment that underpins the viability statement. It will be crucial for lessons to be learnt from recent high profile corporate failings to ensure that the viability statement and the process involved in preparing it is strengthened.
In addition to highlighting the importance of risk, the Association has suggested that greater emphasis on building trust and its importance in creating value throughout the business model should be placed in the FRC’s code. Organisations, supported by management accountants, should assess, measure and report on the extent to which they are building trust within the context of the value drivers of the organisation.
The Association is currently undertaking a project, aligned with the current Lord Mayor of London’s ‘Business of Trust’ initiative, on ‘Managing the Trust P&L’, which will be published in Spring 2018. The project will provide guidance for boards on how they can exercise their roles as guardians of trust and reputation of the organisation.
In its response to the FRC review, the Association has called for a principles-based approach to corporate governance, and also recommends strengthening the connection between decision-making and delivery. It is also the Association’s view that culture be of fundamental concern for boards and that members’ state how they fit with the stated company values.
Andrew Harding FCMA, CGMA, Chief Executive – Management Accounting – at the Association of International Certified Professional Accountants commented: “It is increasingly clear that companies must have stronger risk management procedures that go beyond a simple tick box procedure. We welcome the opportunity to comment on the FRC’s proposals and, whilst we agree with the direction of the review, we believe that our recommendations to make improvements around trust, culture and their roles in driving value for businesses would strengthen the code further.
We welcome the opportunity to comment on the FRC’s proposals and, whilst we agree with the direction of the review, we believe that our recommendations to make improvements around trust, culture and their roles in driving value for businesses would strengthen the code further.
“A strong corporate governance code is essential to the smooth running of businesses in an increasingly complex and interconnected environment. In our view, the code must balance its principles and the responsibility of boards to take a lead role in decision making that benefits their own objectives for governance and reporting. Management accountants can help play an important business partnering role here to support this and create value over the short, medium and long term”.