Reporting Excellence Means Effective Organisations?

I always believe that when you are new at something, you are entitled to ask the most basic questions. That was exactly what I did when I was the MIA President. I asked about the value of excellence awards such as the National Annual Corporate Report Awards (NACRA) and the National Awards for Management Accounting (NAFMA) where MIA was co-organisers for both.

As for NACRA, listed companies are not required to apply. All their annual reports would be screened by dedicated accountants until winners are determined. Not a bad deal for those companies, the accountancy profession takes all the trouble. Only when they are shortlisted, they have to pay for attending a dinner where the winners would be announced.

NAFMA, then, differed slightly where companies are required to apply and disclose their management accounting practices. The panel of judges would visit them to verify and understand more their practices. One organisation kept on winning for the first few years until they were gently encouraged to give way for others.

Of course I got strong responses from the other partners which were very clear of their positions in defending those awards. Among the arguments were the awards encourage companies to be more transparent in corporate reporting and would continue to enhance their management reporting practices because of the awards.

I am not denying that these kind of awards could generate benefits. There could be real progress where the winners become better companies. However, does this rule apply to all companies? How many award winners had troubles later and are no longer listed? Someone should look into this aspect.

So, does reporting excellence correlate to organisational effectiveness? I am not yet convinced. My scepticism applies to even organisations which managed to implement integrated reporting. 

If organisations have specific mandates and key information about the mandate are missing, what is the point of telling lengthy stories about "value creation" when certain fundamental information are not there? With the present printing capabilities, readers might be fascinated with beautiful graphics and could miss the "missing links or points".

Doing the same thing over and over again without challenging their meanings and ascertaining outcomes is not my cup of tea. Isn't this the cause of why many great companies failed? They got very nervous when their flagship products were criticised. Until the market really shifted and competitors have secured huge chunks of their markets with superior products or solutions, then only the reacted, albeit too late.

Well, I am still wondering about the nexus between excellence in reporting and organisational effectiveness. I could be alone. What the heck!

How Boards Drive Innovation

I was invited by the Malaysian Directors Academy (MINDA) to be a panellist at the Bursa Malaysia's Power Breakfast session on innovation. While this was certainly an honour, the bonus was I would be sharing the stage with Ross Dawson, a technologist and futurist from Australia whom I respect very much.

Ross started by sharing his observations on the global state of play around innovation. It was made clear that for companies to remain sustainable and continue to create value for their customers and shareholders, they have to keep on innovating. Otherwise, products would be less competitive, cost will go up and the very business models which worked in the past may have been overtaken by time and competitors.

I shared my observation on how the Securities Commission (SC) decided to facilitate the adoption of financial technology (fintech) by introducing regulatory frameworks for Equity Crowdfunding and Peer-to-Peer lending platforms. At the moment, such funding platforms would only be useful for the small-medium enterprise sector which is small relative to the size of the Malaysian capital market which exceeds RM 1.3 trillion Ringgit. If the SC did not have the innovative mindset, such space would remained a mystery.

A day earlier, when opening the SCxSC 2017, the SC Chairman, Tan Sri Ranjit Singh announced that the platforms had succeeded in promoting 450 campaigns, raising RM 50 million in a space of more than a year. 70% of the businesses which benefitted were founded by women and youth while 40% of investors are below the age of 35.

At present, both the SC and Bank Negara Malaysia are at the forefront in transforming the financial services landscape by enabling financial institutions and market intermediaries to test their ideas through regulatory sandboxes which allow both sides to experiment. This sandbox approach is very revolutionary for regulators which are well known to be risk-adverse in their approaches towards formulating regulation.

So, how would the board influence innovation? I shared the following points:

Board could steer companies toward being more innovative especially at the strategic level. By challenging management to be clear of the market landscape, market positioning, differentiating from competitors and developing brands which actualise those strategic intents, management would have to develop and implement innovative business initiatives. This would over time, inculcate the mind and culture of innovation.

The other issue around innovation is the risks-tolerance towards failures. Would the board expects all initiatives to be successful or they could be sending signals that failures are part and parcel of business? By indicating the board's tolerance,  people would be encouraged to explore and test new ideas and would be less restraint to take some risks. However, this does not mean that governance processes are abandoned but managing risks out of innovation should be part of the framework.

I do not believe that there should be a specific board committee on innovation as such mindset should be applied across all aspects of business. What is more important is the tone and support provided by the board in enabling the companies under their care to test and explore new grounds, guided by boards which are aware of the changing business landscapes, understand where the opportunities are and what could possibly go wrong.

Coming back to Ross, he also explained about the scope of innovation. Innovation is not about applying new technology but it covers broad areas including business models, products and processes. Hence, companies have ample opportunities to be innovative but they need to be very strategic and focus so that positive results could be derived out of such investments.

A New Accountant in the Family

I have been advocating professional accountancy as a career of choice for many years. Benefiting from the qualification myself, I thought it is appropriate for me to spread the virtues to other aspiring accountants.

While I never tell my children what should be their career paths, three of them decided to take up accountancy from our local universities. Two graduated from the Internal Islamic University and one from University ITM. Fortunately, all of them started their career in accounting firms, where the real actions are and where high-end accounting concepts and knowledge are applied on daily basis.

My eldest decided to pursue one of the professional accountancy qualifications from the UK. He did that while he was with one of the Big-4. However, his interest in Triathlon distracted his focus. He eventually started his own cake company with his wife and their business is growing steadily. What could I say?

It was my second daughter who managed to complete her Malaysian-Australian professional accountancy programme. I suppose the support she had from her firm, another Big-4, and the exposure she gained from her work helped her to succeed. So, last week, me and my wife attended the event where she was awarded her certificate of completion. She needs to work for another few months to clock the necessary hours before she could join the Malaysian Institute of Certified Public Accountants and possibly the Chartered Accountants in Australia and New Zealand. Finally, I am not the only qualified accountant in the house.

My second son joined the accounting firm that I established, Khairuddin Hasyudeen & Razi (KHR). Although it is not that large, the firm has a policy of encouraging and sponsoring its staff to become professional accountants. So far, more than 30 young Malaysians had passed or are in the process of qualifying. While many other firms fear that by having professional accountancy qualifications the market value of their staff would be enhanced and they might move on for better opportunities, KHR believes that if such event happens, those well trained accountants would be its ambassadors and would shape a good perception of the KHR brand. Many had actually left, including going overseas but KHR remained as a growing business. Hence, my son is sponsored to pursue CPA Australia, the same qualification with his father.

I am amazed with some Malaysians who are seeing professional accountancy as a mean colonisation especially when smart Malaysians obtained well-recognised accountancy qualifications from the UK or Australia. If they care to study the history of our nationhood, many overseas-qualified accountants contributed to the progress of Malaysia. Tan Sri Hanafiah Hussin, Tan Sri Azman Hashim and Tan Sri Abdul Samad Alias are amongst the living examples who we can still meet and ask them questions.

In fact, the Malaysian Association of Certified Public Accountants (MACPA) was established in 1958, a year after we achieved our independence. Unfortunately the nay sayers somehow do not recognise MICPA (its present name) as a Malaysian body!

In 2000, the Malaysian Institute of Accountants (MIA) changed the title of accountants registered with it from Registered Accountant or Public Accountant to Chartered Accountants. This has mislead many accountants! While many of MIA members had set for the many professional accountancy exam available like MICPA or ACCA, there is a group who had never taken any professional accountancy examination in their life. Hence, the registration title should be reviewed.

Employers in Malaysia are smart. They are able to differentiate the "Chartered Accountants" of MIA with others. So, while some MIA members could be smiling with their title, many employers ask these "Chartered Accountants", which examination did you pass? How to answer?

Again, I am stressing that I have benefited from being a professional accountant and I am mindful of the potentials brought by these qualifications. While I recognise that not all accountancy graduates would like to pursue this path, those who have the opportunities should not forego them simply because they are tough. Let me ask you this question, apart from being a Chartered Accountants of MIA, what else is easy in life?

I would like to thank my daughter's lectures, employer and friends for your contribution in her achievements. I wish every family in Malaysia to have an accountant in the house, a professionally qualified one.

Society and Faith in Fashion Business

What have society and faith got to do with business? Well, they are the major drivers in fashion business! That was the point discussed at a forum on Society, Faith and Fashion in Australia and Malaysia, organised by the Australian High Commission in Kuala Lumpur.

Insted of the usual corporate topics, I attended the event to understand more about fashion and society and was not disappointed at all. The panellists, Karen Teh, General Manager, Chopard; Glynis Jones, Curator, Museum of Applied Arts and Science; Aheda Zanetti, Founder & Designer, Ahiida and Calvin Thoo, Calvin Thoo were excellent in sharing their views on how societies influenced fashion and the emergence of "modest fashion" inspired after the Abrahamic faith shared by Muslims, Christians and Jews communities. In fact Calvin did very well in explaining why Muslim ladies need to cover themselves and how he blended those requirements with his designs.

Aheda shared her experience in designing the "Burqini", as a choice for ladies who want to remain modest while still enjoying the carefree lifestyle of Australians. In fact, 40% of her customers now are non-Muslims and her designs, which comply with her faith, have provided comfort to women who are inclined towards modest fashion, irrespective of their beliefs. She, again and again, emphasised that modest fashion is a choice, which works well in societies which are less judgmental like in Australia. Calvin, on the other hand, explained that in Malaysia people are more judgmental and one need not only pleases herself but her host and other guests. That makes modest fashion designs in Malaysia more complicated.

Me and Aheda

One interesting point which was discussed was on the influence of online and social media on fashion. According to Calvin, online sales in Malaysia exceed offline. One of the artiste who has done this well is Neelofa who has her lines of head cover and is promoting them via her Instagram account very well. Karen shared that even the high end brands do have online channels which are contributing to their overall sales quite well.

Glynis walked the audience through the evolution of fashion in Australia which according to her was still new. She also sees modest fashion as a segment of a larger choices which Australians have and that segment compliments the choices which Australians could make when deciding what they think suit them.

The Nasi Lemak design was raised by one of the audience and Calvin was very firm on his view about how much that design lacks taste and quality, even from the technical point of view. He is willing to sponsor a better design, something which will make Malaysians proud.

Looking forward to more life events, away but still connected with business.

The Quest For Prosperity

The Chartered Accountants in Australia and New Zealand (CAANZ) recently released a report on the Quest For Prosperity: Shaping The Future Of Our Region. It is based on the Legatum Institute Foundation's Legatum Prosperity Index which measures prosperity of 149 countries in the world.

The index measures prosperity on a broad measured covering:

Economic quality

Business environment

Governance

Education

Health

Safety and Security

Personal Freedom

Social Capital

Natural Environment

The data-driven report analyses prosperity across Australia, Hong Kong, Malaysia, New Zealand, Singapore and the UK - key markets for the CAANZ and its members.

I was invited to share my views and thought on the topic at a forum organised by CAANZ with the same title.

During the discussion, I highlighted my concern on the direction of Malaysia's education performance as education was the tools used in helping many people to move out of poverty and enabled them to contribute towards nation building.

At the same time, given that the whole world is competing based on knowledge and innovation, excellence in education would provide any country or community competitive edge.

When asked about the role of accountants in enhancing prosperity in the markets they are in, I argued that being competent and performing their respective roles with the highest standards of professionalism and integrity would be critical. In Malaysia, many accountants are occupying C-suites with decision making power which would influence wealth creation and distribution. Hence, they carry heavy responsibilities on their shoulders to ensure the country progresses in the right direction.

Accountants should also be willing to walk away if required to do things which are against our professionals values and the best interest of our society. We need to stand tall and be counted.

Looking at prosperity beyond financial wealth would provide a more balance idea of the meaning of being citizen. I hope this report would provide Malaysians ideas of assessing the performance of their leaders and this report is an independent view of where Malaysia stands compared to markets which we are competing with.

The report could be downloaded here:

https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc/shaping-the-future-of-our-regions