One-off opinions and contributions from accountancy's great and good.
Future of the Eurozone and what it means for accountants
Headlines around the Euro crisis have resurfaced with a vengeance in recent weeks, says Cognizant’s Tony Virdi.
The uncertainty surrounding the future of the Euro is taking its toll on financial stability and the markets. What is certain is that the resolution of the Euro crisis, whatever the outcome, will bring with it major and extensive challenges across all industries, banking and accountancy included, as organisations are forced to implement major systems and process changes to secure trust with their customers, while minimising any financial losses and business risks.
The break-up of the Eurozone would be enormously disruptive for those in the accountancy industry.
The worst case scenario, in which some or several major economies left the euro, would result in the introduction of new or existing currencies. The introduction, however temporary, of a new or second currency would create a huge amount of extra work for accountants. Policies would need to be re-examined and accountants would need to deal with dual-reporting, in order to provide comparative information in the old and new currencies. There would likely be reconciliation issues with regard to the new currencies, and additional audits would need to be performed; particularly for systems and process compliance. Additionally, there could be major tax implications which could lead to organisational restructuring. Finally, all these changes would of course mean the costly and disruptive implementation of new systems and processes. Accountants will need to help their clients to assess such impacts by carrying out ‘health check’ assessments of their clients’ businesses. All the above clearly mean it’s vital that both accountancy firms and senior financial managers in the wider industry prepare to future-proof now. My advice is: consult third party expertise, get a plan in place and tackle the potential Eurozone fall-out head on now before it happens and you find you’re already on the back foot.
The introduction of the Euro in the late 1990s provided a great deal of experience of changing from one currency to another, and provides a strong basis to tackle the challenges associated with any countries leaving the Euro. However, it is clear that a potentially ‘contracted’ Euro scenario will have a widespread impact on both the systems and processes that accountants depend on, requiring additional resource and experience to plan and deliver the necessary compliance changes in a cost-effective and efficient manner.
In summary, while a lot of groundwork and experience was gained in introducing the Euro, it is essential for accountancy firms with Euro exposure to start putting plans in place now to be able to adapt to the anticipated changes in systems and processes. Those that do will be the ones that will not only be ready for any disruption and financial impact caused by future developments, but will also be in a strong position to benefit from the changing environment ahead of their competitors.
It is time to act, rather than wait for the next stage of the crisis to unfold.
Tony Virdi is the VP and head of banking and financial services for the UK & Ireland at Cognizant. Cognizant is a leading provider of IT, consulting and business process outsourcing services.