As a CPA, you are a trusted adviser and partner who either helps individuals, businesses, and other organisations directly plan and reach their financial goals or helps them indirectly by confirming warranted confidence with the client’s outside business partners. Whatever those financial goals, as a strategic thinker with a broad understanding of strategy, your interpretation of financial information allows the people you work with to make more informed business decisions — decisions that help those clients, firms or companies become more successful and resilient over the long term.
Public accounting firm partner — What drives long-term organisational value?
A strategic mindset, for a firm partner, is all about understanding what is driving your business. Much like the role of a management accountant, it is about being the link from the external environment into a firm’s strategic direction and understanding how drivers of change will impact your firm’s business model. Firm partners have a role to play helping their firms simulate strategic scenarios to understand the impact those scenarios might have on the generation and preservation of long-term value.
Advising on your clients’ strategic direction
Acting as a consultant and adviser to clients’ businesses and personal financial decisions requires a strategic mindset to understand what drives their long-term business value. This includes using scenario analysis to understand what is on the horizon for a client’s business and connecting the future risks and opportunities to new strategic initiatives while, at the same time, highlighting external events that might prevent strategic initiatives from delivering value to a client’s business.
Note that applying strategic thinking to consulting and advising is not about crossing the line of independence or telling a client how to run their business. However, you can state facts, point to guidance and tools, and inform them how others in similar cases have handled strategic issues and decisions. It is about being a trusted adviser who listens, evaluates, recommends, motivates, and helps clients achieve their goals, whether individual or business.
The long-term value to an individual goes beyond their current business relationship (if a business owner) and extends into their personal goals and plans for future business endeavours. Strategic thinking helps explore bigger picture value proposition questions including the following:
Why do we do what we do? (The proposition or purpose)
How does what’s on the horizon affect the value proposition?
How do risks and threats jeopardize the value proposition?
What are additional actions that can be taken to improve the probability of success?
If clients (businesses or individuals) don’t understand why they do what they do or aren’t able to clearly explain it, then they will find it difficult to translate strategy into operational tactical plans.21 Strategic thinking has to be at the heart of the decision-making process.
Public accounting assurance — The shift from tangible to intangible value
Traditionally, the independent auditor’s role has been to increase the credibility of the financial statements by providing reasonable assurance that they are free of material misstatement. However, integrated reporting <IR> and the publication of an organisation’s strategy is part of a growing and very real trend of multi-stakeholder empowerment.22 Today, stakeholders want reports that do more than merely focus on financial capital and conventional financial data. They increasingly want to understand how the shared value an organisation creates benefits not only its direct stakeholders but also the wider society and environment.23
The U.S. Securities and Exchange Commission (SEC) recently proposed a rule on the standardisation of climate-related disclosures that would have an organisation use ‘scenario analysis to assess the resilience of its business strategy to climate-related risks’.24 Once organisations are required to disclose this information, there will need to be independent, reasonable assurance of the strategic processes used to generate the disclosures to ensure the sustainability reporting is credible.
Many of the value drivers for organisations have shifted away from tangibles, such as property, machinery, inventory, and plant, to intangibles such as brands, trust, patents, and human resources.25 If you don’t have insight into a client’s organisational strategy, you can’t understand what drives their business and, consequently, can’t provide the necessary reassurance about the business’s future resilience. Applying a strategic thinking mindset in your role as an independent assurance provider supports an understanding of the integrity and transparency underlying an integrated report.
Both integrated reporting and a strategic thinking mindset shift focus from short-term financial goals to meeting long-term sustainability goals. Going forward, meeting long-term sustainability goals will require individuals that can objectively evaluate strategy against standard practices to provide confidence and assurance to stakeholders looking in from the outside.
