An Era of Unprecedented Change
The shift in focus from profitability to sustainability arises from the emergence of two categories of system-wide financial impact that accounting does not recognise.
First are the increased complexities inherent in the global risk landscape in which modern business is conducted. Boards of directors, CEOs and CFOs must now navigate their organisations through a veritable minefield of nonfinancial risks that have grown exponentially in recent decades.
Second are the environmental, social and governance (ESG) attributes of an organisation that mitigate nonfinancial risk and enhance shareholder value with respect to its people, innovation, business networks and relationships, environmental protection and the wellbeing of communities.
Boards, CEOs and CFOs are Vulnerable
Despite their materiality, there are no accounting and auditing standards applicable to nonfinancial risk exposures and ESG attributes. Their absence causes accounting reports to be of limited value, even misleading.
The nonfinancial risk management toolkit is appallingly weak. There is no generally accepted method of nonfinancial risk quantification thereby disenabling the analysis of accumulating nonfinancial exposures in the aggregate. Instead, operational and enterprise risk management typically relies on subjective, non-aggregatable, non-comparable, colour-coded (red/amber/green) risk self-assessments that are not useful for effective governance or accountants.
This leaves boards, CEOs and CFOs vulnerable to unexpected losses.
Profitability vs. Sustainability
In response to escalating nonfinancial risks that threaten financial, environmental and social wellbeing, governments, regulators and investors are pressing organisations to focus their corporate reporting on sustainability in place of today’s backward-looking, point-in-time focus on financial profitability.
Of particular concern is the absence of an accounting expression for the impacts of climate change and the pandemic as well as escalating exposures to supply chain, manufacturing, transaction processing, cyber, conduct, geopolitical, model, fraud, legal and compliance and many other nonfinancial risks.
About the book Despite twenty years of endeavor, it's thumbs down for the banks' approach to operational risk management. The Basel Committee on Banking Supervision has abandoned the flagship advanced measurement approach (AMA) - the in-house models banks use to...
RASB Board Members
Peter is Chairman of the Risk Accounting Standards Board. He is a chartered accountant and a visiting fellow and member of the advisory board of Durham University Business School’s Centre for Banking, Institutions and Development (CBID) research group. He was formerly a banker with JPMorgan Chase where he held senior positions in finance, operations, risk management, treasury & trading and audit.
Dr. Colin Lawrence
Colin is currently on the Board of OSTC Ltd where he chairs the Risk and Compliance Committee and he is additionally a member of the Audit Committee. He also sits on the academic advisory board of IHS Markit and PRMIA UK (Professional Risk Managers’ International Association). He is an honorary visiting professor of risk management at the UCL in the department of computer sciences and a senior advisor to Stratagem, a strategic consulting company, and to Basinghall Analytics.
Dennis is a Professor in Finance at the Durham University Business School and Director of its Centre for Banking, Institutions and Development (CBID) research group. He holds a PhD in Finance from Cass Business School. His research contributes to the understanding of the interactions between firm characteristics and financial markets. His research has been funded by financial companies, central banks and recently from the European Commission.
Mahmoud is a lecturer in accounting and finance at the University of Leicester School of Business and a member of the RASB Risk Accounting Standards Board (RASB). He holds a PhD and an MRes from the University of York. Mahmoud has extensive teaching and research experience in Egypt and the UK. In addition to his extensive teaching experience across a range of Accounting and Business modules at both undergraduate and postgraduate levels he also mentors and supervises undergraduate, postgraduate and PhD students.
Paul is a seasoned marketing and sales professional with a diverse background covering advertising, media, business consulting, and over 20 years in enterprise software solutions, currently acting as RASB’s COO.
Paul is a law school graduate with a master of business administration from the Romanian Academy of Economic Studies and a Professional Diploma in Management from Open University UK.