Accounting

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    Regulating in the dark: the challenges of overseeing the secret services

Regulating in the dark: the challenges of overseeing the secret services

One of the most well-known principles in the canon of Jeremy Bentham’s writings on government is the general principle of transparency. All activities, according to Bentham, were to be made open so as to allow for external scrutiny. One sector, however, was exempted from this universal principle: the security or intelligence services. The reason for this exemption appears straightforward; […]

Managing risk in the age of disruption

The context of risk management and risk preparedness has changed in recent years.

Structural disruption

We are living through a period of multi-dimensional disruption that is often dubbed as the fourth industrial revolution. Developments in extreme connectivity and extreme automation have consequences beyond the world of technology: business models, industries, markets, regulatory, and governance regimes have been thrown into a flux. […]

The effortful nature of risk management practice

In managing risk, organizational actors are constantly engaged in the work of representing it. From a philosophical point of view, this co-mingling of risk and representation is unsurprising. Risks are contingencies or future possibilities which have not yet crystallized into events. As non-real possibilities, they literally do not exist and cannot be seen until they are represented and processed […]

Harmonising accounting standards across the globe

Over a decade has passed since the European Union (EU) mandated a uniform set of accounting standards, i.e. International Financial Reporting Standards (IFRS), for all companies listed on the major European stock exchanges in 2005. Since then, over 100 countries are currently requiring their listed firms to prepare financial reports either under IFRS or under a closely linked accounting […]

Challenging the accountability agenda for NGOs

The past two decades have seen a steady increase in the number of organizations that prescribe accountability measures to improve the perception of trustworthiness of non-governmental organisations (NGOs). These include GuideStar (1994), the Sphere Project (1997), the Charity Navigator (2001), the INGO Accountability Charter (2008), and the Core Humanitarian Standard (2014). This push for accountability measures reflects a wider trend in NGO self-regulation as the best means to promote good […]

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    The risk culture in financial institutions needs fixing, but how?

The risk culture in financial institutions needs fixing, but how?

Canary Wharf Skyline, by David Iliff, under a CC-BY-SA-3.0 licence
In the aftermath of the financial crisis and other large scale corporate scandals, a large number of public inquires and documents written by regulators, consulting firms and professional associations drew attention to something that needs fixing: the risk culture of financial sector organisations (see, for example, publications by the International institute of Finance, the Financial […]

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    Measuring social impact is complicated and may create dysfunctional incentives

Measuring social impact is complicated and may create dysfunctional incentives

Home, by George Hodan, Public Domain
Increasingly, people who work for the good of humanity speak the language of business (G8, 2014). Social impact reporting has become best practice for many social enterprises, which use metrics such as ‘social return on investment’ as a means of quantifying their success. ‘Social impact’ can be seen as the social sector analogue of ‘profit’ in […]

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    Untied to economic fluctuations, insurers are less likely to generate systemic risks

Untied to economic fluctuations, insurers are less likely to generate systemic risks

In a nutshell, macroprudential regulation is made up of two building blocks: surveillance and supervision. Surveillance is concerned with identifying, assessing and monitoring the build-up of systemic risks, i.e., those regarding the financial stability of a country or region. Supervision is aimed at preventing, mitigating and managing systemic risks.

A key lesson from the recent global financial crisis is that […]

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    Should auditors be reviewed by peers or should the state do it?

Should auditors be reviewed by peers or should the state do it?

Financial reporting and auditing are vital elements for global capital markets. The confidence in the financial market’s efficiency is bolstered by the trust placed in auditing being able to operate as an external controlling function, something that has led to the audit profession being perceived as the “guardians of truth in markets”. However, concerns over the guardians’ trustworthiness are […]

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    Why airplanes take off and land safely despite all the risks

Why airplanes take off and land safely despite all the risks

You are sitting on an airplane, enjoying the end of a flight back home. The flight lands ok, the pilot and crew thank you for choosing airline X – persuasively saying that they look forward to seeing you again on board – the doors open ok and you can happily disembark the aircraft. It happens for thousands of flights […]

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    Reducing budget slack may lead managers to focus on the short term

Reducing budget slack may lead managers to focus on the short term

Every time I see corporate accounting irregularities in the news I recall how a key finding in my doctoral research some time ago has remained relevant. The research showed support for a spillover effect between slack resources and managerial time horizon. Kind of like a ‘whack-a-mole’ effect. Slack refers to securing more resources (such as during an organization’s annual […]

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    Have unified standards made financial reporting more comparable?

Have unified standards made financial reporting more comparable?

The mandatory adoption of International Financial Reporting Standards (IFRS) by European listed firms in 2005, accompanied by similar regulatory action worldwide, represents one of the most influential accounting rule changes in history. The switch from a diverse set of domestic financial reporting regulations to a common set of accounting standards has affected thousands of companies that differ in terms […]

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    Management control systems have evolved to address the need for innovation

Management control systems have evolved to address the need for innovation

Innovation is the adoption of an idea or behaviour pertaining to a product, service device system, policy or programme that is new to the adopting organisation. Innovation has been recognised as a significant aspect of corporate survival. This has become particularly apparent in recent years as firms are increasingly operating in highly competitive markets where technologies are constantly developing, […]

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    Community involvement lends legitimacy to firms’ social accounting

Community involvement lends legitimacy to firms’ social accounting

Social accounting is a broad term describing a range of company reports on community or wider stakeholder engagement. It is often viewed as a simple process of one-way communication as a company seeks to put forward an account of its social impact. It is less regulated in form than financial accounting, and its purpose is usually framed as winning […]

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    Institutions that settle market transactions need strong corporate governance

Institutions that settle market transactions need strong corporate governance

There have been a variety of systemically important banking issues making the headlines since the global recession of 2008, but the challenge to mitigating credit risk during settlement seems to be a constant frontrunner. This article discusses the importance of effective liquidity management, particularly from the sphere of timely payment settlement via financial market utilities (FMUs), defined as “multilateral systems that […]

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    Evidence suggests that firms set targets to avoid small losses

Evidence suggests that firms set targets to avoid small losses

The first picture shows the distribution of actual earnings in our study on target setting (see the study in brief box below) and replicates a well-established finding that reported earnings exhibit a ‘discontinuity at zero’ (meaning that there are disproportionally fewer firms with small losses compared to small profits), which one might surmise perhaps suggests that firms ‘manage’ earnings […]

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    While Bitcoin is virtual, the rewards and risks are very real

While Bitcoin is virtual, the rewards and risks are very real

Technology and finance have always gone together. So what’s new this time around? Virtual currencies are part of a broader tech revolution that is driving fundamental change in the global economy.

While the money is virtual, the rewards and the risks are very real. It boils down to this: how best to encourage financial innovation while regulating to protect consumers […]

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    An environmental disaster in Brazil raises highly problematic risk and regulation issues

An environmental disaster in Brazil raises highly problematic risk and regulation issues

The bursting of the dam in Mariana in the Brazilian state of Minas Gerais on 5 November 2015 has generated considerable headlines. The dam containing the tailings of the Fundão iron-ore mine caused at least 16 fatalities, displaced hundreds, disrupted water supplies and caused considerable environmental and ecological damage. It also had potential devastating economic and social impacts on […]

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    When managing risk, overconfident managers don’t always follow the fundamentals

When managing risk, overconfident managers don’t always follow the fundamentals

Why and how firms hedge has been an area of interest in corporate finance for a long time. The traditional notion of hedging is matching one risk with an opposing risk. Gains on the hedge offset the losses on the position otherwise exposed to price uncertainty, making the resulting cash flow volatility lower. The traditional theories of corporate risk […]

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    Friday timing plus social media multipliers may mean Paris attacks have more impacts on markets

Friday timing plus social media multipliers may mean Paris attacks have more impacts on markets

Until recently, the lamentations (right, wrong or simply irrational) of the world’s discontent were only a nuisance to the status-quo. The proliferation of social media, however, has facilitated the dissemination of irrational ideas. A notion which required generations to gain traction is now instantaneously impressed on the minds of numerous, ready and willing subjects throughout distant lands. As a […]