Friendship with Austcham & Premier CPAs

Deborah Biber, CEO of Austcham Hong Kong & Macau, and her team did a fantastic job (as they always do!) of organising a gala lunch for members of the Australian Business Community in Hong Kong with the Premier of Victoria, John Brumby, last week. Fellow CPA Australia member, Clement Chan, is Chairman of Austcham, and CPA Australia was delighted to support the event.

The Premier spoke of Victoria’s great relationship with Hong Kong and China, and particularly of the investment that Victoria has made, along with many other Australian states, and many Australian businesses, in gearing up for the Shanghai 2010 Expo. During our conversation, the Premier told me that his father is a proud member of CPA Australia and that he had once considered continuing the family tradition but that his interest in politics took him in a different direction. He was delighted to learn that with the launch of CPA Australia’s Pathways there remains an opportunity for him to become a member – a life after politics perhaps John?

The lunch served as a reminder of just how many friends and ties CPA Australia has around the world, and of the importance we place on friendships like the one we enjoy with Austcham. Those links make our lives richer and they create reciprocal value that helps CPA Australia achieve its goals in the areas of advocacy, and professional and community outreach. United we stand.

More than one Path(way) to Success

I took some time out today to flick through some recent back issues of BRW and to look at, in particular, the league table showing the Top 100 Accounting Firms in Australia. Getting to that list required opening up a CPA Australia insert that was placed by our marketing team. I had seen the insert previously, but I couldn’t help but again make a mental note of the excellent profile that it gives to Pathways, and to CPA Australia in general. The Pathways initiative holds much promise to create fantastic career opportunities for future CPA’s who otherwise would not have been able to join the profession, or who would have joined it via another professional accounting body (only). If you missed the insert in BRW, or elsewhere, you can find information at Pathways to Success.

Keeping Things Simple

Friends, I’ve just spent 4.5 hours trying to resolve an issue of minute importance in the overall scheme of things. An issue that is so clearly resolvable in my mind with recourse to common sense that it should have taken minutes to fix. Half a day later, the issue remains unresolved. Why? “Because the manual doesn’t provide for that”.

Well, the manual was written by someone absent of context and not possessing an ability ab initio to think through all angles. I will now spend another few hours (at least) writing letters and making calls to get someone (likely in the senior executive suite – perhaps even at Board level) to think about the problem the right way. In so doing, I will waste more of my time and theirs on the issue. Rest assured, the issue will ultimately be fixed, but at what cost? How often this must happen to you all, and how frustrating it is.

Mindless bureaucracy gobsmacks me – yet it is to be found everywhere. Wasted time, wasted activity, unthinking activity…yadda yadda yadda. How many passwords do you now have for banking and internet access? When was the last time that you called a “help” line and found help? When last did you find a person who took ownership of an issue rather than passing the buck? “Not my problem”, or, “Not my role to find a solution”. Such thinking is all too familiar.

Oftentimes, there is little that a dose of common sense would not resolve, but nary an apothecary to dispense such sense exists in most organisations. Those at the top of the tree often kid themselves that “processes” and “systems” are in place to ensure “procedural fairness and equity”. Poppycock. Such thinking is too frequently an excuse for inaction. Lazy, slothful, inexcusable, inaction.

Dr Ken Henry, Treasury Secretary for the Australian Government, recently went on record as saying that dealing with government departments has become too complex and needs to be simplified. Hole in one Henry! Let’s hope this means that the tax system is about to get a whole lot simpler come December…

In any event, Dr Henry has it right. Here’s a suggestion: have any organisation of size create a new role of “Chief of Common Sense” and let them act as mediator to connect the disconnected dots that (should) lead to simple, rational, logical and effective outcomes. Billions of dollars will be saved – daily. I’m hoping that Scott Adams reads my blog and does a Dilbert on this issue. I’d like Dogbert’s take on it…

Mispricing Risk

Wearing a non-CPA hat, I’ve spent a great deal of time working on looking at macro models of the global economy during the past couple of weeks. This has entailed much research, some rather dull number crunching, and many interesting conversations with regulators and lead players – current and former – in various markets.

I won’t get into the detail of the calculations and the projections here, but what is interesting, I think, is that the global financial crisis (GFC) really boils down to the mispricing of risk. Full-stop.

There were many different products, markets, institutions and people involved in making up the mess (pretty much all of “us” played a role, actually), but not pricing risk properly is the common denominator.

The reason risk was mispriced goes to complexity. For example, one collateralised debt obligation (CDO) contract that I looked at was actually a “CDO cubed” — it was a CDO of CDO’s of CDO’s. Seriously.

I approximated the number of pages that one would have had to read in order to be able to claim that they understood the underlying risk and it numbered in the millions. Obviously, that was an impossible task. In short, no-one understood that CDO – yet it sold well, like many others.

This won’t be revelatory to some, though a colleague who is otherwise well versed in financial matters tells me that such information is “news to him”, but what I find interesting is what this likely means for the accounting profession.

As I see it, the world will either do away with derivatives and other complicated financial structures, or find a better way of dealing with them. I think it unlikely that only simple financial products will be used and sold. Thus, finding a better way to deal with them is the likely outcome.

For some accountants, this will mean that they find opportunity in the rapidly growing field of risk management. It will mean that actuarial-type studies are likely to feature more prominently in the education of many future accountants, or that the profession looks to hire more actuaries. It will mean that the risk analysis and risk management teams of MNCs get beefed up, and that lots of opportunities are created in the field of risk management.

I recall that the best paid graduate from my cohort at Uni was someone who majored in accounting but bundled lots of econometrics and actuarial subjects into the mix. I think that the package on offer (from BHP, if memory serves me well) was, in financial terms, roughly twice that of the next best offer. That was rare for the time, but such job opportunities and placements will be more commonplace in the future provided the world continues to become more complicated, not less.

First year Uni students who are largely financially motivated would do well to “quant-up” – they will surely reap the rewards a few years hence.

On the Quality of Education…

I was saddened, but not altogether surprised, to read online this week (Brisbane Times, Aug 31) that university lecturers across four states in Australia are considering a national strike that may mean that the marking of student exams is disrupted, among other outcomes. If the action proceeds then presumably some of our future members will be adversely affected, as will some existing members.

In an earlier blog entry entitled On Education I lamented that:

A decline in funding in real terms for the tertiary sector – as measured against most other OECD nations – has clearly impacted the education sector in many ways… (many) have long held concerns about access to education and on the effect that cuts in funding may have on educational quality.

Genevieve Kelly, state secretary of the National Tertiary Education Union, seems to agree with these remarks. Ms Kelly claims in the article that increased workloads, and a shift towards casual teaching and fixed-term contracts have conspired to reduce the quality of education offered to students.

Regardless of the reason for the action, the fact that the situation in Australian universities has become so untenable, and that the teachers themselves cite the poor quality of teaching at universities as being a reason for the proposed action, is regrettable. One can only hope that the standard of education is sufficient to ensure that future graduates are capable of keeping Australia globally competitive in business, and competitive in other ways.

Mr Ian Argall, executive director of the Australian Higher Education Industrial Association, is quoted in the news story as claiming that “the national approach by the union was inappropriate and did not take into account the economic circumstances of different universities.” By extension one must conclude that very different educational standards are applied by the universities too. Again, this is a concern for our profession.

Andrew Dunn responded to my earlier blog post On Education with some lengthy and insightful comments including the following (a note to devotees of this blog: Hi Mum, Hello Prime Minister, you may care to read Andrew’s comments in full, they are compelling):

While the rhetoric of teaching quality is bandied about, the truth is that teaching effectiveness is not routinely monitored, rewarded or, in cases where it is manifestly inadequate, sanctioned. Indeed, it is a little known fact that there are clauses in the enterprise agreements of several universities which specifically prohibit performance related disciplinary action being taken against faculty members on the basis of poor teaching evaluations… The notion that this territory ought be the sole domain of the universities is in my view indefensible, principally because the hard truth of the matter is that many cases, under the pressure of business and funding models which poorly serve business and accounting education, they have in many cases failed to deliver to an adequate standard – to say nothing of a world class standard (of education).

CPA Australia is of course a major supporter of universities and students and has been so for many years. We fund scholarships, award programs, academic conferences, academic bodies, research journals, a professional journal with an educational bent, individual faculties in their pursuit of excellence in teaching and research, and do myriad other things to support high quality of education in Australia and beyond. Our members have a stake in ensuring that they and their future fellow members and colleagues are taught well, and that their learning experience is world-class.

The beacon of light in all of this is that while the issue still makes the headlines there is hope. Perhaps the headlines will attract enough attention to get all parties to the table to try and ensure that the decline in the standard of education is reversed, and that our profession does not become a victim of bureaucratic folly and administrative malaise within the tertiary sector.