Management accounting: Fostering resilience in turbulent times

 Developing the workforce, particularly in vital sectors like financial services, will catalyse economic recovery even as the Sri Lankan economy faces challenges

• Amidst challenges, management accountants are critical in delivering results and advising on business operations for sustainability and growth

Sri Lanka’s economy has been facing significant challenges for a few years, making effective management of expenses for businesses an absolute necessity. 

In the first quarter of 2023, Sri Lanka’s economy contracted by 11.5%, indicating an ongoing financial crisis. Despite the stability created in supply chains and improvement in foreign exchange reserves, Sri Lanka continues to grapple with multiple economic issues, due to currency depreciation and inflationary pressures. These factors have increased the cost of imports, raw materials and energy, putting a strain on business profitability.

As management accountants, our role is to identify and mitigate risks while seeking opportunities to create and deliver value for our organisations amid challenges. 

Strategies such as cost control measures, budgeting and forecasting to identify areas of potential savings and optimising resource allocation are key. By closely monitoring expenses, identifying cost drivers and implementing the right initiatives, we can advise business leaders on tactics to maintain financial stability and mitigate the impact of economic uncertainty. This includes increasing efficiency, enhancing agility and encouraging innovation through digital transformation.

Foster informed decision-making

As management accountants, we have an essential role in data governance and should become the broker of information in the business, ensuring that decision-makers have key insights available. We must make the most of technology to gather and interpret data available across the business (such as cash flow, supply chain expenses and profitability) to assess our business performance and understand how it is impacted by external factors. In addition, as ESG factors impact customers’ and business partners’ decisions, it is imperative that we think about how to deliver long-term value to our stakeholders. 

We also need to collaborate with various teams across the business to foster a multidisciplinary approach and mitigate potential unconscious biases.

Finance teams are responsible for promoting sound business stewardship and ensuring that decisions align with the best interests of stakeholders. Management accountants often lead the way in this aspect because they are pivotal in allocating or reallocating resources to areas with the highest potential returns of investment. 

To make critical decisions, finance teams must have accurate financial and nonfinancial information at their fingertips. However, we should also have on hand the relevant data about the key drivers of business outcomes. Salient data may vary depending on the specific needs of the decision-maker or the objectives of the analysis. 

Accurate and relevant data is crucial 

Management accountants must have a quantitative and evidence-based (in today’s context data driven) understanding of the business model to know how to increase value for their stakeholders. Holistic understanding includes everything from the targeted market segment and value proposition to external resources, rapport with third-party vendors, internal processes, and staff’s ability to deliver the tangible and intangible benefits customers expect. 

To be fully business-minded and make strategic decisions, leadership also requires access to data about their competitors and the current market, plus forecasts of potential risks.

Professional development is essential 

Developing the workforce, particularly in vital sectors like financial services, will catalyse economic recovery even as the Sri Lankan economy faces challenges. Improving expertise within the financial services workforce contributes to enhanced financial management, risk assessment and strategic decision-making capabilities. 

By gaining advanced skills and knowledge, we can help our organisation navigate disruption and enhance their performance and overall resilience, which in turn will contribute to the country’s economic recovery.

Given my recent experience with various stakeholders in the current Government, their willingness to listen to the private sector — including accounting and finance professionals — is evident, clearly highlighting the importance of our role in shaping economic policies and initiatives.

(The writer holds an FCMA, CGMA, and is Country Manager — Sri Lanka at AICPA and CIMA, together as the Association of International Certified Professional Accountants.)