Let’s talk for a moment about….IFRS. Now wait, stay with me, and try to keep a straight face while we go through this.
From the consulting perspective, this is just an accounting problem, right? Bring in the bean counters.
It looked for some time back in 2008 as if IFRS might actually happen in the US, but some dust-ups in 2012 over the responsiveness of the IFRS Interpretations Committee to issue resolution and concerns about costs effectively killed it. It’s not officially dead – in its Strategic Plan for Fiscal Years 2014–2018 the SEC acknowledged the advantages of a single, global accounting standard, and the SEC mentioned in late 2016 that it continues to study IFRS, the International Financial Reporting Standards – but does anybody believe in Trump’s America that IFRS will happen here? Anybody?
The US has some legitimate concerns about IFRS. Some claim IFRS’ controls are too vague for a society as litigious as the US, and there’s been a noted lack of coordination between the IFRS and national bodies like the American Institute of Certified Public Accountants (AICPA). And again, any conversion would hit American companies with big costs, no matter how well rolled out the process was.
But, like the metric system, these kinds of things aren’t always decided in Washington. Multinationals are feeling the pain of having to maintain two sets of accounting books, both for themselves and their international clients. And nowadays, having a complex, international supply chain is not the exclusive domain of Fortune 1000 companies. Middle tier companies are feeling this pain as well. And transactions and deals increasingly involve IFRS counter-parties, both vendors and customers. So IFRS is seeping in to the US business world, just like the metric system.
But the real issue is not whether the US ever abandons GAAP or the Paris Agreement on Greenhouse Gases, or for that matter continues to put ketchup on its French fries instead of mayonnaise; the issue is what are companies going to do in a world where global business comes up against a reviving nationalism? It’s not even really nationalism, it’s more nationism and nativism – a reassertion of early 20th century-style political prerogatives for individual states, and a cult of localism. But veering away from a political science debate, it is the reality in 2017 and is every bit as impactful on markets as a recession or volatile currency values.
The upshot here is that companies must learn to function in a multi-tiered political, cultural, regulatory and etc. environment – even if their own sales or operations do not cross international boundaries. Consulting firms can position themselves to help firms adjust their strategies, with implications throughout the value chain, back office through the middle office to distribution channels and the network ecosystem beyond.
But this isn’t business-as-usual for consultants; this nationism is the new Sarbanes-Oxley, the next bellwether that will reshape how consulting firms remain relevant for their clients, and organize themselves to meet the new challenges. Consultants are already (for the most part) experts at realizing cost, organizational and operational efficiency but now they need to add a new tool to their kit, political efficiency to help clients not just with their grand strategies but being able to tactically adapt at every operating level.
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