By Embracing the full potential of IFRS 17 companies will reap the most long-term rewards.
In our first blog post on this topic, we covered the predominant perspectives on IFRS 17, short-term (compliance challenge) versus long-term (transformation opportunity). In this post, we’ll look at the three options companies are considering along that range of perspectives, as the effective date for IFRS 17 — January 1, 2021 — gets closer:
- Compliant Response. Companies that view IFRS 17 as a compliance matter will attempt to abide by its requirements by the most expedients means with the least cost.
- Integrated Response. Companies with this perspective will look for a high degree of process automation, with the aim of lowering ongoing costs and enhancing data accuracy and transparency. Some of these companies may even consider tackling things like planning and simulation at the same time.
- Transformative Response. Forward-looking companies will examine their technological and operational options with an eye toward transforming their policies, procedures, and processes. They’ll prioritize things like maximizing insight and transparency (optimal use of available data and using latest technology to do so), efficient closing processes (quick and error-free), and employee satisfaction (stress reduction during close, as well as good user experiences).
Companies that take a forward-looking approach to IFRS 17 adoption will reap the most rewards as they study the possibilities of fully embracing the potential of the new standard and look to expand their accounting and operational capabilities by:
- Adopting a single source of data, thereby reducing the amount of time spent reconciling disparate data sources. Studies show that consistent data across all views can lower process costs by up to 29%[1].
- Providing real-time access to the specific information required by their various constituencies.
- Offering enhanced analytic capabilities to better simulate the impact of potential management decisions
- Focusing on the interaction point between actuarial and accounting teams, not just to minimize the risk of errors, but to enhance understanding and guarantee that the new financial results are understood
- Extending user-friendliness to give transactional users an intuitive user experience.
- Automating the movement of data from transactional systems to the general ledger.
- Expanding their definitions of transparency to include high levels of data traceability and security.
Technology isn’t the answer to everything, of course. Much of what transpires from the adoption of IFRS 17 will result from our human capacities for adaptation — imagination, ingenuity, and creativity, as well as the willingness and the ability to embrace and drive change. We have a little more than three years to learn about our efficacy and our resourcefulness.
No matter what, IFRS 17 is coming. It will constitute a test of our malleability. And it constitutes a tremendous opportunity for the transformation of our finance function, the efficiency of our operations, and the satisfaction of the various users and consumers of our data.
Keep a watchful eye. This will be a fascinating evolution.
