Although Enterprise Risk Management (ERM) is a discipline that has been around in various forms and fashions for a number of years, there has been limited focus on its application to an IFRS conversion program. The basic principles associated with an effective risk management approach, i.e. being aware of critical risks and taking steps to prevent or mitigate them, are critical to the success of an IFRS conversion effort.
As NorthPoint researched the market for IFRS conversion risk management tools and approaches, a number of conclusions began to emerge from experience gained in other regions of the world which have gone through the IFRS conversion process:
- IFRS conversion efforts are likely to be large, multi-disciplinary and complex programs of change that extend far beyond any needed financial reporting changes
- Cross functional and multi-disciplinary teams which have not typically worked together before will need to be formed and will need to deal with subject matter that is new to the entire enterprise.
- Given the complexity and scale of IFRS conversion programs, there will be multiple sources of significant risks that will need to be managed and mitigated during the years required to complete a conversion program at most companies
- The software tools used by some audit and professional services firms in support of a diagnostic effort are limited to a “snapshot” of a client’s current situation and can only provide limited prescriptive guidance to a client once an IFRS conversion program commences.
- No software tools exist that identify and consider all the steps, tasks and processes (STPs) needed to successfully execute an IFRS conversion program
- Given the size and scale of conversion programs, professional services firms are building, licensing or customizing existing robust program management tool kits to support their clients’ needs for program management office support and tools
- The best available conventional approach to deal with IFRS program risk management today is people-based. Companies are retaining advisors who are qualified, experienced and have been through multiple successful complex programs of change. These types of professionals are scarce and therefore relatively expensive.
As there are different types of tools and approaches available to support risk management for an IFRS conversion program, we thought it would be helpful to develop a framework to categorize the tools and approaches that do exist. In my next posting, I’ll review the framework and provide some examples of its application in considering approaches to IFRS conversion risk management.
Tags: IFRS, IFRS conversion risk management, IFRS risk management, IFRS risk management software
