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Monday, May 27, 2024

State of Accounting: Moving Boldly and Decisively Through Unpredictable Times

The near-daily presence of words like “chaos” and “uncertainty” in political headlines may make for compelling television and click-worthy articles. But they also don’t help to create an ideal environment for many businesses to thrive.

Typically with any administration change, there is a call to action for business leaders who are concerned about where they see growth and opportunity and where there may be significant risk. However, it’s understandable that there could be more apprehension within the business community surrounding an administration that ran on a platform of disrupting business as usual, when it comes to national politics.

Business leaders may no longer be able to rely solely on past patterns as a guide to future possibilities when change feels unprecedented. Exploring a broad range of outcomes through scenario planning or related processes may help to combat the tendency to mistake the unfamiliar for the impossible.

In this regard, it can be helpful to consider what from the campaign may actually result in new policy, how global trade dynamics may change and how new policies might drive government spending and investment.

Leaders that formulate sound analysis of these questions could find themselves better positioned to succeed in tumultuous times. There may be opportunities for growth for organizations that can identify and take advantage of circumstances more quickly than others. When sudden and unexpected change occurs, there are often two dominant responses: Denial and paralysis. Both are natural tendencies, but they likely will do nothing to help a company gain or maintain competitive advantage.

Businesses that can quickly mobilize may find more opportunities for upside. Organizations that can move beyond denial and paralysis, recognize the many variables in play, and develop a plan of attack could be better positioned. Organizations that sit on the sidelines may see opportunity pass them by.

This is where bold, decisive leadership can play a huge role. It’s often easier to hesitate to watch and to wait, than weigh the risks of acting now versus waiting for clarity. But there’s never likely going to be a perfect data set that can inform the right decisions, and navigating imperfect information is not new for many boards or organizations. Leaders who act decisively are often the ones who will succeed.

They can no longer afford to take anything for granted because circumstances can change instantaneously and with little warning. This upheaval can upend the strategies they have in place. They should consider building their capabilities to anticipate, adapt, maneuver, make risk-informed decisions, and adjust course as needed to help their organizations become more resilient. They should look to develop scenario planning, simulations, and other tools readily at their disposal to support and accelerate this process.

Leaders who can assess risk can take a much more dynamic view and continuously track the changes going on around them that would affect the future of their organizations. But this likely isn’t enough for the kind of change that defies the models or has no precedent.

Scanning, evaluating and adapting to risk should typically be key parts of a business strategy. Executives should consider challenging their assumptions about industry disruptors and think in a broader context than their immediate environment because nothing happens in a vacuum.

The broader lesson: Geopolitical, geo-economic, and international issues beyond our control can suddenly disrupt conditions that had previously seemed like safe bets, and the commonly accepted conditions in which leaders make decisions on how to compete and win in the marketplace can shift in abrupt and unexpected ways.

Unexpected, unpredictable and often unprecedented actions seem to be emanating from Washington at speeds even those who’ve been quick to adapt in the digital age could find difficult to anticipate. It may seem that the only predictable aspect of the nearterm future is unpredictability. It is the leaders who embrace this uncertainty and aren’t frozen in place by it that will likely have their organizations best positioned to not only ride out this turbulence but prosper in it.

Michelle Kerrick is the Los Angeles Managing Partner for Deloitte LLP. Please see www.deloitte.com/about to learn more about Deloitte’s global network of member firms.

ABOUT DELOITTE: Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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