Finance directors: planning for a euro break-up

I’ve been doing some thinking and researching for CFOWorld magazine about what happens if the eurozone begins to come apart and countries start dropping out. Like Greece, to state the obvious.
What struck me was the very emphatic view from one finance director (I can’t reveal a name, sworn to secrecy) who told me he was about to drop his single British bank in favour of a syndicate of banking providers, perhaps three or even four, from around the world.
His hope? That he’d be spreading his risk of being badly hurt by eurozone fragmentation.
The concern, for the time being, seems to have receded, but it’s well worth thinking about corporate policy on dealing with such trouble. Not a pleasant thought experience - but necessary all the same.
Read my full article here... my CFWord article.

IASB and the diplomatic challenge ahead

International  accounting standard setters just gave themselves a whole new project, in many senses one of its most ambitious to date.
Hans Hoogervorst, IASB chairman
In a speech in Mexico yesterday the chairman of the International Accountanting Standards Board (IASB), Hans Hoogervorst, revealed  what the board would be doing in future. At the moment its time is dominated by the project to converge international standards (IFRSs) with those used in the US. Now, however, Hoogervorst has floated the idea that he needs to creat more stability around the use of the standards.
At the moment more than 100 countries use IFRS but they do so on an informal basis. There is no formal arrangement binding these countries to listen to the IASB.
Hoogervorst said it was “now time to move from this loose affiliation to a more integrated supply chain based on strengthened and more formalised relationships.”
He added that the “formalisation of this network will greatly assist out global standard setting activities by binding-in national and regional standard-setting bodies more closely and earlier on in the standard setting process.”
This is an interesting point of discussion. With relations as informal as they are what’s to force any country to abide by international standards once adopted? Who monitors that they are being properly applied? At the moment the IASB has no function which allows it to assess whether its standards are being properly used or indeed whether they are being abused. 
To attempt a more formal arrangement is to extend what has been a huge experiment in law making. In this one key area, accounting standards, many of the world’s countries have decided that the IASB is the best place for making rules. But there’s nothing to say they have to listen to the IASB. The board remains an advisory body at distance. Nations merely look at what the board has on offer and decide whether they want to buy.
The board, an independent international body, answers to no single country and has limited accountability (though it has to be said it has worked hard on increasing how it answers to stakeholders). To formalise its relations will be to take the next step in this lawmaking experiment.
At this point there’s no telling what these formal relations will look like. It could happen in any number of ways.
But Hoogervorst has given himself a huge piece of diplomatic work as he attempts to persuade nations that somehow their relationship with the IASB should be set in stone. First he will have to explain exactly what “formal” and “binding” mean in his mind.
This will undoubtedly riase more questions about its accountability and whether any one country has more influence than another.
In some places this will be a difficult sell. The US, in the process of deciding on IFRS, has spent a lot of time debating how it retains control of its accounting. In papers from the Securities and Exchange Commission, there’s no mention of formalising its relations with the international body.
If the idea is to gain any traction Hoogervorst will need to make political allies, win their support and then their public backing. He may have to go to some very senior people indeed.
Interesting times ahead.

Work experience: business gives a lesson to government

Work experience? Where are with that this week? Suddenly giving young people the chance to sample the world of work has become intensely controversial.
Of course work experience is a good thing. Likewise, it's never a good thing to exploit people giving their labour for free.
I'm not very concerned about people shelf staking. Someone has to do it. It's an essential part of running a supermarket. What's more important is that such activity should not amount to the be all and end all of the work experience. 
I think the really interesting development in all this is why Sainsbury politely declined to be involved in the government's scheme.
CEO Justin King was on Radio 4 yesterday explaining that he thought Sainsbury's own programme was better than the government's because he did not want anyone compelled to take part. Participants had to make their own choice.
Now, that may look like a political statement about free will. But I don't think it is. It's a cool headed decision about the kind of people you want in the business. If they make their own choice to be there, they are motivated. And that's the key. Even if it is only stacking shelves you want motivated people to do it. Why? Because they respect the job and they stick around. That means better productivity and less staff turnover. And that should add up to lower costs and a better deal for the customer.
Yesterday government u-turned on the element in their work experience programme which tied continuing to receive benefits to completing the work programme. There is now no threat hanging over those involved in the scheme.
That was an important step for government. It's significance is that it should be a lesson in what motivates people to work. We no longer live in a world where it is work at any cost, even in these difficult economic times. People want to feel valued. They wish to feel that their personal/individual choices are being respected. Government was way behind business in thinking about that. 
Indeed, businesses in the scheme complained to government that they did not want a threat attached to work experience. That reflects the fact that they wanted the people coming into their organisations to be motivated. It also reflects that fact that they did not want to be attached to a "political" decision to compel people to take part. That always looks like a political decisions and why would you want to be part of that. 
What we see here then is the private sector demonstrating a better understanding of workers, and according more respect to them, than the state.
Of course it's not catastrophic. According to government the work scheme has been successful in many cases and we should probably take their word for it. But what a salutary lesson. Don't think for a minute I believe business holds all the secrets to better public policy. It certainly doesn't. But in this case business revealed a certain enlightenment that seems to have escaped government.