Capital Markets: Alex Malley: Capital markets need number eight wire

Alex Malley, chief executive of CPA Australia.

Opinion

It's time to engage in a little disruptive thinking, says Alex Malley.

Sir Ray Avery, inventor, scientist and social entrepreneur, recently shared his life story with a packed lunchtime session at CPA Australia's Congress; a colourful and rich career epitomising the "number-eight wire" mentality. Avery's innovation in developing a low cost optical lens has brought the gift of sight to millions and sits proudly on the long list of New Zealand innovations that have genuine world-wide impact.

Giving investors sight through a growing haze of complexity in capital markets is recognised as an issue globally. In an environment of intensifying resource and credit scarcity, informing the evolving needs of investors in a rapidly changing world is a central challenge for the accounting profession.

There is a level of misunderstanding surrounding the modern role of the professional accountant. For centuries, we have balanced books and produced financial statements outlining in fine detail the tangible and financial assets of businesses. The rules of financial reporting have been written and rewritten with increasing layers of complexity.

The popular perception of accountants as safe, solid measurers of historical data remains persistent while the reality is of an innovative and transformative strategic resource advisor.

Having access to relevant information is at the core of the challenge of applying capital productively. Today's markets demand real time information and accessible insights on a more nuanced, diverse set of measures than traditional annual or half yearly accounting allows. There are growing pockets of innovation within the accounting profession globally, and an emerging recognition that step change is needed.

I have taken a seat on the International Integrated Reporting Council (IIRC) and believe if we can reflect all aspects of entity's capital in Integrated Reporting we will deliver the full breadth of information, covering tangible and non-tangible assets, that investors and other stakeholders are increasingly demanding from company reports.

Similarly, through my work on the Advisory Group of HRH Prince Charles' Accounting for Sustainability Project (A4S) I am working on promoting the concept of Integrated Thinking as a key enabler for Integrated Reporting. This offers the opportunity for the accounting profession to develop new methodologies for sustainable wealth creation. It is also breaking new ground for the central role of the modern CFO as a strategic resource advisor to work across all areas of business wealth and value creation.

Concurrently, the reliability and soundness capital markets have come to expect from the accounting profession - those qualities afforded by rigorous auditing and assurance - remain paramount.

CPA Australia recently hosted the inaugural Evolution of Auditing Forum where Professor Miklos Vasarhelyi of Rutgers University in New Jersey, inventor of continuous auditing technology and a pioneer in advanced data analytics, evoked Steve Jobs' radical approach to consumer electronics as an analogy for the auditing profession - "how can we make auditing something people use twice a day - like toothpaste". His challenge was clear - "how can we simplify our messaging to equate to the ethos of our customers 'being able to do everything in three clicks or less"'.

This is not rhetoric common in the accounting profession, but it is this kind of disruptive thinking that is required to address a potential crisis of relevance and to meet a rapidly mounting set of challenges facing capital markets.

Avery has been named a "rebel with a cause" - a title denoting that willingness to challenge the status quo often treated as a virtue in New Zealand and across the ditch in Australia while censured in other parts of the world. On both sides of the Tasman, we punch well above our weight in the global accounting profession and global business innovation - it would be poetic if these strengths could merge to offer the number-eight wire global capital markets yearn for.

• Alex Malley is chief executive of CPA Australia