Detect It!

Detect it!

“Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk – and to act.”

-Andre Malraux-

Introduction

In an effort to face risk, risk detection is perhaps the most important element, addressing it contributes to enhancing prospects for all the others. Effective risk detection would result in timely detection of emerging risks. It should also enhance risk management and further, lead to increasing confidence among the individuals and societies to be ready to take on risk, undermining the growing risk aversion.

The current economic turmoil is a consequence of malfunctioned risk detection on part of policy makers and those playing at the expense of such faulty risk detection. It cannot be denied that the 2008 financial crunch triggered by the US sub-prime market, led to the so-called ‘inevitable recession’ (economic cycles are a characteristic of capitalism). Given the sphere of influence of the United States, it spread more rapidly than a fire, and remains prominent still, moving from one part to another of the global economy, creating crisis after crisis. Effective risk detection could have spared the world its current plight.

However, it is often argued that a risk of downturn had been detected and forecasted by several individuals and entities long before it actually occurred. Hence, the economic crisis was a result of gross-negligence on part of the regulators. But my answer to them is that the cause of such negligence was again faulty risk detection. This is so because whatever risks had been detected, detection failed to portray the intensity of the germinating crisis. The regulators would certainly have listened to these independent pleas-had they been shown, then, a trailer of the current global economic state. But again, the question, ‘Did we have the ability then to detect risk that way? If no, then have we acquired it now?’ and if the answer is a ‘No!’ again, then, ‘What needs to be done and what are we doing to take risk detection to that level?’  

What is risk detection?

Risk can be defined as a situation involving exposure to a danger or loss. While detection can be defined as the action or process of identifying the presence of something concealed.[1] Hence, together, risk detection can be defined as the action or process of identifying the presence of something concealed, where such something refers to situations involving exposure to a danger or loss. Risk detection is performed at various levels of the society by diverse groups, to varying extents and at different time intervals. Within organisations, scenario planning and a vast range of forecasting methods and support systems and structures, define the level, extent and time of risk detection.

What is the role of scenario planning and forecasting methods? Who is or should be responsible for these aspects in the organisation?

Scenario planning helps organisations formulate long-term plans based on known assumptions and helps identify possible future performance, taking account of perceived uncertainties and risks. It provides for an extremely useful method to enable the application of a proactive approach to any unwelcomed circumstances likely to occur in future.

Forecasting methods on the other hand, compliment scenario planning by providing the planners with data analysis techniques and enabling interpretations and deductions for future events based on results generated by processing the available data. Their roles are as significant to risk detection as a calculator to performing calculations. Deciding whose responsible for these aspects in organisations varies from case to case.

However, in my opinion, the primary responsibility for detecting risks shall lie with the strategy formulators in the organisation and with decision makers at junior levels. A common and more structured way is to have risk detection delegated to a separate risk management team reporting directly to the top leaders. But such a practice needs revision.

Risk management should be an enterprise wide exercise and engrained in the business culture of the organisation.[2] An organisation today needs to add risk detection to the job roles of every team member, and train them to be able to perform it at intervals expedient to their operations. This would result in timely detection of risks at the lowest of levels possible, where at times the top management cannot reach.

In some cases, risk could be managed by junior team members at the point of detection, reducing significant costs annually and empowering them too. Significant preliminary findings, requiring more sophisticated solutions, ought to be reported to the risk-management team, and thereafter, dealt with appropriately.  

Moreover, organisations should ensure that their employees see risk as a threat which exists everywhere. The key to successful enterprise risk management practices depends on the behavioural attributes of the organisation at all levels.[3] They need to invest in providing for the right behavioural attributes across the organisation, advocating standard detection and reporting procedures to be followed. This will widen the scope of risk detection internally and to an extent externally, beyond the perceived scope of the risk detection teams.   

Perceived risks should be seen as traditional risks only and those beyond, should be identified by incorporating risk detection as part of the organisations’ overall and specific strategies. Often organisations fail to respect specific strategic risks. Risk is a function of how poorly a strategy will perform if the ‘wrong’ scenario occurs.[4] The what-if analysis and management information systems need to have the dimensions to deal with situations where scenario planning might fail altogether.

Plus, organisations should also evaluate their dealings on a regular basis at different levels so that timely risk detection is ensured. Better management of decision-making processes within British Petroleum (BP) and other companies, better communication within and between BP and its contractors and effective training of key engineering and rig personnel would have prevented the Macondo incident[5] (Deepwater Horizon Oil Spill 2010). Organisations should therefore, keep assessing their activities not only in terms of numbers but quality as well. Organisation wide support systems should be equipped to handle such anomalies on a timely basis before it gets worse.

How should the detection of risks be addressed in an increasingly complex and interconnected global landscape?

Effective risk detection in the current global landscape is achievable by virtue of a comprehensive and meaningful coverage. Organisations and leaders need to be tactful of not only what’s on paper but also of what might be or may have an influence on the organisation due to their positions. Competitors who might innovate better substitutes and steal away your market or greed which might force you to touch the depth of the ocean by two feet, are all potent sources of risk. Hence, anything beyond the usual need not be ignored.

My efforts after school on risk detection helped me find a model approach to get full coverage of the scenarios. Accordingly, organisations should address risk detection using a Troika Approach, breaking the process of risk detection into three phases:

a.       Internal

b.      External Sphere of Influence

c.       Beyond Sphere of Influence

In phase A, organisations apply risk detection procedures on areas specifically vulnerable in the organisation and at the overall organisation level. The risk-management teams in addition to addressing risk-detection at different levels and managing it must also undertake researching the likely sources of risks internally. This phase includes the points I have discussed earlier, under the role of scenario planning and forecasting methods and those responsible for them.

In phase B, organisations should extend risk detection to areas which are outside it but which the organisation’s actions could influence (depending upon the significance of such influence). These would include the local community and the environment etc. 

In phase C, risk detection should focus events and circumstances beyond the organisation’s control but which have an influence (depending upon the significance of such influence) on the organisation and the achievement of its goals (short-term or long-term).  They would normally include government policies, legislative changes, political changes, national security and competitor practices etc.

Furthermore, the Troika Approach should also be applicable in politics and the state. Phase A should then refer to the government or the state depending on the case, while Phase B should refer to international influence or national influence outside the government machinery and Phase C shall certainly refer to the international forces and influences brought-in from outside.

Moreover, organisations like the United Nations, International Monetary Fund, the European Commission and interest groups, should make collective efforts for establishing a global board for risk detection standards and procedures. The board should frame standards and procedures which the organisations and governments must follow to achieve adequate and timely risk detection. Legislative support to such standards should ensure proper compliance around the world and reduce economic disasters, in particular.

Inherent Limitations

Risk is chemistry, it’s not particle physics. You cannot separate the risks.[6]  Risk detection is mostly based upon perceived practices and procedures. It is impracticable to know all the risks and be able to separate one from another. Even though risk detection is not necessarily sample-based, it still cannot provide for complete relief. The most we can do is to ensure a maximum scope of risk detection as possible within the given resources. Still undetected risks may lead to material consequences.

Also, risk detection is extremely expensive because it requires employing highly-sophisticated and technical personnel and systems, and also requires extensive research activity. All of them carry a significant cost burden. Large organisations with sufficient resources may afford it, smaller ones cannot!

Consequently, often detectable risks lead to their failure because these organisations could not detect them owing to the cost and technicalities involved.  This could be devastating in such crunch times because I believe that smaller entities are significant to growth in the society by virtue of their adaptability and the potential to grow into larger organisations in future. They are also seen as being that part of the economy which adds the most jobs every year on in some of the major economies of the world.

Moreover, awareness about risk is another limitation. In countries like Pakistan with low literacy rates and improper business practices, organisations, at times, with millions worth of turnovers run without any risk detection processes at all! Therefore, policy makers in such countries must initiate and manage risk detection facilities, funded by public-private partnership for the benefit of such vulnerable but significant groups of the economy, making it accessible and affordable for all groups to face risk.

Such facilities should also run risk awareness programs and workshops to educate the business classes of the significance of risk detection to their businesses. Enterprise risk management is no panacea, and I know some people who question whether it really exists. But anything that gets people and the institutions they’ve built to look at risk from multiple angles, with an eye to building value, is a most welcome thing.[7]

Politically, risk detection (in terms of the state) is subject to the integrity of the politicians driven by self-interest. They might at times go away with detected risks, at the expense of national interest as well. Countries like Pakistan, Bangladesh, and India where good governance is still a luxury and where the people lack empowerment, politics and the governments are dominated by personal and support group ambitions. They are extremely negligent about risk detection of any sorts let alone be relied to face risk proactively.

Finally, the current era being an era of technological influence on decision makers, neither will reliance on technology yield the useful results always nor would it, in my opinion, lead to greater improvement of detection methodologies. Improvement by virtue of technology will remain limited because technology requires certain parameters within which it can be effective and efficient, whereas risk detection is something far more abstract, diverse, open, and complicated.  In order to make technology’s role more effective one needs to develop such parameters, to be more dynamic by innovating more effective techniques for risk detection and striving to increase our understanding of the scenario. 

“This awful catastrophe is not the end but the beginning. History does not end so. It is the way its chapters open.” -St. Augustine-

---

[1] Oxford English Dictionary

[2] OSFI Superintendent Julie Dickson, June 1, 2011

[3] RIMS-The Risk Management Society

[4] Michael Porter, Competitive Advantage

[5] Broder, John M. (January 5, 2011). "Blunders Abounded Before Gulf Spill, Panel Says", New York Times

[6] Enterprise Risk Management, (Chapter 5, Becoming the Lamp Bearer by Annette Mikes)

[7] Mark A Hofmann

5 Min Reading pt 2

Hi folks,

Its strange how sometimes in life one comes across people who are complete aliens and they turn out to be the best part of your life. Its quite a norm actually. My friend Francois met an old man in the tube sometime ago. He certainly didn't know him but he took a seat next to him. The old man introduced himself as Pascal, and told him that he ran a bakery in Paris city center. Francois told him about himself.

He asked Pascal where was he headed, and he replied that he was headed for a funeral. Francois asked, whose funeral was he going to, and he replied calmly that he was going to the funeral of his daughter. She'd been fired from her job, and had been unemployed since six months. She'd committed a suicide.

Francois was amazed to see his pleasant reaction and a generous smile on his face. He couldn't keep it and asked, "Why is it that you're smiling? Aren't you sorry about your daughter's demise?" The old man replied, "I am sorry about her death. But I cannot afford to cry or feel sad for even a moment. Because, my sorrow won't bring her back. She gave up to life, and killed herself. I can't afford to fall weak against life and be sad or sorry. I will remain defiant!"

Francois was stunned at his passionate reply. He'd just been fired from his job too, and was thinking of killing himself somehow. But he would not do it now. He disembarked the train on the next station, and went home by bus. Two weeks later, he started a cleaning business, which now employs over 500 people!

Thanks!

5 Minute Reading Series-pt.1

Hi folks,

Indeed one has come alone and so shall he leave this world on his own. Every relation is as worthless as a particle of dust rather even more worthless. A man experiences two types of relationships over the span of his life: 1. Relationships contingent on purpose and 2. Relationships contingent on priority. Let us examine each in detail.

1. Relationships contingent on purpose: These kinds of relationships are mostly the strongest in one's life i.e. parents, spouse etc. But the strength and all together, the existence of such relationships is all based on some purpose. A purpose which connects the parties to the relationship, unifying them to such an extent, that the parties begin to ignore the existence of a purpose for which they are sharing the relationship. At times they may find themselves so engulfed and taken by it, that nothing else seems more important then satisfying the needs of such relationships. But are they really that important?

2. Relationships contingent on priority: These are the next strongest relationships a person has in life and they include his friends, the extended family, work partners etc. The basis of such relationships is superficial, and gradually, as time moves on,the existence and the effectiveness and the satisfaction derived from such relationships is decided by one factor. That factor is 'priority'. To what extent the parties to the relationship see it to be a priority in their lives, will determine its strength. This calls for equal contribution from all sides, in order to create and sustain the equilibrium, unlike in (1), where the purpose supersedes individual priorities.

-To be continued-

Success-Briefly defined and understood

The philosophy of success varies from one successful person to another. The more you'd look for, the more and the more different interpretations and explanations of success you would come across. Some say success is all about winning while some say success is all about winning consistently. Some also say that success is all about the number of times you get up once you fall; some say success is about thinking you can and you will. So what is the best definition and the best interpretation and explanation of success? What is the most appropriate philosophy of success?

If a person has all the resources he needs to achieve his goal and he achieves it, this is what I called ordinary success. i.e. if an athlete steps on the race track with a desire and belief to win and he is in fact the fittest and the fastest among others, and if he wins, that's ordinary success.

Now if a person who has inadequate or insufficient resources all together for achieving his goal and if he is able to achieve it still, then this is what I call extra-ordinary success. i.e. if an underdog boxer comes out as the winner in a heavyweight bout, then its success is extra-ordinary. (remember Rocky?)

So what makes a person achieve extra-ordinary success? The following should help us understand:

1. Desire:

For a person to achieve something, he ought to have a desire for it. The desire forces thinking and regulates his efforts towards achieving that goal. To be precise desire is what pushes a person to work hard and go that one step further. Desire instills persistence, resistance to distractions and ensures a flow of energy all the time. It is the impetus for everything in the direction of achievement.

2. Belief:

It could be said that desire and belief are indeed one and the same thing. But they are grossly different. A desire is a longing while a belief is a feeling of being able to achieve what one has a desire for. Indeed many would tell you that they have a desire to be a professional soccer player or a cricketer or someone like Bill Gates etc, but ask them if they believe they can? Belief is what sustains a desire throughout one's pursuit of achievement. Without belief all desire is worthless. It also helps us release positive energy and attract the same.


3. Skill:

Skill is the ability not a capability. Capability is one's potential. Potential when polished becomes skill. Skill is what come in use when working for your goal. It has to be relevant to your aim otherwise your efforts will never bear fruit. One can turn his potential into his skill by practice only. This practice is a combination of working with inherited as well as acquired knowledge about a particular characteristic and applying the same again and again, till one becomes experienced and a master at it.

4. Timing:

Every dog has his day, as we say, but its quite true. Time can play a major role in one achieving and one failing to achieve. Time is a quantity which has a direct link with energy that surrounds us. We are all made up of energy and attract different types of energy at different times. Hence, the timing of the kind of energy we release will determine the kind of energy we attract from our surroundings. So, its advisable that we remain positive at all times, no matter what the circumstances.

5. Natural Law:

This is something perhaps beyond one's control. It is something knitted in the fabric of universe. Like no one thing remains the same or should I say, change is the only constant, so are success and failure prone to change. An individual in life can become no.1 and stay no.1 but not forever. Similarly, what is a zero today may climb up the ladder one day but how much, depends upon the aforesaid factors also.

6. Planning:
Failing to plan is like planning to fail, and yes, we know this by heart, and why shouldn't we? Planning provides a system for you to follow to achieve your goal. The whole universe runs according to a system, so how can you do without it? Planning has the quality of providing for you even if it's the eleventh hour. It helps you become efficient and effective and also keep a track of your performance in achieving your target.

Moreover, when a successful process of extra-ordinary success is repeated once it has achieved the desired goal, any further achievement will no more be extra-ordinary but ordinary. And the many times ordinary success is achieved, the more consistently one shall remain successful. And if one is at the bottom, then each cycle shall help him rise toward the top gradually.

This is how success can be defined and understood, perhaps.

Thank you very much for your patient reading.

Mustafa Mustansir, CFC

If you want me to write more on this, please request so in your comments. Your feedback is warmly welcomed and highly appreciated.

Find out more about me on www.greenspotservices.com

I want to be an Accountant!

I want to be an Accountant!

                                

Accountancy refers to the practice of recording and reporting changes in an entity’s assets, liabilities, revenues and expenses, over a period of time. Accountants worldwide prepare financial statements of companies and other organizations, file tax returns or work as independent or employed auditors and even as consultants and advisers on financial planning and management, taxation and financial decision making. Accountants are mostly employed by audit firms. But they are also employed by almost every organization and sector of the economy i.e. banks, governments, insurance firms etc.

The profession has been one of the most lucrative since the 20^th Century, and day by day as economies expand into newer dimensions, and public reporting and the need for compliance with the corporate laws increases, and as the states make smarter tax laws, the need for accountants is set to keep growing in the future too.  According to the US Bureau of Labor Statistics, job prospects for accountants and auditors are expected to grow by 22 percent between 2008 and 2018.

Accountants all over the world, especially those with notable certifications earn well beyond their respective countries’ Per Capita Income, and enjoy a more than modest lifestyle. Estimates suggest, that entry-level accountants in most countries, earn in the range of USD$ 55,000-USD$ 70,000, annually, which jumps to USD$ 70,000-USD$ 80,000 after four to five years of experience and exceeds USD$ 100,000, in case of partners of audit firms.

Moreover, Pakistani accountants are in a relatively high demand, mostly in the Middle-Eastern economies, like the United Arab Emirates, Saudi Arabia, Qatar, Kuwait and Bahrain. This is mostly due to the dynamic and rigorous accountancy courses like the Chartered Accountancy course offered by the Institute of Chartered Accountants of Pakistan (ICAP) and the extensive internship, which the students must go through to earn their certification.

These courses not only meet international standards and requirements, but surpass them as they are supposed to-primarily-meet the requirements of the Corporate Laws of Pakistan, which are some of the toughest and smartest laws, in world. An evidence of the effectiveness of these laws is the ever-resilient banking, financial and corporate sector of Pakistan, under the supervision of the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan.    

However, today accountants are mostly certified by the respective worldwide accountancy bodies chartered by the State. Other than these, some independent private institutes and professional associations worldwide, also offer credible certification programs in accounting. The pursuers are mostly required to clear mandatory examinations and fulfill experience requirements, to be eligible for a Certificate of Practice.

In some cases, a Masters in Accounting or a related field is a pre-requisite for a certification. Notable designations remain the FCA, ACCA, ICAEW, IAT, CPA etc.  Alternatively, students can enter the profession with either a degree in Applied Accounting or a Masters in Accounting, or any other relevant field, with sufficient experience. It could take one, three to five years, depending on the program on an average, to become a recognized accountant.

If you are good at crunching numbers, keeping records, remembering laws and practices and applying them appropriately, time and time again, and have enough motivation and are a diligent worker with a mind for good social status and a top-notch salary, accountancy is a career you could go for.

But becoming an account with a notable certification was never an easy game. It still isn’t! Some of the certifying institutes are well notorious for their unexpected, insufficient release of information to the students about the curriculum and a constant mismatch between the syllabus content and areas which are ultimately examined. This is further exacerbated by outrageous demands on the students’ intellectual capacity, with syllabi that are highly versatile and advance and vast in their approach, along with severe time constraints.

Nevertheless, the esteem and benefits a coveted certification brings, is worth it all! Hence, the number of students opting to be accountants, especially Chartered Accountants, has trebled in the last decade. The traditional charm and the fact that economic recession has left lesser opportunity for other career professionals or made competition tougher for them, more and more students want to be accountants and hopefully, get a highly rewarding job in Pakistan or preferably, abroad!

This has turned this profession into a millions of rupees worth industry. Heavy-weight certification bodies like the Institute of Chartered Accountants of Pakistan and the Institute of Cost and Management Accountants of Pakistan; are also engaged in scuffles (locally and internationally), in order to protect and increase their supplies to the job market and enhancing the credibility and worth of their respective certifications, by virtue of continuously upgrading their syllabi to align with the local and international industrial needs.

In addition, where there were no formal teaching centers two decades ago, there are more than one could count on fingers, today. Each institute battling it out with others to get hold of the best teachers and attract the most students. Not to forget the neighborhood coaching centers and the self-employed house tuitions providers.

Surging demand has made room for hundreds of new and inexperienced teachers, to make good and easy money. Some well-off and experienced players, with a mind for business, are also setting up training institutes effortlessly. In all the drama, students are the major sufferers.

No institute is perfect! Some have the facilities while some have the faculty. Some have results while others have even better results. Some are new, while others have been around for some time and enjoy a good reputation. Each of them is bombarding students with their cheap promotion, scholarship offers and faculty and just about anything they can to sell themselves. And when teachers switch institutes or set-up their own, they use their influence and name, to attract prospective students.

This is confusing for the students, as they must now choose between the teacher and other training centers in the market. Not only this, in an effort to make the right choice, they must research about the background of each subject teacher, because there are just so many of them now! Should I go to a place that boasts high-achievers or should I join a place that has the most renowned teacher on their faculty? Do I have a rational answer to all this penetrating promotion? All this to follow after the grueling process of career selection!

 However, the key to selecting the best training institute is a combination of everything. That is to say, a preferable choice would not only possess a reasonable faculty but an equally good management and experience, along with good results or pass rates, complemented by the caliber of audit or training firms their students land in. As for a preferable certification or degree, it shall be discussed some other time. 

All the same, competition has led to making accountancy one of the most cost-effective programs to choose in Pakistan. Medicine, Business Administration and Engineering, and programs in Arts, if undertaken at private universities, are considerably expensive to be within an easy reach of the common man. On the contrary, state funded institutes are affordable, but are equally deficient in their curriculums as compared to private universities, in most of the cases. 

Plus, a career in accounting is a rewarding career in terms of salary and benefits, with a much significant substantial assurance of job security, and an ever growing number of positions for accountants in the industry. On the other hand, being an accountant still limits the prospects of climbing the organizational ladder in years to come unlike an MBA. Most accountants remain in the same organizations with little or almost no promotions, for their entire careers. This is changing!

Accounting programs are being modified to meet this deficiency, integrating in knowledge from other core areas of business, like management, human resource, marketing, and leadership.  Each addition or alteration makes the course more difficult, the demand for accountants to widen, and the competition in the training industry, crueler.

In any case, be it any profession, it’s the student’s ability, hard-work and commitment, which ultimately make the difference in end. Teachers and institutes are only stepping stones. Solid stepping stones will make the journey to the top, pleasant. Weaker stones or incorrect ones altogether, shall lead to a shaky and bumpy ride, a ride that could cause an accident as well! The war is on and it’s the survival of the fittest. The profession has been among the fittest for decades, but are we prepared to meet its standards?

Please, find me at: http://www.greenspotservices.com

or Facebook or Twitter.

Find more about my work at: http://www.lulu.com/spotlight/mustafamustansir

Thank you very much for your reading. Your valuable feedback is awaited.

Mustafa Mustansir, CFC

An urgent call!

Dear Readers!

Despite all the environment issues, our Planet still produces abundant food and potable water to feed the whole humanity sufficiently! Every year billions of dollars of surplus food produce is dumped in the seas by the developed nations, only for the sake of protecting their domestic farmers' incomes, so that they may grow the produce again next year and it goes on! If only we could overcome our hypocrisy and donate the surplus to the poor, especially to Africa, crisis could be averted. But we don't!

This is an urgent call! After reading this, THINK before you take your next meal or even take your next sip of water, POTABLE water-even the water for our domestic uses other than for drinking, is a thousand times clean than what 10 million people in the arid areas of East Africa have for now.

Even dirty water is scarce for them! No food! No water! Under open skies, these representatives of human race, are fighting a war of life and death. Stricken by disease and utterly malnourished, these people need our help desperately!

Please follow and also forward the given links and donate for humanity generously:
www.care.org
www.greatglobalfoundation.org
www.unhcr.org

This is an emergency! Please help!

Thank you for your patience!

Hi Readers!

Today I have decided to talk about materialism or 'thinking about one's own self-interest only' as is widely perceived. However,  I would define materialism as the believing and doing of what is the best for you and when you follow such a principle as the philosophy of life, life changes automatically, and your desires get fulfilled and your aims achieved.

How is a good materialist?

A classical example of a materialist would be a person, who weighs everything in line with the costs and benefits associated with every such thing. For example, when you want to do something you just don't do it rather you contemplate and ask yourself these questions:

1. What am I doing?
2. Is this going to benefit me?
3. How long will this benefit remain? Is it short-term or temporary or long-term and perhaps permanent?
4. What will it cost me?

Nothing comes cheap! Even what's for free. Somethings are more expensive while others are less expensive but they are all expensive because, everything costs you TIME! Time is one such item that can neither be held, nor restored nor bought back nor substituted, it's gone forever, once it's gone. A materialist must realize this importance of time.

Moreover, a good materialist should be an asset for the society. In trying to maximize his benefit or gain, a materialist would make every effort to make the best use of the resources available to him, cutting on waste, helping the welfare of the society. But it must be noted, a good materialist, shall never do anything which might cause a loss to any other being in the society, he shall never break the law but follow it at all times!

That will be all for this post!
Thank you for your patient reading.

For more information on my work, please visit the link:
http://www.lulu.com/spotlight/mustafamustansir