- alarming global warming effects

Report issued by the Inter-Governmental Panel on Climate Change (IPCC):

• increasing rate in global sea level rise from 1.8mm a year to 3.1mm a year from 1961 to 1993;
• projected sea level rise at end of the 21st Century will be 18-59cm;
• by 2020 between 75mil and 250mil people in Africa are projected to be exposed to increase water stress;
• eleven of the last 12 years (1995-2006) rank among the 12 warmest years in the instrumental record of global surface temperature (since 1850);
• in the past 100 years there has been a rise of 0.74ºC in temperature;
• arctic sea ice extent has shrunk by 2.7% per decade,with larger decreases in summer of 7.4% per decade;
• mountain glaciers and snow cover on average have declined in both hemispheres and
  
• for the next 2 decades a warming of about 0.2ºC per decade is projected.

Key Problems in Asia

• by 2050 freshwater availability particularly in large river basins is projected to decrease;
• coastal areas especially heavily populated mega-delta regions will be at greatest risk due to increased flooding from the sea and rivers and
• endemic morbidity and mortality due to diarhoea disease primarily associated with floods and droughts are expected to rise due to projected changes in the hydrological cycle.

- you can do it, too

Vinod has done it so can you ...

The StarBiz-ICR Malaysia Corporate Responsibility Awards on August 22, 2008 reported that:

• only 4.5% of the sample size of 200 companies assessed by Bursa Malaysia were close to international best practice benchmark &
  

• companies perceive CR (Corporate Responsibility) as acts of charity when it should be embraced holistically and practiced across several key dimensions of their business, such as the workplace, marketplace, community and environment.

Start with winning The Prime Minister’s CSR Awards perhaps?

The Prime Minister’s CSR Awards was launched in 2007 and spearheaded by the Ministry of Women, Family & Community Development. The Awards represent our country’s highest recognition of corporate organizations that have had a significant and positive impact on the lives of people around them. There are six categories of Awards i.e:

· Community & Social Welfare,
· Education,
· Environment,
· Culture & Heritage,
· Small Company CSR, and
· Best Workplace Practices

For further information go to www.anugerahcsrmalaysia.org

- obsession with principles over rules

The current thinking of the financial world is ‘principles’ is preferred over ‘rules’. The regulators and accounting watchdogs believe that rules-based reporting regime has failed us. They are saying that rules are mere box-ticking exercise and crooks can find loopholes to circumvent them. So, don’t just follow the books you should also dig into your conscience!

Surely, no one would want to challenge the use of principles in our transactions. It gives one a sense of righteousness, morality and conscience. It cuts across a person’s religious belief, education and upbringing. But, one man’s principle may be quite different from another man’s interpretation. A man would steal food if he has no food to eat, a player would foul another to win a game; a man’s principle would be severely tested if the stake is high.

Regulators blamed it on the lack of principles which led to the collapse of some of the world’s largest companies in recent years and the current financial crisis brought about by the US subprime lending. If anything, there should be more and clearer rules in accounting and reporting of financial transactions, especially in less understood but highly speculative financial instruments such as derivatives and hedge funds. Financial institutions that trade with such speculative financial instruments should disclose more information e.g. the volume and content of their trading so as to enhance transparency. If there were clearer, transparent and accountable reporting rules that permeate the whole value chain of an underlying financial instrument the financial problems as we witnessed today might have been detected or reduced.

They say that rules are more complex to apply than principles. Are we then saying principles are easier to apply? One person’s beliefs may be very different from another. Rules are simpler to follow than principles. Rules demarcate a clear line between acceptable and unacceptable behaviour. Rules also reduce discretion on the part of individual decision makers.

Rules and principles should be promoted with equal prominence. Many rules are in fact born out of principles. It is unthinkable to have one without the other.

- CR awareness

A corporate social responsibility (CSR) survey was carried out in 2007 by Bursa Malaysia. The result was very disappointing. Only 4.5% of the sample size of 200 companies assessed were close to the international best practice benchmark. Datuk Yusli Muhamed Yusoff of Bursa Malaysia pointed out that "by and large companies perceive CR as acts of charity when it should be embraced holistically and practiced across several key dimensions of their business, such as the workplace, marketplace, community and environment".

The panel of judges for the StarBiz-Institute of Corporate Responsibility Malaysia Corporate Responsibility Awards concluded that CR and its objectives were not well understood as well as not planned or documented well. Certainly it is not due to lack of promotion on the part of the government agencies such as Bursa Malaysia, Securities Commission, Companies Commission of Malaysia (CCM), the Prime Minister CSR Award, as well as professional bodies such ACCA, CIMA and our Malaysian Institute of Accountants.

So why is CR awareness still lacking despite active efforts? What say you?

- credit card bubble on the card?

Already they are talking about it and voices are getting louder and louder ...

If one were to adopt the same logic that was responsible for the US subprime housing woes, it then follows that the credit card industry is going to suffer the same fate too. Because the same modus operandi is applied when credit cards are issued to the consumers. Credit is made easier and accessible to almost the whole of a nation's working population. Present day lifestyle of ordinary folks is very much influenced by the availability of credit extended to cardholders. We can now afford to shop till we drop.

There are so many innovative ways to sell credit cards. They have inducements such as promotions, balance transfer, lower interest rate (per month mind you and not per year which usually works out to be more expensive than bank finance cost), loan-on-phone (can you imagine you can have loans through phone conversation?), fee waiver, cash rebates, discounts etc. .. . the list goes on.

Every working adult seems to own a credit card. Some take pride in displaying the number of credit cards but not the cash they have in their wallets. In the olden days, you needed to go to the bank to apply for a credit card. You have to go through very stringent credit evaluation before a credit card was issued to you. Nowadays, the credit card salesperson will call on you. He will ask you a few questions and if all goes well, he will arrange for an application to be faxed to you. You don't even have to know what he or she looks like and you are on your way to spend, spend and spend. The bank officer of olden days would interview you face-to-face; he would request for 'convincing' documents such as your salary slip, tax return, copy of bank statement and even required you to produce a guarantor.

If consumers are badly affected by the current financial turmoil and could not even afford to pay the minimum installment amount, the adverse effect on the credit card industry will be disastrous.

In the case of the housing bubble, governments of the world are actually saving financial institutions from going bankrupt. But will they save the individual men or women in the streets in the event of a credit card bubble?

- corporate social responsibility - the conscience of an organisation

Can 'conscience' be used as a business strategy? If you think about it would you rather deal with people with a 'conscience' or uncaring, irresponsible people using any means to justify the end result?

The conscience of the corporate world today is corporate social responsibility or CSR in short. By embracing the tenets of CSR, it has proved that this could lead to enhancing a company's reputation, risk management and sustainable business. For example, there is a growing trend for investment preferences to be increasingly monitored towards ethical or socially responsible investment in line with personal moral, ethical and religious values. For example, managed socially responsible investment portfolios grew by 56% during the 2006 financial year from $7.67 billion to $11.98 billion in Australia. In Europe, there are 388 green, social and ethical funds as at 30 June 2006 compared to 280 funds in 2001. McDonald suffered bad press publicity and involved in expensive lawsuits for causing obesity, and saw a drop in its share price. It then re-examined the way it conducted its business. The result was that it moved from “greasy fingers to green fingers” with the introduction in 2003 of salads to its menu and encouraged its customers to lead a balanced lifestyle in its campaign. This strategy has a positive impact; resulting in increase in sales and its share price .

Malaysian companies need to do much more in CSR. Many Malaysian companies still think of CSR in terms of philanthropy. They pride themselves by the amount of donations they donate each year or the number of school projects they financed. This is just an image projection exercise. What they need to do is to integrate responsible and ethical practices in all aspects of its operations, including ensuring that its business practices do no harm to the environment and that it contributes towards the development of capacity within a community to facilitate long term sustainability.

We have lived and prospered over the past few centuries. Why are CSR issues only being addressed now? I would put down to two factors. Scarcity of resources and an increasing knowledge world. In the past our planet was blessed with abundant resources and natural environment. The world was larger then. Today, our planet resources are becoming scarce due to our propensity to industrial development which depletes the earth's resources at an alarming rate. The advent of information technology bridges the knowledge gap amongst the developed, developing and under-developed nations. The divide is getting narrower.

In the old days, it was perfectly normal for the white masters to keep slaves, Chinese towkays to keep concubines. In fact their success and social status were judged by the number of slaves and concubines they kept but such practices are unthinkable today.

So, those who choose to ignore CSR will ultimately face sanctions from their clients, business associates, shareholders and the world at large.

- value accounting

Recently I wrote an article in a newspaper on accounting values, which is condensed here and essentially, the following observation.

Accountancy has a long and rewarding history. Since the introduction of the double entry book-keeping model of accounting in 1300, accounting value has gone through an evolution and the search for its most appropriate measure continues to this day. For many centuries, historical cost accounting has been the accountant's trusted value measurement method. $1 is $1 and no such thing as $1.20 if you applied replacement cost accounting or $0.90 if you were to apply net realisable value to an asset.

The European industrial revolution in the 17th-18th centuries laid the foundation for change in the manner in which recognition and measurements in financial statements applied. Over the years, the accounting profession has been tasked with the responsibility of looking for valuation methods that best fit the economic environment and complexities in a changing business world.

In the 1970s, when economies in Europe and North America were facing a period of hyper -inflation, we were introduced to the rigours of inflation cost accounting and current purchasing power accounting . Shortly after another wave of accounting concepts such as replacement cost accounting and net realisable value accounting was introduced.

The current emphasis is towards fair value accounting. It sounds nice speaking these words and pleasant to the ears. Fair value...just what does it mean?. Well, accounting literature defined it as the price that would be received to sell an asset or paid to transfer a liability. Commonly thought of as an 'exit price', it is a principled-based accounting regime directed towards providing information to the market namely investors and potential investors.

Developments in the capital markets over the past decade have witnessed the creation of increasingly sophisticated derivatives and other instruments, as well as financing and business arrangements to isolate and parcel out particular risks. Accountants now believe that it is more relevant to measure financial transactions based on fair value. In an actively traded market, 'marked to market' is the fair value measurement of financial instruments / papers. So, 'reliability', which the historical accounting's measurement method is now taken over by fair value measurement which they say is more 'relevant'.

The current global financial crisis has demonstrated to us that accounting measurement convention itself would not guarantee a country from financial disaster. It is interesting to note that the panel of experts set up by the International Accounting Standards Board (IASB) has defended the marked to market fair values. They say that the fundamental values are not consistent with the objective of a fair value measurement because they do not take into account factors that market participants would consider when pricing the instrument such as 'illiquidity and credit risk'. Opponents argue that mark-to-market system of pricing has led to billions of pounds in write-downs. They proposed that the market price of an asset should be measured over a period of 6 or 12 months which basically mean 'smoothing' or averaging out the risk. More jargon ..... there is now a real need to find a workable solution that can be implemented and applied to safeguard global financial assets.

Well, you never can tell. One day, perhaps the accountant's value journey may come back to the cradle of traditional accounting using historical cost convention once again.

- prevention is always better than cure

Before John Denver, the country singer died on 12 October 1997, I had the opportunity to go for one of his concerts. Before singing his songs, he told a story ...

There was a small mining town somewhere in South America. Men would wake up early in the morning and walk up using the mountain road leading to the mines at the top. The road is treacherous and slippery, especially when blanketed by the morning dews. Because of those conditions, every now and then, a man would fall from the mountain road down to the valley at the bottom of the mountain. The mayor of the town then decided to build a hospital and bought an ambulance to bring the bodies to the hospital for treatment. As time went by, more and more miners fell down to the valley at the bottom of the mountain.

This time, the town's mayor tried to solve the problem by building a truck road and gave orders that all miners must go up to the mountain by hopping onto trucks rather than walking on the slippery road. This 'innovation' did not stop bodies from falling down the cliff. The problem was more acute because instead of a single body falling, a busload of miners fell each time. The mayor thought long and hard. He came up with a solution. And that solution is that more ambulances ought to be bought and a bigger hospital to be built!

But, bodies kept falling down from the mountain road at the top to the valley at the bottom.

Then a bus company came along and applied to the mayor to give them permission to use the mountain road so that they could ferry workers from another town who were also interested to work in the mine on top of the mountain. The mayor told the bus company that he has no objection. But warned them that there would be casualties falling from the cliff above. On hearing this, the bus driver said to the mayor, "that's not a problem Sir; all we need to do is to build dividers and fences along the road " and no body fell ever since.

How do we reduce road accidents in our country which often result in dealths?. I am sure each morning when you open your newspapers, somewhere, someone is killed due to road accident. Often, young men/women are involved. Such a waste of human lives who are at their prime.

By meting out heavier and heavier penalty in the form of fine would not deter much, I would guess. If we wish for a good outcome in anything we do, surely we must start it right. If our drivers are subject to a stringent test of driving skills, sound knowledge in road signs and an unselfish caring attitude on the road, road accidents will surely be reduced.

- passing on ....

My elder daughter who is 'accounting and finance' illiterate finds coping with accounting terms and financial jargons quite inconceivable. But her work necessitates her to read financial statements and reports and maybe one day she may have to analyse the figures to make a presentation. Surely, there are many young people out there who are like my daughter.

Shall we do something here to teach the young?

- start them from young

An event I witnessed decades ago when I was a student in London still brings back flashes of its memory every now and then. There was this young boy whose age was somewhere between 8 - 10 who had just finished his sandwich lunch in a crowded park and nonchalantly threw away his sandwich box onto the pavement floor instead of the dustbin displayed prominently beside him.

At the opposite was a gentlman who saw the boy's act. Feeling disgusted, the gentleman walked over and told the boy loudly that he should be ashamed of himself of such an uncivil act. He then asked him to pick up the sandwich box and to throw it inside the dustbin bag. The boy refused and stood his ground. Of course he would; when so many pairs of eyes were silently but furiously persecuting him. Boy and gentleman stood their grounds, with the boy avoiding eye contact but with a defiant look and gentleman staring hard at the boy. Looks like a lose-lose situation.

An old frail lady in the crowd came forward to speak to the boy. She said, 'Pick up the rubbish young man. You know it's the right thing to do. You should be ashamed if you want to just walk away. People will not laugh at you, they will learn from you." Common sense prevailed. The young man, still trying to put on a dignified face, picked up his lunch box and threw it inside the dustbin. People around were moved by his gesture and started to clap at his 'heroic act'.

The boy will carry this experience with him I am sure and so would the people who witnessed the incident on that day.

- global financial crisis

The recent global financial crisis has taught us a lesson that human nature is very predictable. Whenever there is mega fortune to be made, there will be financial wizards and there will be undiscerning victims. We believe in people who come with high sounding jargons backed by creditable institutions/establishments. The people whom we believed with awe and respect can one day take us to a place of despair and wreckage.

The dust will no doubt settle over time. There will be another big leap forward in financial engineering. There will also be another financial tsunami with perhaps more serious consequences. This time around there will be different players in the world of high finance. And these will be the same people who are condemning the wrongdoers vociferously now.