Nobody likes an abundance of red tape, but today’s corporate accountants appear fed-up with the flood of regulations hitting their businesses. New findings from the International Federation of Accountants reveals that corporate finance and accounting professionals the world over are feeling overburdened by financial legislation, and that they anticipate the weight of that burden to increase.
The IFAC Global Regulatory Survey, published Tuesday (Sept. 8), uncovered some harsh sentiments in the corporate accounting community about regulation.
“The regulatory burden seems to have been materially increased with no consideration of the cost to the real economy of industry and commerce, hence to society,” one respondent said.
[bctt tweet=”‘The regulatory burden increased with no consideration of the cost to the real economy'”]
“There appears to be more duplication in regulation, with standards-setters failing to align policies and processes, despite an overall commitment to reducing red tape by government,” said another.
The IFAC pointed to other remarks that epitomize how many corporate accountants feel about the red tape they are facing today. To some, the regulations are “demoralizing” and are “killing entrepreneurship.” Additional responses included phrases like “over-regulation” and pointed to the “harmful effects of ‘regulation without accountability.’”
Researchers found evidence that some corporate financial professionals believe the laws were created by civil servants without true understanding of what it is like to operate a company in today’s global market, and without consideration for the real-world implications of such rules.
[bctt tweet=”To some, regulations are “demoralizing” and are “killing entrepreneurship.””]
Overall, two-thirds of respondents said they believe regulation is hampering the ability for their corporations to grow and innovate, according to researchers.
According to IFAC CEO Fayez Choudhury, this disdain for financial regulation may stem from the rising complexity of new laws.
Analysts found that 79 percent of survey respondents described the financial regulations that affect their corporations as “complex” or “very complex.” According to researchers, this sentiment is making it more difficult for accountants and money managers to adequately manage cash flow and compliance.
In a statement, Choudhury said the sheer volume of legislation is making it more difficult than ever for accountants and financial executives to navigate the regulatory waters. Glass-Steagall, for example, was 37 pages when it was enacted in 1933 following the Great Depression, which divided the worlds of commercial banking and investment banking. But the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Choudhury pointed out, is made up of more than 2,000 pages.
“Discerning how this complexity affects the ability of all key players in the economy to foresee emerging risks, and the fluid, nimble collaboration necessary to address them as they arise, is crucial,” the report concluded. “Understanding how complexity impacts businesses, financial market participants, regulators and professionals is equally relevant.”
Further, 83 percent said that these increasingly complicated rules are also rising in significance for their businesses compared with just five years ago. Plus, researchers say the significance of these laws is expected to increase in the coming years, too.
One respondent noted that in addition to regulation becoming larger in volume, it also appears to be getting less efficient – and that’s despite government promises to do otherwise. “There appears to be more duplication in regulation, with standards-setters failing to align policies and processes, despite an overall commitment to reducing red tape by government,” the respondent said.
According to Choudhury, corporate accounting professionals understand that regulation is necessary for a healthy economic climate. “Good regulation is essential to the fairness, efficiency and effectiveness of economics, and making it work as well as it can is a never-ending mission,” he said.
But the research suggests that the market should take a close look at the effects of the rules being put in place on the ability for businesses to compete and manage their finances.
“Growth remains a concern globally, and these results should be a wake-up call for us to examine the impact of regulation,” he added, “including the regulation and reform introduced in response to the global financial crisis.”