When the World Economic Forum (WEF) published its Global Risks Report in January 20201, all eyes were on climate issues and cyber threats. Infectious diseases didn’t even feature in the top 10 most likely events the world would face that decade.
It was a glaring oversight. Just weeks later, the COVID-19 pandemic struck, and the tone for business turned to uncertainty, distress and change.
Yet one positive leaped out of the unexpected turmoil: organizations discovered new levels of agility – the ability to rapidly respond to changes in the operating environment and marketplace, when and wherever they occur. In the case of the pandemic, those changes were enormous. Yet, as the WEF Risks Report suggests, few companies had ever even imagined them, let alone planned for them.
Despite this lack of readiness, the reaction from businesses was impressive. Companies restructured supply chains, pivoted to new products and markets, and established new ways for global talent to continue their work from home. Behind the scenes, organizations found themselves creating new offerings and adopting new tech and flatter organizational structures – often all at the same time. They were making important decisions under pressure and improvising solutions to pressing problems.
While many parts of the world are slowly learning to manage the pandemic, uncertainty still hangs over many operations, and agility remains a key watchword for business. But agility is not merely a means of fighting fires. Many companies are realizing efficiencies that contribute to their bottom lines, too. The most agile businesses also happen to be the best equipped to seize new opportunities that are springing up in the here and now.
Agility in tax and finance
When it comes to the tax and finance function, agility was already a critical attribute, particularly in compliance and reporting. Before anyone had even heard the word COVID-19, companies were facing a slew of new reporting requirements – with demands becoming increasingly cross-border in their application and new standards and reporting formats arriving all the time.
The pandemic has significantly added to this compliance requirements, sparking a wave of new legislation and guidance – with global supply chains rupturing and rearranging, and governments moving filing deadlines, introducing rafts of new incentives, and changing tax policy to pay for the trillions of dollars of support they pushed out.
Compliance teams must keep up with this rapidly shifting terrain – and swiftly introduce the necessary systems to cater for the changes – all while communicating with the business to ensure exposure to tax risk is reduced and reporting continues as normal.
The issue is that the very concept of “normal” has changed forever, too. Businesses will continue to face challenges – whether that’s in the shape of another public health crisis, an increasingly extreme climate, or fundamentally disruptive new technology. So, compliance teams must keep looking ahead and considering future hurdles, even as they navigate the current requirements.
Rising to the challenge
There are a couple of key areas where this is particularly the case. First: talent. The pandemic has served to drive a broader shift in people’s attitudes to work – a huge number are now re-assessing what they want from their working lives and making radical changes. In the US alone, a record number of workers – 47.4 million2 – quit their jobs in 2021 as part of what has been dubbed the “Great Resignation.”
This seismic shift, which played out globally, has served to make finding and retaining key talent a lot harder. Yet in this agile new age, companies are crying out for the best tax professionals – ones who are nimble, digitally savvy, and, increasingly, smart enough to work closely with key decision-makers across the business.
A second key driver of agility is technology. Companies are now actively looking to implement some degree of better digital preparedness in the face of continued change.
Indeed, according to the 2022 EY Tax and Finance Operations Survey, respondents, on average, say they will spend $4 million in tax technology over the next three years.
Even some of the world’s biggest companies have realized they will struggle to keep up with the pace of change when they face such demanding compliance processes, tight budgets and a shortage of skills.
The challenge for all compliance teams is to establish the right level of in-house capability to stay close to the business and provide decision-making support, while remaining nimble enough to address all the issues that are coming at them.
Strategic partners can be invaluable here, in providing both tech and people – bringing expertise to certain key tasks while reducing the cost burden. These providers are investing billions of dollars in developing the best purpose-built technology, providing an immediate, cost-effective means of accessing the most powerful solutions, and insulating organizations against the unexpected.
A dynamic new future
The pandemic has taught tax and finance leaders what agility can mean for their own operations. Yet for the broader organization to be nimble in the face of such a fast-moving operating environment, and to meet the many convergent changes, companies must incorporate agility into their longer-term planning.
The tax function needs to sit close to the C-suite, supporting key decision-makers and steering them away from the risks inherent in any change – ensuring the business has substance in the right locations and making it clear where solutions can be found.
Such agility will soon be a requirement. Organizations that have historically been slow to transform were seen to respond to the challenges of the pandemic in an agile, fast way – they will now simply be expected to continue to do so.
Take reporting as an example. Authorities are expecting companies to be able to share ever-higher volumes of digital data at a country-by-country level under increasingly tight deadlines. Any excuses for being slow to respond to information requests are now likely to get short shrift.
The task is for organizations to further entrench agility in everything they do – honing hybrid working models that entice the brightest talent; taking advantage of powerful tech platforms to enable a quick response to increasingly tough reporting demands; and collaborating with third parties to increase capabilities while driving down costs. The majority of the significant changes made during the pandemic aren’t going anywhere – yet they will require continued work.