Nowadays, accountants should understand the many different financial issues a company may face and how various financial markets operate in order to survive in today’s extremely competitive business environment. They should also understand that accounting is not only just about numbers, but also about human behaviour and actions. In particular, they have to understand how a director, a manager, a shareholder or an investor makes financial decisions in reality, which may be substantially different from what the textbook financial theories tell them.
In other words, the “psychological” approach provides an alternative explanation to how an individual behaves and makes decisions in real-life financial situations versus the “rational” approach, where human beings are simply “calculating machines.” The six released “Every Accountant Should Know” e-series courses will essentially help accountants to gain an all-round understanding behind how people think and make rational and sometimes impulsive decisions.
The courses provide relevant knowledge on various topics related to corporate and strategic finance. For example, the course on “Personal Risk Profiling” can help one to identify risks, while the course on “Investment Biases” looks at the underlying reasons why people do not make the best investment choices. The course on “Behavioural Corporate Finance” explains the reasons why a director, a manager, a shareholder or an investor behaves in a certain manner or takes a certain course of action in a corporate setting. For instance, people may be subjected to groupthink and polarization when they make a collective decision in a company meeting compared to when they make decisions on their own. All in all, this alternative viewpoint on finance will provide accountants with more insight and prove useful when they interact with their colleagues and clients on a day-to-day basis.
Another key issue that accountants should understand is how financial products are evaluated and how financial markets operate. The “Bond and Stock Indicators” course discusses and interprets important indicators that accountants are likely to encounter in evaluating the performance of a bond or a stock. For example, indicators such as duration, convexity and PV01 are all used by finance practitioners to measure interest rate risk, which is a key risk factor in the bond market. The course will also examine how the basic and diluted earnings per share of a company are actually measured in the annual report. Accountants may find that it is not as simple as just dividing the total earnings by the number of shares outstanding.
The “Key Economic Indicators” course discusses the key economic indicators and how financial markets typically react to the trends of these indicators. For example, it examines how the fiscal and monetary indicators can show the intention of the government to influence the economic conditions through fiscal and monetary policies. The course will also discuss why a stock market can still perform well when the economy performs poorly under the COVID-19 pandemic.
The “Hong Kong and PRC Financial Regulators” course unveils the relatively complex regulatory structure of the financial markets in both Hong Kong and Mainland China. For example, it will discuss the recently established China Banking and Insurance Regulatory Commission, which was set up in April 2018 by a merger of the China Banking Regulatory Commission and the China Insurance Regulatory Commission.
Also, stay tuned for the forthcoming “Issues in Foreign Exchange Market” course, which will discuss the actual operations of the foreign exchange market, the largest financial market in the world. For example, it will discuss the difference between onshore renminbi (denoted by CNY) and offshore renminbi (denoted by CNH). It will also examine the short-term and long-term drivers of an exchange rate.
In a nutshell, the “Every Accountant Should Know” e-series courses seek to help accountants understand that there are many behavioural factors and hidden agendas behind the financial decisions made by a director, a manager, a shareholder or an investor. It will also help accountants to understand the important indicators, operational issues and the regulatory framework in various financial markets. Above all, the courses will help accountants to consider financial issues from different perspectives and across a multi-discipline setting, which will facilitate their decision-making process in a more efficient and all-round manner at work. These courses aim to lay a solid foundation and ensure accountants are in a better position to understand the more advanced issues in different aspects of the financial decision-making process and the operations of financial markets as a whole.
M. K. Lai is the Principal Consultant of Executive Training and Management Consultancy Company Limited. He has been offering quality training and consulting services to a wide variety of financial institutions, academic organizations and professional bodies for more than 20 years. He obtained a doctorate degree in finance from the London Business School, and is a CFA charterholder.