The noughties are nearly over and the financial outlook for the next few years is distinctly rockier than it was for the early years of this decade. To move on from recent financial difficulties, the team at ACCA have come up with some steps to achieve financial stability by 2020.
The recent financial woes were caused by banks that produced financial toxicity to go with bumper profits, bad behaviour by consumers and corporations, and tax systems which exacerbated this behaviour.
These problems need rectifying. Firstly, retail banking (deposit taking etc.) must be separated from other banking activities to protect consumers and businesses from future banking foul-ups. Secondly, pensions and benefits reforms are needed to encourage consumers to choose the piggy bank over the credit card, while corporate governance needs to be about principles rather than regulatory box-ticking. To support this, fairer, more stable, and more transparent tax systems are needed.
These solutions are about plugging holes, but this isn't enough for stability; pro-active measures are needed too. The problems facing the global economy are too big to be confronted by the G8, let alone individual countries. The G20 presents a forum for effective co-operation between countries and it should be formalised and given a permanent secretariat by 2020.
To this global governance framework, IFRS should be added. IFRS reflects better than GAAP the changing distribution of global economic activity, and makes financial information more transparent and comparable across countries, industries, and companies.
While the above two solutions focus on the 'big', the 'small' shouldn't be forgotten. Small businesses make up 95% of all OECD enterprises and they need more support (through appropriate legislation and regulation) from governments by 2020. Consumers need more support too; without them, economies go nowhere. As consumer activity moves online, governments and business must ensure that they are safe from criminal activity.
None of the plans for 2020 will matter if we're all underwater; climate change presents an even bigger threat to the global economy than the banking crisis. To avoid the doomsday scenario we need a collaborative effort from scientists, governments, and business to provide the funding and innovation to ensure a vibrant low-carbon economy by 2020.
The recent financial woes were caused by banks that produced financial toxicity to go with bumper profits, bad behaviour by consumers and corporations, and tax systems which exacerbated this behaviour.
These problems need rectifying. Firstly, retail banking (deposit taking etc.) must be separated from other banking activities to protect consumers and businesses from future banking foul-ups. Secondly, pensions and benefits reforms are needed to encourage consumers to choose the piggy bank over the credit card, while corporate governance needs to be about principles rather than regulatory box-ticking. To support this, fairer, more stable, and more transparent tax systems are needed.
These solutions are about plugging holes, but this isn't enough for stability; pro-active measures are needed too. The problems facing the global economy are too big to be confronted by the G8, let alone individual countries. The G20 presents a forum for effective co-operation between countries and it should be formalised and given a permanent secretariat by 2020.
To this global governance framework, IFRS should be added. IFRS reflects better than GAAP the changing distribution of global economic activity, and makes financial information more transparent and comparable across countries, industries, and companies.
While the above two solutions focus on the 'big', the 'small' shouldn't be forgotten. Small businesses make up 95% of all OECD enterprises and they need more support (through appropriate legislation and regulation) from governments by 2020. Consumers need more support too; without them, economies go nowhere. As consumer activity moves online, governments and business must ensure that they are safe from criminal activity.
None of the plans for 2020 will matter if we're all underwater; climate change presents an even bigger threat to the global economy than the banking crisis. To avoid the doomsday scenario we need a collaborative effort from scientists, governments, and business to provide the funding and innovation to ensure a vibrant low-carbon economy by 2020.
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Posted by: Finance Dissertation | 24 January 2010 at 14:57