Health and Healthcare Systems

Can the tools of finance build back better?

A man wearing a protective face mask, following the coronavirus disease (COVID-19) outbreak, is silhouetted in front of a stock quotation board outside a brokerage in Tokyo, Japan, June 15, 2020. REUTERS/Kim Kyung-Hoon - RC2N9H93ZD5P

Business-first responders are keeping the economy going in its direst moment Image: REUTERS/Kim Kyung-Hoon - RC2N9H93ZD5P

Michael Izza
Chief Executive Officer, ICAEW
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The Great Reset

  • The accountancy profession is working as “business-first responders”, keeping the economy going in its direst moment and channelling the oxygen of cash into businesses.
  • The solutions to the COVID crisis have to work for all and the planet. If businesses do not solve this, the liabilities will be beyond measure and assets will have no value.

In the wake of the 2007-8 financial crisis the Institute of Chartered Accountants in England and Wales (ICAEW) hosted a series of high-level roundtables. We asked: was it a crisis without a legacy? Looking back, we would have to say that there was a legacy but maybe not what we hoped for.

The way the financial crisis played out contributed to undermining belief in international organizations and a retreat into nationalism. It would also be fair to say that the lessons of that crisis were not learned. More specifically, we have to confess that the accountancy and finance profession did not come out of it well and that we dodged a bullet.

COVID: black swan or brewing storm?

A series of corporate failures and audit shortcomings later, and the profession is at its watershed moment as we now face another crisis. Much as the mainstream might want to call the coronavirus a “black swan”, it isn’t. There was too much discussion and reference to disease and pandemics in the mainstream for this to be a black swan.

The last 15 years of the World Economic Forum’s annual Global Risks Reports are a case in point. Diseases and pandemics appeared enough to suggest they were a major concern. This swan came with strings attached and we knew it.

Chartered accountants create trusted information and insight, which inform our understanding of the world and the resulting decisions that shape our lives. Comprehending and making sense of risk, uncertainty and opportunity and helping craft a way forward through the storm is what we do. Have we reached a defining moment for the accountancy profession to rise to the challenge and become part of the solution? As whole new vistas of risk rapidly open up, the profession is at a pivot point.

A problem-solving profession

As this disaster evolves, we are now seeing an increasing focus on what the world will be like on the other side. There is an opportunity to press the reset button and achieve something better. We all accept that right now we are firefighting.

We must also acknowledge that coronavirus is a chapter of a wider unfolding gruesome-threesome of climate emergency, massive biodiversity loss and increasing inequality.

Michael Izza, ICAEW Chief Executive

We cannot lose sight of this bigger picture. In fact, chartered accountants – as a profession of problem solvers – must learn from how society is responding to the virus but also think about how to build on that.

Business-first responders

This profession emerged at a time of corporate crisis in the 19th century. This time we can say the accountancy profession is working as “business-first responders” keeping the economy going in its direst moment; helping channel the oxygen of cash into businesses and nurturing their organizations and those they advise through this period, necessary for holding things together.

We can also be part of the rebuild; helping to operationalize the post-coronavirus recovery.

Collectively we need to question if the institutions of government, of civil society, of business and markets and, yes, of accountancy and finance, are fit for purpose. Do we have the courage to learn from this crisis and then adapt and evolve to meet this greater evolving crisis and develop new industries and products? Can we become change agents challenging the status quo in our organizations and with our clients, charting a route to the new world?

An emerging narrative of capitals thinking

We have tended to ignore the connectivity of issues, putting climate change, change of land-use, intensification of agriculture and livestock breeding, growing inequality, and so on into different buckets. This enables us to ignore their interdependencies, which drive them exponentially. In recent years, this has begun to change.

The emerging narrative of capitals thinking, with its focus on how business and economic success is rooted in thriving societies and nature, is also a demonstration of how connected thinking is becoming normative. However, the coronavirus crisis provides an important lesson.

What began as a virus jumping species as a result of deforestation, intensive agriculture, climate change, wildlife trafficking and wet markets, rapidly became a human health crisis. And then it became a global economic crisis. It has laid bare existing inequalities and has become a reinforcing feedback loop for others.

It has highlighted institutional fault lines: getting cash into the business community has been challenging and the fragility of charities’ funding at the moment they are needed most has been exposed. Thinly capitalized businesses have and will continue to fail as they lack any resilience.

In addition, various groups in our societies have been left behind. The elderly have been forgotten or triaged out of help; the poor, refugees and people in prison cannot isolate physically and don’t have the same access to health as the wealthy.

Lockdown has forced victims of domestic abuse to become prisoners of their abusers, caused civil unrest, enabled the wholesale removal of human rights, often without question, and facilitated the worst excesses of dictators.

Oxfam’s report Dignity not Destitution published in April highlights the disproportionate effect the coronavirus is having on the developing world as well as on the vulnerable and women. The report estimates potentially half a billion people are being pushed into poverty.

Image: Statista

This interconnecting web just keeps expanding and reinforcing itself. A way forward has to be one that brings together the needs of economy and society but one that is rooted in nature’s carrying capacity.

What story do we want to tell?

It is true there are positive stories. We have seen communities pull together. A YouGov survey commissioned by the RSA's Food, Farming and Countryside Commission (FFCC), and The Food Foundation reports that most people in the UK want to alter their lives in some way after the pandemic. Only 9% of people said they wanted life to return to how it was before.

The coronavirus temporarily reduced pollution and we experienced the joy of birdsong and clear skies. We also discovered that we can take the homeless off the streets and pay people a basic income (although these will come at a cost to some).

However, human, social and economic capital has taken a battering. We are experiencing a taste of what nature has been subjected to for decades. This is devastating value destruction and it will take years to rebuild this capital.

The solution has to be one that works for us all and the planet. As businesses, if we do not solve this our liabilities will be beyond measure and our assets will have no value. Just like the Beveridge Report argued for a better deal for all after the second world war, so must the post-corona recovery.

The EU and governments across the globe are talking about post-crisis development plans that are green and just. Some commentators are even suggesting that a green rebuild will be cheaper than a return to pre-crisis business as usual.

Have you read?

We now have an opportunity to ensure that the choices we all make create a pathway to that better tomorrow rather than back to where we left off. We have a vision of what that looks like in the Sustainable Development Goals, which through the 17 outcomes they describe, offer a framework for the rebuild. We also have an opportunity to change the way we make those choices to one that is collaborative and inclusive as well as issue-driven.

As we applaud our key worker heroes at the front – and in that newly acquired admiration for them, value them better – we might reflect on what will be the story we tell about what the accountancy profession did in the war against the virus.

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