Exploring the unknown
Paolo Quattrone discusses the big issues facing accounting.
"We are at the beginning of a substantial change in the way in which not only investments, but the entire structure of capitalism works in our society."
These are powerful words from Professor Paolo Quattrone, who believes that not only the accounting and finance professions but society as a whole is on the cusp of a monumental shift.
In his new role as Director of the Centre for the Analysis of Investment Risk (CAIR) at Alliance MBS, his mission is to “put CAIR on the map even more than it is already” and ensure researchers have the platform to influence key issues facing policymakers such as global development, environmental sustainability, and the impact of technology.
Tying together his research interests, his views on the future of the profession, his vision for CAIR, and his role as a lecturer, is his conviction that mystery and the unknown sit at the heart of accounting.
"Accounting is all about decision-making and how we use numbers and governance to explore and deal with what we do not know.” He argues the real innovation and cutting-edge thinking needed to drive forward the profession, and society, sits in the unfamiliar. “Dealing with principally the unknowable and unexpected, accounting actually encourages you to draw on imagination rather than representation or measurement."
The post-pandemic world has made this even clearer he believes, spurring a need to focus on imagination, scrutiny and ambiguity to deal with unprecedented scenarios. We cannot rely on our existing models and best practice that simply are no longer adequate.
The big thing in my view is not just thinking of the reform of auditing but the much larger reform of financial and corporate reporting.
Professor Quattrone's affection for The University of Manchester and the city itself dates back to his early career. The first position he secured on leaving Italy was as a Marie Skłodowska-Curie post-doctoral fellow at the School of Accounting and Finance (at that time, part of the Victoria University of Manchester).
After successful spells at Saïd Business School, IE Business School (Madrid) and most recently The University of Edinburgh, he says the allure of Alliance MBS as a prestigious and leading centre for management education across Europe and internationally was just one of the reasons he has been drawn back to the city.
Another is the historic reputation, combined with the modern “international diversity, strength and size” of the Accounting and Finance division at Alliance MBS.
As he adds: “I was excited to work with renowned academics across the School who have forged a strong tradition of research in one of my key areas of interest, project and programme management."
Managing Complex Business Challenges
Along Paolo Quattrone, navigate decision making and complex business situations.
Paolo emphasises that discussion surrounding investments have become even more important in the wake of the global pandemic, ushering in Recovery Funds, new ‘New Deals’, and large infrastructure investments in the UK. “We want to be at the forefront of studying these new trends."
Building on this, Professor Quattrone and other colleagues at the School have been collaborating with the UK Cabinet’s Infrastructure and Project Authority. He is also keen for CAIR to develop a “serious collaboration” with the government, crucially making a link between policy and the delivery of major infrastructure and investment programmes.
In the wake of the UK’s long overdue audit reforms, he believes the recent announcements are a step in the right direction but asserts that broader fundamental changes need to happen to complement the reforms. "The big thing in my view is not just thinking of the reform of auditing but the much larger reform of financial and corporate reporting."
His passion for history informs his theory for the solution to accounting’s problems, looking into the past and moving away from its current framework.
"Accounting is a platform for scrutiny, mediation and interrogation. The disclosure of numbers and the process should trigger the asking of even more questions. Drawing on the history of the profession, we need to go back to the idea of accounting as an instrument of judgment, negotiation and compromise.
"The profession will only remain central if it uses figures to open up and facilitate this debate, and questions the purposes of corporations. It cannot continue its obsession with being focused on measurement, being a single point of truth and objectivity."
CAIR produces research on wide-ranging aspects of financial investment decision-making. Importantly, the notion of investment itself has broadened and focus is turning from solely financial investments to investments in physical, digital and social infrastructures.
In this context, he wants to refine CAIR's expertise primarily into three key research areas - investment decisions, ESG (Environmental, Social, and corporate Governance), and auditing, assurance and corporate reporting. He sees vital contributions that can be made by CAIR in putting his profession back at the heart of defining value and decision-making.
He explains: "There is a clear need now for a different set of tools, techniques and practices that orient how we make decisions and how we think about the world and society in which we live. It's a really exciting time to be part of this."
Influencing policy is a crucial goal for CAIR. "I want our exceptional researchers to be public intellectuals, generating wider impact and having a voice beyond academic circles. But the greatest impact we have is when we teach and profess to thousands of students. This is where we have real potential to influence the way in which people think and make decisions."
"The big thing in my view is not just thinking of the reform of auditing but the much larger reform of financial and corporate reporting."
Financial Reporting Council
Professor Quattrone is taking up the role of Principal Investigator on a new FRC Scenarios Analysis research project, working with co-investigators Dr Robert Charnock and Dr Yasmine Chahed, and his PhD students Kefei Wu and Jonathan O'Rourke.
The project will explore how companies set up processes for scenario planning to benefit strategically from their approach to climate-related governance and reporting. At the moment little is known about how business models and operations will be impacted by the transition to a net zero future.
Says Professor Quattrone: "The project concerns a core aspect of my research, about how to make sense of the unknown and having to deal with it. In this case, the future and the impacts of climate change on business strategy, operations and values."
He believes this research has great potential impact to see the UK play a leading role in spearheading policy in terms of the governance of the process of scanning the risks in relation to climate change.
Chartered Institute of Management Accountants (CIMA)
Alliance MBS has won a grant for a new CIMA project titled: Calculating sustainability: on making accounting numbers central again. Professor Quattrone and a team from Bocconi University in Milan will be investigating how organisations embed Sustainable Development Goals (SDGs) into their strategic business decisions.
In particular the project aims to provide a management and reporting framework to align the SDGs to accounting measures. "These non-financial measures and financial measures are currently disjointed, but we are creating a connection between the two and our solution could potentially become policy," says Professor Quattrone.
The rising importance of SDGs is causing a profound structural shift in the way capitalism is conceived, driving the need to change existing models of reporting that no longer reflect this.
Corporate Reporting Development Panel
Professor Quattrone has been selected to Chair the CRDP (Corporate Reporting Development Panel). He says the panel presents "an opportunity to rethink the entire way in which we go about financial reporting."
The panel will encourage interaction with international bodies and policymakers. "It is exciting to have a voice in shaping the future of corporate reporting. The panel is a small piece in that big puzzle, but it's great to be part of the puzzle," he said.
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