Dreaming about IFRS 17

Inspired by ‘Leading change: why transformation efforts fail’ by J.P. Kotter, published in Harvard Business Review in January 2007

I am dreaming about successful implementation of IFRS 17 and IFRS 9 for all insurers around the world. As I came across an article of J.P. Kotter about transformation projects I was curious to compare my dream with reality. Here are my findings.

1.       No sense of urgency

Deferral of effective date for IFRS 17 was a much welcomed news from the IASB. We are lucky to have one more year to make sure that we are on track. However, this comes at a high cost of losing momentum. J. Kotter advices that the urgency rate is enough when about 75% of management is honestly convinced that business-as-usual is unacceptable. We seem to be miles away from that magic number on average.

2.      What exactly our plan look like?

A journey of a thousand miles begins with a single step. Do you know your steps for 2019? I mean exactly. Who is responsible for every step and what is the deadline? We are all humans, we have more important priorities, take holidays, get sick and we secretly love to procrastinate. The world stops moving without deadlines. As J.P. Kotter suggests, we need to celebrate small wins on this long way. Meeting a deadline seems like a good occasion for team drinks. What do you think?

3.      Declaring victory too soon

A few companies started projects very successfully but even they are not safe. Per J.P. Kotter, declaring victory too soon puts them into risk of losing momentum. Skipping steps to gain speed may also not prove successful in the future. I know that this is not the most pleasant step in the program but have you discussed your key technical decisions with auditors? It would be a big surprise to realise in 2022 that your auditor does not agree with the fundamental settings of your systems because of aggressive technical positions taken on at early stages of the project.

4.      Who drives your project?

Per J.P.Kotter, companies usually underestimate the difficulties of producing change and the importance of a powerful guiding coalition. Actuaries are driving the change in many companies. They are well equipped and know everything. Is that enough? I dream of more accountants actively joining actuaries in leadership roles. I cannot imagine the future where accountants do not ‘own’ financial statements or are unable to explain numbers, at least at a high level. Would it worry you?

5.      Under communicating the project

Hard to believe but the project has an impact on many if not all areas of insurers’ operations. I see that many functions don’t look at IFRS 17’s impact yet, for example, internal audit, financial planning and Human Resources. We need to enable people to do their work by teaching them IFRS 17 and IFRS 9. As an accountant I cannot tell specialists in other areas what they should do but I can tell them about IFRS 17 and let them decide. Are you sure we all don’t miss an elephant in the room?

Here are my tips for small wins to avoid big failures

Plan-plan-plan

Rephrasing Antoine de Saint-Exupéry, a goal without a plan is just a dream. I dream we all have successfully implemented projects in 2022 but common sense says that some will fail. Let’s support our dreams with a good plan to minimise losses.

Don’t skip steps

PwC has an IFRS 17 implementation framework showing all steps necessary to accomplish a successful implementation project. Interestingly, some insurers do not plan some critical steps. Would you genuinely believe that a dry run is not that important?

Spread the word

Let’s teach wider groups IFRS 17 basics and ask them to do what they know best: impact on their day-to-day job. Are you sure that everyone who should be involved in the project at least knows that the project exists?

Per J.P. Kotter, even successful change is messy and full of surprises. With both IFRS 9 and IFRS 17 implemented globally insurers go through a change that we have never seen before and probably won’t see again in our lifetime. Even the most capable of us could make at least one big error. I dream that if that happens we could be open and fair to ourselves, adjust and avoid errors that we would not be able fix within such a short period of time.