IFRS 9: The rules of the game have changed – be prepared

What do football and IFRS 9 have in common?

So what do you need to do to start getting your business IFRS 9 compliant? We understand that if you are not a global financial institution with a team of analysts it can be hard to focus resources on the new accounting standard IFRS 9.  So, welcome to our Loss Forecasting blog series, which over the next five installments will show you how Experian can help you prepare your organisation for this new set of rules.

IFRS 9: The rules of the game have changed – be prepared!

Like all things in life, if you’re not prepared, you’ll be left behind – as football manager Jose Mourinho found out recently…

Mourinho lost his position as manager of Chelsea Football Club after a disastrous start to the season which some, including former Liverpool and Aston Villa player, Stan Collymore, blamed on Mourinho’s lack of preparation.

Whether this criticism was fair or not, anyone who’s ever played or watched football knows the importance of preparing for the season ahead. Building and training the team, developing a game plan, meeting transfer deadlines, agreeing budgets – all are vital for a successful season. As former Manchester United player Roy Keane once said, “Fail to prepare, prepare to fail”.

So what are the similarities between preparing for the new football season and preparing for IFRS 9?

Well, first of all, it has to be a team effort.

But, isn’t Loss Forecasting and provisioning Finance’s responsibility? Of course not. That would be like blaming your goalkeeper if you lose because your defenders were still in the opposition’s half when the winning goal went in.

There’s no place for Man of the Match heroics here if you want to win at the IFRS 9 transition process, so no-one should be hogging the ball. Here’s what your line-up should look like:

Your Defenders, Finance, have a key role to play in dealing with the provisioning requirements of IFRS 9, accountings for changes in the provisioning and looking at the economic scenarios to be considered when forecasting future portfolio losses.

You will need them to be working closely with your Midfielders and playmakers (Credit Risk) to successfully transition to this new accounting standard. The lending decisions and portfolio profile, along with account, or segment, level loss models are key components of the IFRS9 impairment forecasting methodology.

To win the game, you will need Credit Risk and Finance to be passing the ball between them as they work their way up the pitch and operate a successful transition to IFRS 9.

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For more guidance on how Experian can help you prepare for IFRS 9, visit our website or read our more detailed ‘Loss forecasting under IFRS 9’ brochure.