Navigating the Pitfalls of IFRS 17 Compliance
tuesday 05 july 2022
We are in the home stretch! Yet, less than a year from the implementation date, a significant portion of our insurance industry in East Africa is not yet really stuck in its IFRS 17 projects.
Implementations of IFRS 17 are complex. Even for the simplest insurance organizations there is a lot to do. For example, understanding the requirements, acquiring or developing an IFRS 17 engine, integrating it into the organization’s system, and developing a new chart of accounts that will be linked to a general ledger.
Additionally, the standards require insurance organizations to review their cash flow models, actuarial models, expense systems, financial planning and analysis processes, accounting rules, transition, controls and their business analytics, among other areas.
The complexity of the standard itself confuses decision makers and makes it difficult for many to get their projects off the ground.
Even if you haven’t started preparing for IFRS 17 yet or are unsure whether your implementation program will meet the deadline, there are still ways to cross the line in time and achieve full compliance. trust. Below are some of our thoughts based on our wealth of experience working with local clients and lessons learned from PwC projects around the world.
A good starting point would be to identify the right implementation partner, one you trust and who has the right expertise and capacity to dedicate to you.
There should be no compromise on meeting the requirements of IFRS 17, but with an implementation partner you want to take a pragmatic approach wherever possible. You should also ask your potential implementation partner what tools and accelerators they can deploy to accelerate your journey.
Trying to do it alone is not the best approach for our market. Can you develop your own tools and accelerators? Far from being the easiest option, “do it yourself” is probably the trickiest, riskiest and, in the long run, most expensive option.
If you opt for a vendor solution, it’s important to recognize that what works for other businesses may not work for yours. Additionally, when selecting a vendor, ensure you have critical access to their understanding of our market, as well as your business and yourself, to have access to long-term support. .
First, you don’t want to end up with a solution that isn’t right for your business, and second, you want to make sure your tool vendor is accessible!
While some elements of IFRS 17 are reasonably simple, others can be deceptively complicated. Our experience shows that this small proportion of complicated tasks can easily take more than half the time; if you are not well planned to deal with it, it can significantly delay your project. It is imperative to be guided on how to solve them quickly and efficiently so that you can keep moving forward.
IFRS 17 changes all of the financial statements, not a single line item like IFRS 9 did. So the sooner you can start piloting the new financial statements, the better your understanding of IFRS 17 will be. thorough.
This reinforces the need to work with an implementation partner who can deploy the right tools and accelerators.
Stakeholder management may sound cliché and as overused as these two words are, they are essential as part of the implementation of IFRS 17. Effective stakeholder management will not only ensure that the project stays on track way, but that it also adds value to the business.
Implementing IFRS 17 will require you to dip deep into your pockets, and so keeping shareholders, boards and auditors on your side will ensure you reap the benefits. It is essential to educate them as you educate your leadership along the way.
Another important consideration is data. You are very likely to spend most of your time sorting your data/systems (even after the implementation date) regardless of which IFRS 17 engine you are using.
It is important to understand the data requirements and potential implications for systems early on. Also, being able to form an opinion on how this data will be collected and what assumptions can reasonably be made in the meantime is equally vital.
Finally, you need the right mix of skills and capabilities to implement IFRS 17 effectively and successfully. However, what is often forgotten is that we also have to take care of these people.
IFRS 17 has already created a lot of movement in our markets and recruiting the right skills will only become more and more difficult. The loss of a key staff member will set your project back several months. An effective change management plan should also be part of the staff agenda within your organization.
With the implementation of IFRS 9 across East Africa, we have seen many banks hesitate until the deadline approaches. Some of these banks bought cheap, their implementation was half-baked, and four years later they are still not happy with their models. They spent money on patchwork updates or just threw away their old system and started over.
We need to learn from this – think very carefully about your approach to implementing IFRS 17 and make sure that the various partners you work with (consultants, vendors, IT vendors) are right for you and won’t cost you more long-term.