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Supply Chain Issues and Inflation - the Role of the Accountant

3 Oct 2022 11:00 | Malta Institute of Accountants (Administrator)


Supply Chain Issues and Inflation - the Role of the Accountant

It’s the fourth quarter of 2022, and the supply chain crisis continues to buckle under the strain of the pandemic, geopolitical conflict, and economic uncertainty. It is safe to say that shortages have defined the struggles of businesses during the last two years with no clear end in sight. Over more recent months, high inflation rates have put further pressure on firms, worsening an already dire situation. Although several factors are contributing towards higher-than-normal inflation rates, a significant amount is derived directly from supply chain issues.

In such a context, one way to start tackling inflation is to directly address supply chain problems, such as cost of container shipping and logistical issues by bringing factories closer to the end consumers. Yet, many companies have had their resources depleted during the pandemic and hence require a degree of funding to undertake such an investment. However, earlier this year, the European Central Bank (ECB) announced an unexpectedly large interest rate rise, its first in 11 years.

The rationale behind the ECB’s move is that higher interest rates help to fight inflation by raising the cost of borrowing, encouraging people and businesses to borrow less and spend less. In theory that is meant to lead to lower demand and slow price rises, but it also means less economic activity. Due to this, companies that are looking to tackle supply chain issues by investing more will likely find it more expensive to do so and hence their projects might not be financially viable. This will also put an additional strain on the cashflow of businesses, something that accountants need to keep a close eye on.

In this context, this session will look into how accountants can understand supply chain and inflation and how these impact the performance of businesses. The first part of the session will focus on a detailed analysis of past inflation data and on recent developments within the global environment that are impacting both the supply chain and inflation, today and in the future. Also, conclusions will be derived on the inflation in the Maltese economy in recent years and a clearer vision of where inflation is heading in the coming months and years will be presented. We will also look at what policy makers are doing to mitigate against supply chain and inflation issues.

The second and main part of the session will focus on the role of the accountant in present times and how the accountant can prepare for what’s to come in the near future. We will look at strategies that leading organisations around the world are rapidly deploying to help build resilience and agility, and how accountants and business consultants in companies of all sizes can implement strategies to help them deal with supply chain issues and battle inflation.

Interested in the topic? The MIA is organising a session on 6th October. Read more here.

               

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