There are more battles to be won

Invited to gaze into his crystal ball for the year ahead Wyman says there
will be no scandals this year that could that could propel government, or
regulators, into concluding that UK financial reporting had failed.

For some, that may seem like making oneself a hostage to fortune. For surely
any system of regulation is vulnerable to an event that could brutally reveal
its weaknesses, in particular weaknesses we don’t know about. There’s probably
no need to remind readers of Donald Rumsfeld’s now notorious comment about the
known knowns, and the stuff we don’t know we don’t know.

That’s the risk for Wyman in making his statement of confidence. Although he
would support the current financial reporting regime, and genuinely believe in
it, there remains the possibility that there’s something in it, undiscovered,
that could give rise to a problem.

Wyman’s confidence however is born from the fact that UK financial reporting
is based on principles. If something were to go wrong, it would be in spite of
them. It would be very difficult to say the principles were wrong. This is
unlike a rules-based regime where a finger can be pointed at a gap, or a rule,
which simply doesn’t cover what it needs to.

So principles are a natural advantage. Once written they are difficult to
redraft. It’s this characteristic of the UK system that allows Wyman to be so
confident about 2007.

What he cannot be so confident about, is just how much pressure for change
there would be if there was a corporate disaster. The intellectual battle
against further reform may have been won. The political battle might still be in
the balance.

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