THE ROLE OF ACCOUNTING IN AN ORGANISATION Blog 4 | D1: Critically Evaluating the Role of Accounting in Informing Decision Making Within Complex Operating Environments A Case Study Reference: Hemas Holdings PLC, Sri Lanka

 

Introduction: Accounting in an Age of Complexity

The modern business environment is characterised by unprecedented complexity — rapidly shifting market conditions, geopolitical instability, digital disruption, evolving regulatory landscapes, and the growing demands of diverse stakeholder communities. In this environment, the accounting function is called upon to do far more than produce historical financial statements. It must provide timely, forward-looking, and contextually nuanced intelligence that enables organisations to make sound decisions, manage risks, and create sustainable value. As Seal et al. (2018) argue, the accounting function in complex organisations must act as a strategic partner to management, integrating financial and non-financial data to produce a comprehensive picture of the organisation's value drivers and risk exposures.

Hemas Holdings PLC presents a particularly rich context for critically evaluating this expanded conception of accounting's role in decision-making. As a diversified conglomerate operating across Consumer Brands, Healthcare, and Mobility sectors, with operations spanning Sri Lanka, Bangladesh, and other international markets, Hemas operates in a genuinely complex environment (Hemas Holdings PLC, 2024a). The company has navigated Sri Lanka's most severe economic crisis in decades, pursued international market expansion, invested billions in healthcare infrastructure, and simultaneously committed to ambitious environmental and social goals. This blog critically evaluates the strengths, limitations, and evolving nature of accounting's contribution to decision-making at Hemas Holdings within this complex operating context.

1. The Contribution of Accounting to Strategic Decision-Making at Hemas Holdings

At the strategic level, accounting contributes to decision-making through a range of analytical tools and frameworks. Capital investment appraisal techniques — including net present value (NPV), internal rate of return (IRR), and payback period analysis — enable organisations to evaluate the financial viability of major investment decisions by quantifying expected future cash flows and comparing them against the cost of capital (Atrill and McLaney, 2018). For Hemas Holdings, such analyses underpinned the decision to invest Rs. 1.0 billion in a Catheterisation Laboratory at Hemas Hospitals Wattala, a move that expanded the hospital's cardiac care capabilities and enhanced its competitive positioning in Sri Lanka's private healthcare market (Hemas Holdings PLC, 2025a).

The accounting function's role in informing Hemas's geographic expansion strategy is equally significant. The company's exploration of strategic expansion into Southeast Asia and Africa through mergers, acquisitions, and strategic partnerships — building on its existing presence in Bangladesh — requires sophisticated financial due diligence, cross-border tax planning, and multi-currency financial modelling (Hemas Holdings PLC, 2025a). These are core accounting activities, requiring advanced technical skills and a deep understanding of international financial reporting standards. The accounting function's ability to model the financial implications of different expansion scenarios — accounting for currency risk, regulatory differences, integration costs, and synergy potential — is critical to ensuring that internationalisation decisions are based on sound financial analysis rather than strategic aspiration alone.

Segment accounting also plays a crucial strategic role at Hemas. The group's ability to report disaggregated financial performance for its Consumer Brands, Healthcare, and Mobility segments enables the Board and senior management to identify which segments are creating or destroying value, and to allocate capital accordingly. The Consumer Brands segment's performance during FY 2024/25 reflected the dynamics of volume growth in Personal Care and Beauty alongside volume declines in Home Care and Personal Wash (Hemas Holdings PLC, 2025b), providing management with granular intelligence to guide product development investment and marketing resource allocation. Without segment-level accounting, the strategic conversation would default to aggregate group metrics, masking the performance heterogeneity that is essential for informed resource allocation.

2. Critical Limitations of Accounting Information in Complex Environments

A balanced critical evaluation must acknowledge that accounting information, however sophisticated, has inherent limitations that constrain its decision-making utility in complex environments. The most fundamental limitation is that accounting is primarily backward-looking — financial statements record what has already happened, not what is about to happen. While management accounting tools such as budgeting, forecasting, and scenario modelling attempt to project future performance, these projections are based on historical data and managerial assumptions that may not accurately capture the dynamics of a rapidly changing environment (Weetman, 2019).

For Hemas Holdings, operating in the context of Sri Lanka's evolving post-crisis economic recovery, this limitation is particularly salient. Sri Lanka's GDP growth remained positive for five consecutive quarters at approximately 5.5% (Hemas Holdings PLC, 2024b), and the December 2024 completion of the International Sovereign Bond (ISB) restructuring triggered Fitch Ratings's upgrade of Sri Lanka's credit rating from Restricted Default to CCC+ (Hemas Holdings PLC, 2025b). These macroeconomic developments could not have been reliably predicted from historical accounting data alone — they required qualitative judgement, macroeconomic expertise, and an understanding of geopolitical dynamics that go beyond the accountant's traditional toolkit.

A second significant limitation of accounting information is its inability to fully capture intangible value drivers. Hemas's competitive advantage rests substantially on its brand equity — the "Clogard" oral care brand, for instance, was recently featured in the Sri Lanka and Maldives Edition of Essentials in Modern Marketing by Kotler Impact Inc. as a benchmark for marketing excellence (Hemas Holdings PLC, 2025b). Yet the value of this brand equity does not appear on Hemas's Statement of Financial Position, as internally generated intangible assets are excluded from recognition under SLFRS (SLAASMB, 2024). Similarly, the value of the group's human capital — its 5,380 employees, their skills, experience, and organisational knowledge — is entirely absent from the financial statements. As Seal et al. (2018) note, the growing significance of intangible assets in the modern economy represents a fundamental challenge to the relevance of traditional accounting-based decision frameworks.

A third limitation concerns the potential for accounting information to create a false sense of precision. The Statement of Financial Position presents Hemas's total assets of Rs. 93,723 million as a specific figure (Hemas Holdings PLC, 2024a), creating an impression of exactness that belies the extensive estimation and judgement involved in its preparation. Asset valuations, depreciation rates, provision estimates, and deferred tax calculations all involve managerial judgements that can significantly affect reported outcomes. In a complex, multi-business conglomerate like Hemas, with operations across multiple jurisdictions and business types, the scope for such judgements is substantial, and decision-makers must remain alert to the difference between accounting-reported values and underlying economic realities.

3. Accounting and Risk Management in Complex Operating Environments

One of the most critical contributions of accounting to decision-making in complex environments is its integration with risk management processes. The growing recognition that financial risks, operational risks, and environmental/social risks are deeply interconnected has driven the evolution of accounting beyond its traditional boundaries into the territory of integrated risk reporting (Hemas Holdings PLC, 2024b).

Hemas Holdings's Enterprise Risk Management (ERM) framework represents a sophisticated response to this challenge. The framework embeds accounting-derived metrics alongside operational and strategic risk indicators, enabling the Board and management to monitor the financial implications of key risk exposures in real time (Hemas Holdings PLC, 2024b). The integration of climate risk into the accounting framework — through the adoption of IFRS S1 and S2 sustainability disclosure standards — is a particularly forward-looking development, recognising that climate-related physical and transition risks have material financial implications that must be reflected in financial reporting and strategic planning (Hemas Holdings PLC, 2025a).

The practical application of accounting-informed risk management at Hemas is illustrated by the group's response to the Sri Lanka economic crisis of 2022-2023. As interest rate volatility, foreign exchange shortages, and supply chain disruptions threatened financial stability, the accounting function provided the analytical foundation for crisis management decisions — identifying which cost centres were under greatest pressure, modelling the cash flow implications of different revenue scenarios, and quantifying the impact of currency devaluation on imported raw material costs. The result was a controlled navigation of the crisis, with the group maintaining positive operating performance throughout the period (Hemas Holdings PLC, 2023). This outcome demonstrates accounting's pivotal role not just as a historical record-keeper but as a real-time decision support system in conditions of acute organisational stress.

4. Accounting's Evolving Role in Meeting Societal Expectations in Complex Environments

The concept of accountants' societal responsibilities has evolved substantially in recent decades. The traditional view — that accounting's societal contribution is fulfilled by providing accurate financial information to markets, enabling efficient capital allocation — is now supplemented by a broader accountability paradigm that encompasses environmental stewardship, social equity, and governance transparency (Medium, 2024).

Hemas Holdings's integrated reporting approach embodies this expanded conception of accounting's societal role. The 2024/25 Annual Report's alignment with GRI Standards, the UN SDGs, and the UN Global Compact's Ten Principles signals that Hemas views its accounting function as a mechanism for accountability not just to financial stakeholders but to the broader society in which it operates (Hemas Holdings PLC, 2025a). The group's sustainability assurance provided by Ernst & Young — confirming the reliability of its non-financial disclosures — extends the assurance framework that has historically been applied to financial statements to encompass the full range of the company's social and environmental impacts.

Critically, however, the expansion of accounting's scope to encompass sustainability reporting also introduces new challenges and tensions. The quantification of environmental impacts — particularly those involving complex ecological systems, long time horizons, and uncertain scientific projections — is inherently more difficult than the quantification of financial transactions. The risks of "greenwashing" — presenting superficially positive sustainability metrics that obscure more fundamental environmental or social problems — are real and must be guarded against through rigorous accounting standards, independent assurance, and transparent disclosure of methodologies and limitations (Seal et al., 2018). Hemas's approach of engaging Ernst & Young for sustainability assurance addresses this risk, but the inherent limitations of sustainability accounting remain a legitimate area of critical scrutiny.

5. The Future of Accounting in Complex Operating Environments: Technology and Beyond

Looking ahead, the role of accounting in informing decision-making within complex environments will be further transformed by technological innovation. Artificial intelligence, machine learning, blockchain, and advanced data analytics are already beginning to reshape accounting practice, offering the potential for real-time financial reporting, automated anomaly detection, and predictive analytics that anticipate future financial developments with greater accuracy than traditional historical analysis (GISMA, 2026).

For Hemas Holdings, the company's strategic emphasis on "technology-led transformation" — part of its new operating model aimed at increasing responsiveness and sharpening strategic focus (Hemas Holdings PLC, 2025a) — signals recognition that the accounting function must evolve in step with broader technological changes. The integration of ERP (Enterprise Resource Planning) systems, cloud-based financial management platforms, and advanced analytics tools will enable Hemas's accounting function to provide faster, more granular, and more forward-looking financial intelligence — further enhancing its value as a strategic decision-support function in a complex operating environment.

However, the adoption of advanced accounting technologies also introduces new risks — including data security vulnerabilities, algorithmic biases in financial models, and the risk of over-reliance on quantitative analysis at the expense of qualitative judgement. The professional accountant's role in evaluating, interpreting, and contextualising accounting outputs — applying the ethical framework established by ICASL and IFAC — will remain as important as ever, even as the tools of the trade evolve rapidly (ICASL, 2024).

Conclusion: A Critical Assessment

A critical evaluation of accounting's role in informing decision-making at Hemas Holdings PLC reveals both the profound value and the genuine limitations of the accounting function in complex operating environments. On the positive side, accounting provides the quantitative framework for strategic capital allocation, segment performance management, risk identification, and stakeholder accountability — functions that are indispensable to the effective governance of a complex, multi-business conglomerate. The group's consistent financial performance — including a revenue CAGR of 23.5% and earnings growth of 43.1% in FY 2023/24 (LankaBIZZ, 2024; Hemas Holdings PLC, 2024a) — attests to the effectiveness of an accounting function that has successfully supported sound strategic decision-making.

At the same time, critical evaluation must acknowledge that accounting information has inherent limitations: it is primarily backward-looking, struggles to capture intangible value drivers, involves significant estimation and judgement, and cannot by itself navigate the qualitative complexities of macroeconomic uncertainty and geopolitical risk. These limitations do not diminish the value of accounting — they define its appropriate scope. The most sophisticated organisations, like Hemas Holdings, recognise accounting as a necessary but not sufficient input to decision-making, complementing financial analysis with qualitative judgement, stakeholder engagement, and an integrated understanding of the broader environment in which they operate. In this balanced view, accounting remains one of the most powerful tools in the organisational decision-maker's arsenal — imperfect, but irreplaceable.

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