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The failure to anticipate fraud risks can leave us open to significant financial and brand loss, explains Maureen Kelly. As businesses internationalise and move into new, potentially unknown markets and jurisdictions, the risk of fraud, both internal and external, is increasing. Furthermore, recent developments in anti-bribery and corruption legislation in Ireland means that businesses need to exercise even higher degrees of caution and due diligence as they navigate and explore new opportunities in 2020.    Recent Irish business research undertaken by Mazars Ireland shows that businesses are experiencing financial loss due to occupational fraud and abuse. Of those senior business leaders surveyed, approximately 50% had experienced a loss due to occupational fraud and abuse over the past two years.  The average financial loss was between €10,000 and €20,000, but 12% of respondents suffered losses greater than €500,000. The research shows that the principal causes of this financial loss relate to theft of cash and goods, but businesses also experienced losses due to expense fraud, payroll, invoice fraud and conflict-of-interest issues. The good news is that 33% of the fraud was detected via internal audits, with 25% detected via whistle-blowing/speak-up channels. An internal audit or concerns raised by whistle-blowers are invaluable for detecting fraud and the information provided to businesses by these two channels can then inform the improvement of their internal controls. However, the importance of robust internal controls cannot be overlooked.  What can be done to prepare for – and, therefore, prevent – fraud from happening in the first place? Five critical steps to managing fraud risk Step 1: Ensure the existence of a robust and mature control anti-risk environment   You can do this by: leading with a strong ethics culture and attitude displayed and communicated by those in charge; assigning authority, responsibility and reporting lines for all areas; openly displaying and enforcing policy statements and codes of conduct, particularly the whistle-blowing channels; and ensuring all staff have the knowledge and skill level required to accomplish tasks. Step 2: Carry out a focused risk assessment Identify the areas of fraud risk to your business, estimate the significance, assess the likelihood of the risks occurrence, and decide actions to address those areas of risks. By classifying your specific fraud risks, you can then put systems in place to eliminate or reduce them. Step 3: Ensure adequate controls, technology and due diligence processes are in place and in use Policies and procedures, segregation of duties, physical controls of assets and documents, appropriate authorisation levels and reconciliations remain integral elements of a robust internal control environment. However, organisations need to better leverage technology, systems and data to identify, anticipate and respond to potential fraud patterns and schemes in 2020. Furthermore, due to the anti-bribery and corruption legislation, the importance of relevant training and adequate due diligence on employees, agents, distributors or joint venture partners cannot be overlooked. Step 4: Review the security of your communication and information systems External fraud, including cybercrime and identity theft, can be costly both in the initial impact and the clean up afterwards. Phishing, invoice fraud, identity theft and denial of service attacks can all be financially devastating to a business. Adequate cybersecurity systems and increasing levels of Board and staff training and awareness are vital in its prevention. Step 5: Monitor, review and react If there is no monitoring of the system, you can have no assurance that it is effective, the controls are working, or potential fraud or misstatement is being avoided. A focused review by internal audit, or a more in-depth forensic style audit if your organisation doesn’t have the scale to have a dedicated internal audit team, must be considered. What will be the result? As your business grows and increases its cross-border footprint, by following the above steps your business can prepare for and prevent fraud in order to protect your business and brand. Maureen Kelly is a Senior Manager in Forensic and Investigation Services at Mazars.

Dec 11, 2019
News

By Moira Dunne December is a hectic time of year in work with the parties and end-of-year attitude, so to ensure you have a relaxing break and a head-start on 2020,   here are 12 productivity tips to get you through the holiday season. Set your priorities In December, there are lots of things to get done, especially in these last few weeks. If you don’t have time for everything, be clear about your priorities. Agree this with important stakeholders to avoid any conflict or disappointment. Protect your time Right now, time in work is more limited than usual. Our days are often shorter due to traffic congestion, late nights, and early finishes for Christmas events, lunches with clients, etc. Be ruthless with your time. Spend it on your priority tasks and people. Catch up with key clients Connect with important people before the year-end. Try to find productive ways to do this. Make a quick phone call or send a charity Christmas Card. A quick check-in can really strengthen a relationship for continued collaboration in 2020. Push some events to January There is a lot of pressure to do everything before Christmas. Start asking if some things can be moved to January. This frees up some time now while also energising January, a month when it can be hard to get motivated. Keep meetings short Going into the third week in December, everyone’s time is limited. Now is the time to use productive meetings skills: keep them short and stay on track, have a clear agenda and make decisions and decide actions. Your colleagues will appreciate it, too! Say no sometimes Saying no is one of the hardest skills in business, but it can be the right decision if the request is a low priority. Explain in business terms the reason you are saying no and suggest an alternative if you can. Batch up tasks to save time Our brains work more efficiently when doing the same task repeatedly. Be smart: if you have multiple meetings in town, can you schedule them all for one morning? If you have three client phone calls to make, can you block out an hour to make them all? Similarly, try processing your email responses in bulk at specific times of the day. Avoid commuting Traffic congestion continues to increase as Christmas shopping reaches its peak. Avoid it by working from home some days. Even a few hours at home first thing before travelling into the office later can enhance your focus and productivity. Make a to-don’t list To-do lists are great to provide focus, but it can be frustrating if tasks are not getting done. What stops you, what distracts you? Make a to-don’t list – a list of things you are determined not to spend your time on. It will be easier to notice and avoid them when they do crop up. (And they will.) Stay healthy This is a hard one! Our good habits can go out the window in leading up to the break. Try to include exercise, even on your busiest days: walk to a meeting or the shopping centre, pick reasonably healthy restaurants for get-togethers, and avoid the corner of the office with the tin of Cadbury’s Roses (for as long as possible, anyway…). Eliminate non-essential tasks Push non-essential tasks to January or don’t do them at all. This includes social requests. Do you need to go to everything and meet everyone? Take control, embrace JOMO – the joy of missing out! Make a plan for January On your last day in the office, plan out the first few days back in January. This will give you a clear plan to get you going as soon as you’re back in the office.  A productive December can lead to a restful Christmas period. Enjoy your break, you will have earned it. You can download a free December productivity checklist from beproductive.ie here. Moira Dunne is the Founder of BeProductive.ie.

Dec 11, 2019
News

  You can't be an innovative organisation without fostering an innovative culture. Katie Scott outlines three key elements needed to create the right ecosystem of innovation.  In the current climate of political uncertainty, changing market demands, skills shortage and a changing workforce, businesses of all sizes are seeking to maintain competitiveness, evolve and grow, while managing their day-to-day business demands. ‘Innovation’ has become the mantra for many, and while this is simply a process of focused change, putting creative ideas into effective use to improve products, services and business processes, many organisations fail to realise this opportunity. This is largely due to fear of failure, resistance to change, aversion to risk-taking and a lack of support for creating a culture of innovation. Innovative culture It is not as simple as asking employees to contribute more innovative ideas, creating an innovation strategy or deploying new systems. In order to embrace innovation, it is necessary to check your organisation’s ecosystem is ready. Moreover, you must be prepared that, as with any cultural change, it will not happen overnight. Peter Drucker states, “If you want something new, you have to stop doing something old”. While we cannot argue with that, it is easier said than done, particularly if you are a large organisation that has a long history of adding new initiative after new initiative! Therefore, how can you begin to build a culture of innovation and move away from the ‘that’s the way we always do it’ attitude? There are three key areas where organisations can focus to build their innovation culture: Create a clear strategic rationale for innovation  In order to get employee buy-in, it is important to understand where you are now and determine where you want to be in the future. Understanding your current areas of strength and weakness and getting a sense of staff appetite for innovation can help you to focus on key areas and identify the potential enablers or blockers. Lead by example To foster and fuel innovation at the individual and team level, it needs to be visibly embraced and actioned by leadership. Leadership is responsible for creating and aligning teams around a culture that is open, collaborative and focused on continuous improvement. Appreciate that innovation will require new behaviours, skills and knowledge, so support your people by giving them the confidence, training and resources they need to embrace innovation at all levels. Empower your people Decision-makers at the top are busy running the business, so they should expect the teams below to help drive innovation. Employees at all levels can see opportunities in their own areas that others will miss. Staff should be given permission and feel empowered to challenge the norm and the confidence to fail, learn and improve within clearly defined parameters. In these uncertain times, taking a risk feels counter-intuitive. However, to quote Bene Brown, “Vulnerability is the birthplace of innovation, creativity and change.” Instead of fearing our vulnerability, let’s get comfortable with failing fast, learning and improving, in order to innovate, thrive and ultimately survive. Katie Scott is a Manager of People and Change Consulting in Grant Thornton NI.

Dec 11, 2019
Member Profile

When Marie Claire McDonnell noticed that Irish Chartered Accountants in Toronto were left out in the cold, she started the Toronto Chapter. Now, she wants the new group, and her career in recruitment, to gain momentum. Tell us about your current role. I recruit mid-senior level accountants in mining, real estate, energy and technology industries in Toronto, Canada. Describe your typical day.  No two days are the same in recruitment. The focus of my role is relationship building both on the client and candidate side. I have control and influence over people’s career choices, which is very gratifying. How did your involvement with the Toronto Chapter come about? I have had a lot of success placing Irish Chartered Accountants in Toronto. In a city that networks significantly, I noticed there was no formal networking group for all the Irish Chartered Accountants I meet. When Fergal McCormack and Brian Keegan visited Toronto in March, I jumped at the opportunity to work with the Institute to set up a committee here and kick-start the Toronto Chapter. Our first event in July 2019 was a great success. We had four Irish Chartered Accountants in a panel discussion about their experiences living and working in Toronto.  What are the best and worst aspects of living in Canada? Best: the quality of life, diversity and there is always something fun going on in the city.  Worst: the winter. We get a lot of snow. I like to ski so I enjoy that side of it, but when it is still snowing mid-April, the novelty has well and truly worn off! What are your goals/plans for 2020? I would like to host three successful events with the Irish Chartered Accountants in Toronto Chapter in 2020. Career-wise, I am hoping to gain momentum in the technology industry in Toronto, which has become a major hub for talent. I recently visited the Robert Walters office in San Francisco and realised there are cross-border relationships which can be developed through our partnerships in California.  What’s the best piece of advice you’ve ever received? The early bird catches the worm! I wake up every day at 5.30am, start work at 7am. I feel those golden hours pre-9am are crucial in providing clarity and structure around the productivity of my day. It is challenging to stay organised in recruitment, so if I have that quiet time in the morning to set my goals for the day, it allows me to be more focused. Marie Claire McDonnell is Senior Consultant at Robert Walters, Canada.

Dec 06, 2019
Careers

Chartered Accountant, John Morgan, explains his five steps to becoming a trusted finance business partner. On 22 September 2002, I was in Croke Park to witness my home county, Armagh, win its first All-Ireland Senior Football Championship Final. Two years into my Corporate Finance career with EY in London, it got me thinking: it’d be great to get home to witness Armagh’s inevitable decade of domination! Having completed my Chartered Accountancy training with EY in Belfast, I was given the opportunity to join a newl y formed team in London that focused on pre-acquisition due diligence for private equity clients. I spent two years in that team, working with amazing people on fascinating deals. My favourite aspect of the role was getting underneath the forecasts in the information memo and working with operational management to understand and challenge revenue and cost forecast assumptions. Getting beyond the numbers and dealing with operational management was something I relished, but it was frustrating to never see whether forecast assumptions materialised. I wanted to not only review and challenge such assumptions, but also work with the management team on implementing the plan. Lesson 1: understand the business I then returned home to Northern Ireland to join BT as a Finance Business Partner, which gave me the opportunity to work with the Operational Director to manage a budget and drive business performance. I immediately got stuck into the detail and came up with money-saving opportunities. BT in the early noughties perhaps still had low hanging fruit, but I immersed myself in understanding the business – both from an operational and strategic perspective. In 2003, the Ireland CEO stood on stage at the company’s annual management conference and spoke about the difference broadband would make to both BT and the country. He seemed convinced that this was a game changer, so I took time out of my day job to spend some time with engineers understanding the network. This taught me lesson number one – to be an effective business partner, you must understand the business from an operational and strategic perspective. This helps on two fronts: first, you gain credibility with the senior operational managers you are attempting to influence; and second, you can become more than a number-cruncher and begin to add value. Lesson 2: build relationships A key lesson for me in the early stages was how to manage key stakeholders with different priorities. Learning to balance conflicting interests is crucial, and this manifested itself with my Operational Director and Finance Director. My first Financial Director wrote on my annual performance report: “has a healthy disrespect for traditional views in BT”. However, my Operational Director did not consider my disrespect “healthy”. He felt that I was not working in partnership with him, so be conscious that your stakeholders may have different priorities and react to your recommendations in different ways. So, lesson number two taught me that unless you can constructively work in partnership with operational management, you won’t succeed. What helps in this respect is objective alignment – you should be on the same side; both striving to drive the business forward. Lesson 3: simplify complex financial data Perhaps one of my first successes was working with my operational Managing Director on driving a material improvement in the cost of installing telegraph poles. The key was being able to distil complex data in a user-friendly manner, which helped drive operational decision-making. My superior felt we were inefficient, so I armed him with some simple unitary analysis that articulated clearly these inefficiencies for both the trade unions and our procurement team. This was critical in negotiating better third-party rates and gaining union agreement to outsource the function. So, lesson number three was the importance of translating complex data into simple, operational language that supported decision-making. I’ve always found unitary analysis really useful in this respect. Lesson 4: be relentless and resilient The bigger the decisions you get involved in, the higher the stakes – and in the early noughties, I learned that you don’t always get it right. Mistakes happen and when they do, the best thing you can do is pick yourself up, brush yourself down and move on. So, lesson four centres around the need to be both relentless and resilient. Lesson 5: do less, coach more As the teens progressed, I started to manage bigger teams, and this leads me to my next key lesson: being an effective leader is the key to success in a senior business partner role. In the noughties, I had more of a solitary role. Now, leading teams of up to 30 people, the balance of time changes significantly as I have evolved from a ‘doer’ into a ‘leader’. It is perhaps my biggest challenge, but unquestionably the most rewarding experience of all. So, lesson number five is that, to excel in senior finance business partnering roles, you need to become an effective leader. Conclusion If you master these five points, you will become a trusted finance business partner. This is what separates a good business partner and a great business partner – moving from merely commentating and recommending, to leading and driving decisions, playing a leading role on some key commercial and strategic decisions, building the business case, and being part of the sign-off on big investment decisions. The line between being a finance business partner and an operational manager can get a bit blurred, which is perhaps when it works best – when you are being asked by the business to step in and do things that you feel is a bit over and above the day job. In the mid-2000s, I led a significant acquisition in Northern Ireland. In the late 2000s, I led the fibre broadband investment business case. And over the last decade, I have signed off on BT’s largest public sector customer bids. When I joined BT in 2003, I never envisaged the fascinating work I would get involved in – from the broadband revolution to leading on some of BT’s largest public sector long-term contracts. But perhaps the most rewarding was building, and being a part of a high-performing team. It all worked out perfectly. Well, almost. What ever happened to that second All-Ireland for Armagh?   John Morgan FCA is Local Government & Health Finance Director at BT Enterprise.

Dec 06, 2019
Tax

While Finance Bill 2019 may have seemed to cater to SMEs, Peter Vale highlights where it includes significant measures for international businesses. The headlines surrounding Budget 2020 and Finance Bill 2019 may have left the impression that most of the legislative changes have been focused on domestic small- and medium-sized enterprises (SME), with less focus on foreign direct investment (FDI) and Irish companies with international operations (which may, of course, include SMEs). The reality is that the Finance Bill was packed with provisions of interest for groups with international operations, either inbound or outbound, albeit many of these were expected and hence didn’t attract the same headlines. Here are some of the key Finance Bill measures for international businesses, some of which were expected, and others which came as a surprise. Mandatory reporting As expected, the Finance Bill saw the introduction of  Council Directive 2011/16/EU (DAC6), which covers the mandatory reporting of certain cross-border transactions to home country tax authorities, to be subsequently exchanged between EU Member States. The DAC6 provisions reflect the ever changing global tax environment and follows on from the Common Reporting Standard (CRS), which was a game-changer in terms of providing for a new level of reporting and transparency. Irish taxpayers might feel relaxed about the new provisions on the basis that Ireland already has domestic mandatory reporting rules, although these haven’t had much bite in practice.  The new DAC6 provisions, however, are much wider in reach, covering not just tax-motivated transactions, but also transactions that may have a “potential tax effect”, but aren’t themselves driven by tax avoidance motives. While the new rules only require reporting from August 2020, they apply retrospectively to transactions from 25 June 2018. Intermediaries and taxpayers need to be aware of the scope of the new rules and have measures in place to track and report such arrangements. Anti-hybrid rules The Finance Bill also saw the expected introduction of anti-hybrid rules, effective for payments made after 1 January 2020, and follow on foot of the binding EU Anti-Tax Avoidance Directive (ATAD1). It is worth noting that the anti-hybrid rules apply to payments made post-1 January 2020 – the actual accounting period of a company is not relevant. So, who needs to be concerned about anti-hybrids? Minority sport? The first thing to note is that there is not a de minimis threshold, therefore all companies irrespective of size are potentially within the scope of the new provisions. The rules target a number of arrangements, in particular where there is a “deduction without inclusion” or a “double deduction” as a result of hybrid mismatches, such as a payment being treated as tax deductible interest by the payor country but as a tax-exempt dividend in the recipient country. It is worth noting that just because a country does not tax a payment does not mean that there is a hybrid mismatch. Thus, the payment of interest by an Irish company to a jurisdiction that does not tax interest income will not be a hybrid mismatch, although interest withholding tax may need to be considered. The anti-hybrid rules are complex. While Revenue guidance (due to be published in 2020) is critical, equally critical is that this guidance is drafted in consultation with relevant industry stakeholders so Ireland’s attractiveness is not adversely impacted vis-a-vis other EU countries. Transfer pricing As expected, the Finance Bill introduced 2017 OECD transfer pricing guidelines into Irish legislation. Other important provisions were also introduced, including the introduction of transfer pricing to non-trading transactions (with limited exceptions), the abolition of pre-2010 grandfathering arrangements and the extension of transfer pricing rules to both capital transactions and to SMEs. The extension to SMEs is significant as it will, at a minimum, add an administrative burden to smaller companies. It is, however, subject to a Ministerial Order. The Minister was reluctant to add to the administrative burden of the SME sector with Brexit looming. Bringing Irish transfer pricing requirements in line with 2017 OECD guidelines will introduce some additional reporting requirements for many companies, with master file and local file requirements now in place.   Of note is that the thresholds for master file and local file introduced in the Bill, €250m and €50m respectively, are much lower than in many other countries. This could trigger additional documentation requirements for some large groups. Many Irish groups will also have intra group financing arrangements in place that may not be arm’s length compliant, and these will now need to be reviewed in light of the Finance Bill changes, which come into effect for accounting periods beginning on or after 1 January 2020. Financial Services/property fund changes There were several changes in the Bill to provisions governing the taxation of Irish real estate funds and section 110 securitisation vehicles. The changes for property funds as initially drafted were unexpected. They were wide-ranging and impacted on funds that only had third party debt. At the time of writing, Committee Stage amendments were expected to correct this anomaly and other provisions that could have inadvertently created a double tax charge for some funds. Additional anti-avoidance provisions have been added for section 110 companies, including the broadening of the control test used in determining whether certain profit participating interest payments are tax deductible, and placing the bona fide commercial purposes test on an objective basis, thereby giving Irish Revenue more scope to challenge aggressive securitisation arrangements.   Interest deductibility limitations Under ATAD1, Ireland is obliged to introduce new rules which broadly restrict interest deductions to 30% of earnings before interest taxes and amortization (EBITA). The Finance Bill did not contain any provisions in respect of these new rules, which are now likely to apply from 1 January 2021 onwards.   In summary, Finance Bill 2019 was one of the most significant in recent years, with new anti-hybrid and transfer pricing provisions, and the introduction of DAC6 reporting requirements. These fulfil Ireland’s commitment to being at the forefront in the adoption of international tax changes and bring our tax regime into compliance with international best practice and relevant EU Tax Directives. Undoubtedly, however, these will add further complexity to the lives of tax professionals and in-house tax teams.  Peter Vale FCA is Tax Partner at Grant Thornton.

Dec 06, 2019