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Will companies be able to find the time and resources to focus on sustainability after COVID-19? Laura Heuston is positive that they will. COVID-19 has sent shock waves through the business community with most companies reeling from the immediate impacts. In the short-term, these companies will need to focus on survival – trying to stay afloat, minimise staff layoffs and keep supply chains going. This may mean temporarily diverting attention away from sustainability efforts which, until now, had been gaining traction as the business world realised its potential to lead the transition to a sustainable, low-carbon future. The key question now is, will companies ever manage to find the time and resources to focus on sustainability again? At SustainabilityWorks, we firmly believe they will. The business community had already reached a tipping point where the corporate profit motive and environmental and social agendas were increasingly aligned, and we predict that as soon as businesses are over the initial shock, the COVID-19 crisis will bring the concept of sustainability into even sharper focus than before. Social sustainability issues that have come to the fore during the crisis include the consequences of the gig economy and the advantages of remote working. There is also a clear link between the crisis and climate change as scientists have warned for years that the risk of pandemics is growing as rising temperatures damage fragile ecosystems, which act as 'containment' systems for our planet. The mindset that believes sustainability will disappear from the corporate agenda due to the pandemic is the same mindset that used to underpin the description of environmental, social and governance (ESG) factors as “non-financial”. However, there is an ever-increasing body of evidence that shows just the opposite – that ESG issues have a clear financial impact, with research proving a positive correlation between a company’s performance on material ESG issues and good financial performance. This positive impact is reflected in share price performance and in a lower cost of capital for those companies. Investors know this, which is why investors with over $80 trillion in assets under management have signed up to the Principles of Responsible Investment, the world’s leading proponent of ESG investing. In fact, the pandemic has already been reported by the Wall Street Journal as leading investors to ask more questions about employee pay and benefits, supply-chain management and other ESG priorities. Companies should expect more questions and more focus on these “non-financial” issues post-crisis – not less. And while there is a broad range of ESG issues that attract attention from investors and the financial sector, it is climate change that is really focusing minds. During his time as Governor of the Bank of England, Mark Carney consistently highlighted the threat to global financial stability associated with both the physical and the transition risks of climate change. This led to the announcement of climate stress testing of banks and insurers by the UK financial regulator, while other regulators globally are collaborating on the issue as part of the Network for Greening the Financial System initiative. There is simply no going back on the awareness of these climate-related financial risks at this point – not by the regulators, the banks and insurers they regulate, nor by investors. Finally, there are numerous examples of the current crisis bringing out the best in many businesses, with small distilleries becoming hand sanitiser producers, grocery stores paying staff unexpected bonuses and An Post bringing communities together with various initiatives from free postcards to free check-ins on our most vulnerable citizens. These actions will not be forgotten and they show the important contribution that businesses can make in response to societal challenges. This underscores one of our core beliefs in SustainabilityWorks: engaging strategically on sustainability simply makes good business sense. As policymakers and corporates call for stimulus packages to be “green deals”, the businesses that rise from the ashes of COVID-19 will be the ones that embrace sustainability as part of their core business and, in doing so, lead the emergence of a fairer, greener, more resilient world. These businesses will also become resilient themselves, something which will stand them in good stead for the bigger shocks to business-as-usual that are coming down the tracks from climate change in the coming years.  Laura Heuston is a Co-Founder of SustainabilityWorks, a boutique sustainability consulting firm that offers a unique blend of skills and experience across sustainability strategy, finance, policy and communications.

Apr 17, 2020
News

An economic downturn will be inevitable after COVID-19. How can organisations weather this storm? Having strong ESG risk-management practices in place is key, explains Lorraine McCann. At a time of fragility and loss of life, our sense of what matters changes. Significant events like the COVID-19 crisis force us to reflect and to examine what’s important personally, for our businesses, communities and society. At times when we’re faced with a lot of uncertainty, it is important to think about our purpose, the value we create and deliver, and for whom. For many organisations, sustainability for them right now means surviving; however, as we emerge and begin to recover from the current crisis, purposeful and sustainable direction can help us all navigate the uncertain and potentially winding roads ahead. Sustainability during the 2008 recession While many assumed the sustainability ‘trend’ would be shelved in the last recession, it was quite the opposite. A need to cut business costs created a mindset shift towards operational and resource efficiency that put sustainability centre stage in the recovery. Businesses that managed a much wider range of environmental, social and governance (ESG) risks were more resilient, and more capable of responding to rapidly changing market conditions. Companies quickly realised that focusing solely on financial value creation for shareholders was not enough to protect against the effects of the downturn. Leading with purpose and values, that extend beyond the financial and consider wider societal values, is now a key component in any business growth strategy. It was only through a complete collapse of the financial system that we were able to realise the true importance of sustainability impacts on long-term value creation of business in society. ESG and risk management is critical According to the World Economic Forum (WEF) Global Risk Report 2020, the top five global risks in terms of likelihood are all environmental, including: extreme weather events, climate action failure, natural disasters, biodiversity loss and human-made environmental disasters. Understanding that another recession is upon us, every business should be critically factoring ESG risks into its risk-management function. There needs to be a recognition of the interconnectedness of environmental, social and economic risks, as a failure to do so could result in material business impacts including profit-loss, operational impacts and potentially losing social licence to operate. It’s imperative that ESG is not seen to be separate to the business but integrated and connected in how a company generates long-term, inclusive growth for its shareholders. Strong ESG risk-management practices include: Governance structures for sustainability, ensuring management is responsible for sustainability risk, with the right skillset, knowledge and expertise in the business to appropriately manage this risk; Identification, assessment and management of risk to protect and create value; and Reporting publicly on the policies, practices and performance relating to sustainability risk management. Investors demand information relating to ESG factors In the EY 2018 Global Climate Change and Sustainability Services study of over 200 institutional investors, there was global consensus that ESG information is now critical to investor decision-making, and assessment of long-term value creation. “Investors believe that ESG factors can provide downside risk protection – 89% say that ESG information is somewhat more valuable (80%) or much more valuable (9%) in investment decision-making in a market downturn”. It’s important that organisations are clear on what is material to their business – that is determining which metrics will yield the most useful view of risks and opportunities that drive long-term value. Greater transparency and consistent, comparable data on these topics can also help restore trust and confidence in business at a time when credibility and brand may be at risk. Lorraine McCann is a Senior Manager and Leader for Climate Change and Sustainability Services in EY Ireland.

Apr 17, 2020
News

What does COVID-19 mean for climate change and sustainability? Dr Diarmuid Torney tells us how we can keep the conversation going about a sustainable future despite the pandemic. We are in the midst of an epoch-defining moment in history. The COVID-19 pandemic is a global tragedy, but what does it mean for efforts to tackle climate change and create a more sustainable future? Over the previous 18 months, climate change and sustainability were front and centre in government, business, and society. Greta Thunberg and the ‘Fridays for Future’ global school strike movement had captured the world’s imagination, drawing attention to increasingly dire predictions of climate scientists. Suddenly, climate change has disappeared from the news headlines. The world is understandably consumed by a different sort of crisis. Our current moment is what social scientists call a “critical juncture”. Most of the time, societies are more or less locked into particular economic, political and societal pathways. But moments of crisis – critical junctures – provide spaces for otherwise unthinkable changes in direction, and this critical juncture can provide opportunities for new conversations about climate change and sustainable development. Here are three ways we can take advantage of those opportunities. Managing systemic risk The COVID-19 crisis has laid bare the fragility of our interconnected world and our vulnerability to systemic risks. The pandemic was an unforeseen risk, but the climate crisis is an entirely foreseeable risk. It is right and proper that the focus is currently on covid-19, but in time we will need to reflect on the lessons of the current crisis for managing systemic risk.  Climate change will have far-reaching, indiscriminate, and non-reversible society-wide impacts. We need to learn from the current crisis that governments have a responsibility to manage this risk and pay greater attention to warnings from scientific and other experts. Having been maligned in some quarters in recent years, experts and expertise are in demand once more. Adapting COVID-19 has enforced abrupt changes to how we work and live our lives. Although hugely challenging, many are finding new and innovative ways to adapt to this new reality. Coming out of the crisis, some of these changes should stick, and we should have more confidence in our ability to change our lives to accommodate more sustainable-living practices. We may become more selective about international travel and flexible working, for example, both providing benefits for combatting climate change. Government action and support The state is back in fashion. As a recent Financial Times editorial put it, “Radical reforms – reversing the prevailing policy direction of the last four decades – will need to be put on the table. Governments will have to accept a more active role in the economy.” Governments across the world have intervened in unprecedented ways to support their national economies. So far, the focus has been on supporting workers and businesses that have been required to shut down temporarily, but attention is now shifting to the types of stimulus measures governments will put in place to restart their economies. There is an opportunity to align these stimulus packages around climate and sustainability goals. South Korea did this during the global financial crisis, devoting 80% of its stimulus package to green measures. There are significant risks, as well. Interest in sustainability has historically tended to wane during economic downturns, and government funding may be cut for sustainability initiatives. It is impossible to know at this point which of these futures will prevail. The COVID-19 crisis provides a potential critical juncture, but the outcome will be determined by the decisions we take collectively over the months ahead. Dr. Diarmuid Torney is an Associate Professor in the School of Law and Government at Dublin City University

Apr 17, 2020
Management

How can we lead people through these uncertain times? Wendy McCulla explores how managers can use the four stages of change to better understand and support their teams. COVID-19 is having a profound impact on the way we live, work and interact. The situation is extremely complex and continually evolving. No one can predict what will happen, so how can we support our employees through these uncertain times? Managing the process of any change is relatively straight-forward. Leading people (and their emotions) through that change is what makes the difference between success and failure. Most people do not like uncertainty. More so, a sense of loss of control. Employees may be feeling worried about their current and future job security, and even angry at decisions that management are being forced to make. The Kubler-Ross Change Curve (Denial, Anger, Exploring, Acceptance) is helpful to better understand employees’ reactions and identify how managers can best support them at each stage of the cycle. At the end of each stage, I’ve suggested some questions to think about. Stage 1: Denial When news of COVID-19 started to make the news, it seemed like something that was happening ‘over there’ and would not affect us. However, the situation has rapidly evolved and is now impacting on every aspect of our lives.  Any changes that are being implemented in the workplace need to be clearly communicated to employees. This can be difficult given the speed at which decisions are being made. Use all available channels of communication (team briefings, one-to-ones, emails, intranet) to ensure the facts are being shared. A lack of information causes fear and the grapevine will fill the void with its own versions of ‘the truth’! Ensuring that employee health and well-being are a priority in any decisions being made will help build trust with the team.  Ask yourself: How can I best communicate with my team, so they have the information they need to feel safe? What information do they need to explain any changes in direction? Stage 2: Anger As the reality of the changes in working conditions, workflow and job security becomes clear, employees may express anger. This is a natural reaction to the sense of unfairness of the situation and the feeling of lost control. Talk to your employees and, just as importantly, listen to their concerns and suggestions. Amid all the uncertainty, it is vital to make yourself available to support them. Enable employees to feel heard and valued. Ask yourself: Am I listening to my employees as well as giving them information? How can I role model the behaviours for constructive dialogue with my team? Stage 3: Exploring  As we settle into this new reality, talk to your team to identify how you can improve ways of working and servicing clients/customers. Perhaps employees can be trained in other skills or tasks to help them expand their knowledge and experience during the crisis. If work is slower, perhaps they could be encouraged to watch webinars or listen to podcasts related to their work to spark ideas for improvements. Many companies are now using technology to enable remote working and virtual meetings.  This will have an impact on how we work after the crisis ends. Ask yourself: How can we adapt the way we work? How can we keep employees connected (mentally and emotionally) over the coming weeks and months if many are working from home? What might we be assuming that is limiting our potential? How can we improve how we deliver for our clients/customers?What do they need from us right now? What can we learn from other organisations and industries that will help us evolve and survive? Stage 4: Acceptance  Offer plenty of encouragement to the team and publicly recognise creativity and collaboration (or any of the other positive behaviours you want to encourage). Share ideas for improvement and generate a sense of ‘we’re all in this together’. This is also a great opportunity to review your business strategy with the team and identify possible changes in direction based on what you have learned.  Ask yourself: What can we learn from this experience? Knowing what we do from this experience, what could we do differently to be better prepared for any future big changes? While there is uncertainty in the current situation, it provides us with a great opportunity to pause and reflect on what ‘good’ might look like for the future. As Winston Churchill said, “It is not what happens that defines us, it is how we respond to what happens to us”. Managers who stay connected with their team and work together through this crisis will be best placed to hit the ground running once we get through to the other side. Wendy McCulla is a Leadership Coach at Aspire Learning & Development

Apr 02, 2020
Management

Raymond Donegan and Ted Webb outline the four steps to a successful sale. As a business owner, selling up is probably the most significant decision you will make in your working life. It is a difficult and often emotional process. However, with the right guidance, it can be navigated over a period of roughly six to eight months to everyone’s satisfaction. Four steps, if followed, will maximise the potential for a successful sale. Step 1: Preparation  The preparation stage sets the tone for the sale. At this point, your corporate finance adviser will draft an information memorandum with your assistance. This should be a compelling document, which will generally contain an executive summary and details of: business history; products or services offered; customers and market; future opportunities; overview of management, staff and facilities; and recent and forecast financial information. In addition to drafting the information memorandum, a comprehensive list of potential buyers should be drawn up by you and your corporate finance adviser. It is better to sell a business that is enjoying a period of growth with some suggestion of future growth remaining for the next owner. Also, if you want or need to retire by a specific date, it is best not to leave the sale too late. Specific areas of preparation to address include financial items such as fixed assets, working capital such as debtors and creditors, operating expenses, and shareholder costs. It is also crucial to assess the status of non-financial items, including management structure, intellectual property, tax status, and the business’ online presence. Step 2: Value the business and make initial contact with potential buyers The key drivers of value from a potential buyer’s perspective are the ability of your business to generate cash and its future risk and growth prospects. Several valuation methodologies can be used, including EBITDA (earnings before interest, tax, depreciation and amortisation) multiples, EBIT (earnings before interest and tax) multiples, and discounted cash flow. Once value has been established, it is time to contact potential buyers. The decision on which parties to approach will depend on the nature of your business and the type of sale process you are planning. Generally, the best result comes from a controlled auction process where several potential buyers are contacted. The benefit of this process is that, by the time the sale goes through, you will definitively know the market value of the business. Your corporate finance adviser will ensure that interested potential buyers receive an information memorandum after signing a confidentiality agreement. Prospective buyers then have approximately four weeks to respond with non-binding indicative offers, and once the offers are received, you and your adviser will decide whom to meet. Step 3: Management presentations and preferred buyer selection There is no substitute for face-to-face meetings; this is arguably the most critical stage of the entire sales process. Afterwards, your corporate finance adviser will request revised offers from interested parties. Now, you and your corporate finance adviser will decide on the preferred party. The price will play a large part in that decision, but other vital factors may include the structure of the deal and bidders’ plans for the future. You will naturally prefer to be paid in full immediately, whereas the buyer will prefer to pay over time. Ways to reach a compromise include: Deferred consideration: when an element of the consideration is paid after an agreed period; and Earnout: when the payment of deferred consideration is conditional on achieving specific financial targets such as an agreed level of sales or profits, or non-financial milestones such as renewing a contract. Once a preferred party is chosen, the heads of terms will be negotiated. This is a short document, which details the key financial and commercial terms of the deal. Step 4: Due diligence and negotiations The final stage of the process involves the preferred party undertaking due diligence on the target business, and all parties negotiating the necessary legal documents to conclude the transaction. Due diligence is akin to an invasive audit, but it is a necessary evil. It usually lasts six to eight weeks and covers several areas including financial and tax, commercial, products/services, legal/intellectual property, human resources and pensions, environmental, technical and property. Remember, the potential buyer’s view of your business can be positively reinforced if you can provide the information promptly. After three to four weeks of due diligence, the buyer’s lawyer will produce the first draft of the legal documents that will give effect to the sale. Assuming you are selling a company, these documents will include a share purchase agreement and a tax deed but may also feature other documents.  Conclusion  Selling a business is a complicated, lengthy exercise that most business owners will only do once in their lifetime. There can be a significant difference between a well-run, competitive sale process and a poorly executed transaction. An experienced team of advisers will know the best techniques to enhance value and mitigate risk for you and your business. Only by engaging with such a team can you expect to maximise your position.   Raymond Donegan is Director and Head of Family Businesses at IBI Corporate Finance. Ted Webb FCA is Managing Director at IBI Corporate Finance.

Apr 01, 2020
Management

John Kennedy explains how to turn a casual chat into a steady flow of high-quality clients. A common problem that limits the success of many practices is also one of the most damaging, but happily, it is also one of the easiest to fix. In this article, I will show you how to turn an informal chat into a positive client relationship. When you master this structure, you will be able to manage any conversation so your potential clients will understand how they will benefit from working with you. The self-defeating spiral A typical self-defeating spiral causes significant damage, and it goes something like this: I don’t feel comfortable talking about myself. When I meet potential clients, I often don’t know what to say. I wish I had more clients and more high-quality clients with whom I like to work. I don’t feel successful, so I lack confidence when I talk to potential clients about my practice. For many years, I have focused on identifying what sets high achievers apart. There is overwhelming evidence that the ability to shape and structure a casual conversation is perhaps the single most crucial skill. This skill is not a result of natural talent, charisma or charm – it is a strength that is practised and learned. Successful client conversations It may seem obvious, but a fruitful conversation involves two people taking turns at listening and talking. Yet time and time again, when the pressure of wanting to make a good impression takes over, we make the same mistake. And, odds are, this has happened to you.  It is easy to fall into the trap of believing that your task is to list the many reasons why the other party should become your client. You say more and more about what you think you should tell them until you reach the point – and this can sometimes come frustratingly early – where you run out of things to say or, worse, you keep talking without feeling in control of the conversation as an unwelcome unease inside you begins to grow. Mastering this skill is easier than you think. A fruitful conversation is about listening and talking. You need to understand how to do both effectively and appreciate how each fits together. So, here is the structure of a successful client chat. 1. Prepare The first stage of the conversation takes place when you are on your own. There is no talking or listening, just thinking things through and creating an approach that works. To master the skill of turning casual chats into client contracts, you need to structure your thoughts. You need to understand how best to probe the value your potential client is seeking, the best way to present the value you can offer, and how to propose the next step in what will lead to a long-term, mutually rewarding relationship. 2. Probe The conversation begins here. This stage mostly involves listening and knowing how to guide the other party so that they talk about issues that move the discussion into ‘productive’ territory. Your main task is to keep the conversation casual, interesting to your client, and moving towards an understanding of the value they can achieve by working with you. You do this by asking high-quality questions. As you chat, gently guide the other party through a series of casual questions in a way that helps them clarify their thinking and reach a more valuable understanding of the outcome that is most important to them. The ability to do this effectively is a skill that takes time and practice. However, three fundamental questions form the bedrock of  every successful client conversation: What will success look like? How will you know if we have achieved the success you seek? What is most important to you about achieving that success? You probe your potential client’s thinking by asking these – and related – questions to help them think in a more structured way about their goals. Most clients are unclear as to what they want to achieve, so helping them identify their priorities will encourage them to talk with you more. You don’t do this by telling them how clever you are or by providing all the answers. The real skill and value lie in allowing potential clients to experience your proficiency by helping them structure and organise their thinking. When you master the skill of eliciting the most precise answers possible to these three fundamental questions, you will set yourself apart. By taking this approach, potential clients will experience the value of your expertise, and you will demonstrate that you are focused on helping them define, and then achieve, the success they seek.  These are the firmest possible foundations for a high-value client relationship. 3. Present Only now do you begin to talk more than you listen, and you keep asking questions to maintain focus on the critical issues. In this phase, your task is to help the client see how they will benefit from working with you. You may be inclined to talk about what you will do, but technical considerations are not very motivating for potential clients. Your critical task is to increase their motivation to the point where they decide to work with you. You do this by giving examples, by telling stories of how you helped others facing similar issues, and by focusing on how things will improve. This evidence is already captured in your value menu, where you prepared a store of material that will help your client feel they are in good hands. The stronger they feel about the specific value they will achieve by working with you, the more you will stand out as someone they can trust. 4. Propose In this step, you move the relationship from talk to action. By probing how the other person currently sees things, and how they would like things to be in the future, you are helping them untangle the issues and identify the outcomes about which they feel most strongly. These are the foundations of a strong, trusting relationship. At this point, you may suggest talking further – but before then, you will send a brief note indicating how you can help achieve the success they seek (this is very different to the standard ‘letter of engagement’). The purpose of the note is to confirm that you have fully understood the outcomes your client desires.  A succinct note about the value they will receive will move you from a casual, theoretical chat to a highly practical and highly focused discussion on the specific reasons you should both work together. Like a road journey at night This is likely to be very different to the path you have followed up to now. The traditional, and often ineffective, model tells you that you should outline your expertise at every opportunity; that you should see every conversation as a sales opportunity and sell from the outset. Sometimes this sales “advice” is even more aggressive with outdated jargon that speaks of “closing the deal” or trapping the potential client in the “killing zone”. This is hardly a basis on which to build a high-quality practice with the right clients and high-trust relationships. Instead, the Practice Builder approach outlines the specific steps you should take to help a potential client identify and access the value that is truly important to them. And through a well-structured conversation, you let them experience how you are an essential element in arriving at the outcome they want. It’s like taking a road journey at night. Through your questioning, you help your client identify the destination at which they wish to arrive. You then map out the route and together, you can set off on your conversational journey. You use your questions like headlights, to light up the landmarks and road signs for the next stage of the journey. The critical thing to remember is that you are in the driving seat, choosing the route, and setting the speed – but your client gets to adjust anything that makes the journey comfortable for them, such as opening the window or choosing the music. In this way, the conversation remains a comfortable and stress-free casual chat, but with a clear set of directions, milestones and a destination that you both reach by working together. This approach is fundamentally about helping your client arrive at the success they most value. When you stand out as a master at this, your client will want you on every journey. And they will want to tell all of their friends about you. This is a firm foundation on which to build a successful practice.   John Kennedy is an experienced strategic advisor who has worked with senior management teams in a range of organisations and sectors.

Apr 01, 2020
News

Worrying over what will happen in the future is not a proactive use of time or energy. Pat Divilly gives us two tools that can help manage our stress. At a time where we are dealing with unprecedented levels of external uncertainty, it’s essential that we invest in ourselves. Now is the perfect time to cultivate mental fitness through simple, daily practices that develop confidence, clarity and consistency. A fundamental need for us all is the need for certainty; feeling some level of routine and control. Though this has been thrown up in the air with recent changes in our external environment, we do have the opportunity to bring about more structure and certainty from within.  Mediation and journaling are two very simple tools that I have been encouraging for years to help bring calm to the busy mind.  Meditation Simply put, meditation is about bringing awareness to the present moment rather than living in the future or past. In times like these, it’s easy to fall into fear, which is always a future-based experience; a case of misuse of the imagination. None of us know what's coming in the weeks and months ahead, but it is clear that worry is not a proactive use of our time or energy. As a starting point for meditation, consider setting a five-minute timer and performing the ‘box breath’ for five minutes. For this breath, place a hand on your belly and inhale through your nose, breathing deeply and expanding your stomach. Inhale for four seconds and then hold the breath for four seconds. Now exhale through your nose or mouth for four seconds, then hold for four seconds. That is a box breath. Repeat for five minutes and watch how quickly your body and mind settles. Do not have any expectations about clearing your mind or getting rid of all thoughts. Instead, see this as a chance to calm the body through slow, deep breaths. After a number of days of practice, I think you’ll be pleasantly surprised with how it impacts your feelings day-to-day. For best results, practice for five minutes in the morning and five minutes in the evening. Journaling The second tool worth implementing during this time is the practice of journaling. Most of us have a busy mind. Throw a pandemic and huge amount of change into the mix, and your busy mind can be overwhelmed. Journaling is about taking some of the mental noise from our heads and putting it onto paper to turn mountains into molehills.  Consider spending 10 minutes in the morning and 10 minutes in the evening with pen and paper. Keep it simple. In the morning, write down your top three priorities for the day and three things you are grateful for. These two prompts narrow your focus to what’s working in your life and what’s important for the day ahead. In the evening, write down your mini-wins of the day and what you learned. Confidence comes from seeing our progress but often we move through life so fast we don’t stop to acknowledge what we’ve achieved in the day. Recognising your mini-wins is about shining light on what you’ve done well. Asking the question “what did I learn today” allows us to reflect on what worked and what didn’t work in the day and consider some small changes we could make going forward. The journaling and meditation practices shouldn’t take more than 15 minutes in the morning and 15 minutes in the evening. They are easy to do, but also easy not to do. I do know they will make a great impact in helping you maintain structure, keep you feeling grounded, and provide clarity in unsettling times. Consider giving this game plan a go for two weeks and see what happens!  Daily routine Morning 5 minutes box breathing. List 3 things you are grateful for.  List 3 priorities for the day ahead.  Evening 5 minutes box breathing. Recognise 3 mini-wins from the day. Reflect upon what you learnt from the day.  Pat Divilly is an Executive Performance Coach at PatDivilly.com.

Apr 24, 2020
Personal Impact

As climate-related threats increasingly dominate our environment, attention is now turning to the impact on global financial stability. Mark Kennedy looks at the effect on the financial services industry and how the regulatory landscape is likely to change. On an almost daily basis, we can see the devastation climate-related events have on our world. Yet as communities battle with the catastrophic impact of storms, floods and bush fires, another threat is emerging: how to manage the risk to the global economy and financial stability. The severity of the threat to financial stability has shifted the agenda from whether central banks and regulators should act on the climate crisis to what measures ought to be put in place. While financial institutions can expect a significant increase in regulatory focus, the complexities supervisory authorities now face in monitoring the physical, liability and transition risks posed by climate-related threats creates several challenges to implementation. A global survey of 33 central banks in six regions by Mazars and the Official Monetary and Financial Institutions Forum (OMFIF) highlighted significant hurdles to developing a framework to manage and supervise climate-related risk. They include a lack of climate-risk data at firm level (Figure 1), disagreement over mandate and responsibilities, and a lack of harmonisation on green investment taxonomies.  Financial system exposures For financial firms and investors, the ability to quantify exposure to climate-related risks is vital – particularly as the regulatory dial shifts to a greener investment landscape, where the danger of holding stranded assets is a significant risk for the banking and asset management industry. This shift not only affects their capacity to generate returns, but also their ability to meet capital requirements set by regulators. For insurance companies, climate-related claims or liabilities can be managed to some extent through catastrophe bonds or other financial instruments. However, the growing number and severity of natural catastrophe events also require insurance companies to explore a broader range of tools to manage their natural catastrophe risk exposure more effectively. Failure by financial services firms and regulators to monitor and manage climate risk exposures could result in significant damage to global economies. Also, rising insurance costs and unmanageable claims, asset value destruction, and vastly reduced investment performance could impact the overall stability of the financial system. The question now is: how do we begin to manage these risks? Reaction from regulators As the Mazars report identifies, a consistent approach by regulators to supervise climate risk is still some way off. While central banks are looking to implement models, the sheer scale, speed and complexity of climate risks pose unique challenges for stress-testing and modelling. According to the report, to date, a minority of central banks and regulators surveyed are currently conducting climate-related scenario analyses in their routine stress tests (Figure 2). One barrier to implementation is the growing consensus that conventional macroeconomic models are inadequate. Instead, integrating climate risk scenario analyses into standard stress tests requires drawing from alternative techniques, such as stock-flow consistent and agent-based modelling. There’s a growing appetite for an approach that also factors in the opportunities created as the investment landscape moves from brown to green. Rewarding positive behaviour Initiatives such as the European Green Deal focus on making changes that protect the environment, as well as supporting positive societal and economic change. As investments in clean technology or sustainable projects are given a more prominent platform, there is potential for investment growth and new business opportunities to expand. By rewarding positive behaviour, such initiatives have a significant role to play in reducing the overall risk of climate-related events as societies transition to a greener way of living. Importantly, it also drives positive behaviours at firm level as it encourages the financial services industry to transition business operations towards a more sustainable economic future. Looking ahead, financial firms that embrace green investment taxonomies and promote societal improvements will help to reduce the need for market and regulatory intervention. The impact on reporting As the regulatory landscape reacts and adapts to climate-related threats, CFOs and accountancy firms will need a framework that adopts the right balance of financial and non-financial reporting requirements. While the industry can expect more stringent regulation on stress-testing and modelling specific climate-related scenarios, there is also a need to assess non-financial exposures relating to legislative or practice-led changes on environmental issues. At firm level, this may involve questions on whether a policy change is likely to impact future business strategies and firm sustainability. A standardised approach to categorising different impacts and harmonising definitions is essential. According to the Mazars’ report, “the lack of harmonised definitions is an important deterrent for establishing, in a comparable manner, which activities and sectors should be considered aligned with the goals of environmental sustainability, and therefore to assess institutions’ exposure to climate risk.”  Looking ahead As we move into an era when environmental and societal issues are connected more than ever to the business landscape, it is vital that financial institutions now collaborate and pull together with regulatory authorities and professional bodies to work towards a more sustainable future for all. As a respected global financial hub, Dublin can take the lead on moving the conversation forward and help companies explore approaches to managing climate risk. It is also an opportunity to think about long-term sustainability issues that will help to enhance shareholder value. By asking the right questions, we can begin to implement a framework that not only helps manage the impact of climate-related risk, but also emphasises the opportunities.   Mark Kennedy FCA is Managing Partner at Mazars Ireland.

Apr 01, 2020
Personal Impact

Caroline McGroary explains how Irish Chartered Accountants can work within the UN sustainable development goals framework to empower women around the world. Recent statistics estimate financial literacy rates of Saudi citizens to be just over 30%, compared with other high-income countries, like Ireland, which have rates in excess of 70%. Within this group, women are at particular risk of financial exclusion, with approximately only 40% of Saudi women holding bank accounts, compared to 93% in other high-income countries. To help address this problem, a number of high-profile campaigns have been launched by the Saudi government in the last year to increase the financial literacy of all citizens, with many framing their campaigns under the umbrella of the UN Sustainable Development Goals (SDGs). In my current role as Lecturer in Accounting at Dublin City University (DCU), I have had the privilege of working in our sister campus at Princess Nourah University, Saudi Arabia for seven years, contributing to the education of nearly 700 Saudi women. Utilising the UN SDGs Both Chartered Accountants Ireland and DCU actively encourage its members and staff to engage with the UN SDGs and, with this in mind, we sought to centre student learning around financial literacy. Using the framework of the UN SDGs, we integrated a financial literacy initiative into a final year module on our undergraduate and postgraduate programmes. The initiative had three parts. The first required students to engage in up to five financial literacy workshops, including financial planning, savings, investing, credit reports, money and identify theft. The second part required them to demonstrate how financial education (SDG 4 – quality education) of women in Saudi Arabia could contribute towards gender equality (SDG 5 – gender equality). In doing so, students were asked to consider innovative financial education solutions to help improve the financial literacy levels of four groups in Saudi society: children in schools; women in higher education; women in the workplace; and women in the home. The proposed solutions were showcased at a university-wide event attended by faculty, student peer groups and industry partners. The third part was a hackathon, hosted by Deloitte. At this one-day event, students had the opportunity to develop their financial education solutions further under the guidance of a team of Deloitte mentors. The initiative gained the support and active involvement of a number of high profile industry partners, including the Saudi Arabian Ambassador to the United States, Princess Reema bint Bandar Al Saud, the Rockefeller Foundation, Deloitte, the Saudi Arabian Monetary Authority, the Capital Market Authority, financial planning experts UConsulting and Chartered Accountants Worldwide. Not only have the industry partners endorsed this work, but many refer to it as an example of an ‘impact that matters’. The students have also stated that it has improved their financial literacy skills and knowledge of the UN SDGs – knowledge and skills they can now bring to their families and local communities. This initiative serves as a practical example of how Chartered Accountants can create high-impact initiatives that empower women not just within our own community, but throughout the world.  Caroline McGroary ACA is a lecturer in accounting at Dublin City University.

Feb 28, 2020
Personal Impact

Garvan Callan explains why digital transformation is both necessary and defining for companies and their leaders. If the Olympic Games handed out medals for buzzwords, ‘digital transformation’ would surely bring home the gold. However, the ubiquitous overuse of the term has also removed all clarity from the concept. It doesn’t matter who is to blame, though software vendors and marketing overlords selling digital transformation as the stairway to heaven do look a little guilty. What is important is that we reclaim digital transformation from its superficial buzzword status and fully understand why and, most importantly, how. Full contact – not a spectator sport One of the first pre-conceptions about digital transformation is that it arrives in the cloud, in a box, through an app or in lines of code. While technology solutions play a part, they don’t deliver digital transformation on their own (far from it) but are critical enablers in conveying a modern strategy and ambition. Nor does digital transformation arrive on a PowerPoint deck from a strategy guru or a social media article. One must imagine it, develop it, and make it happen – for your customers, your market and your context. Digital transformation involves a fundamental rethink of how organisations make use of people, processes and technology to improve performance. It is a complete change in how your organisation develops and delivers value to your customers, colleagues and investors. Organisations that truly want to embark on a digital transformation strategy start and end with the customer, creating a working environment that nurtures creativity, drives growth and delivers new arcs of value. The 360° approach Figure 1 depicts a 360° approach to digital transformation, split across five layers. At the core are the processes, which enable the revenue-creating propositions (features, products and services) that are brought to market through the engagement layer. The workplace is the people, tools and environment harnessed to create those propositions, with underpinning technology making it all possible. Processes are at the epicentre of transformation. This is where what is required to deliver your products and services is hard-coded. Therefore, this is also where the costs lie and risks exist. Taking out unnecessary steps (simplification), automating steps through low-cost, mature technologies such as robotics and then digitising value chains end-to-end is a great place to start the transformation. Does this mean it’s not about the customer? Of course not. Listening to what your customers and colleagues say about where the friction lies should drive the change. The most successful transformations start by reducing unnecessary ‘effort’ anchored in processes, and retiring whole products and services that don’t add, or even destroy, value. This not only improves the customer and employee experience (assuming you hold everyone’s hand through the change curve), but also reduces risk and releases capacity for the innovation of new propositions – constellations of products and services that fulfil customers’ desires, developed from customer insights leveraged from process-transformation analysis, and informed by techniques such as design thinking and the value proposition canvas. Digitising value chains also facilitates the capture of data, the fuel that powers continuous improvement programmes and the application of artificial intelligence (AI). Combining new data with AI can support a step-change in the personalisation of marketing and improve sales-funnel conversion, automate back-office processing, and support channels in becoming faster and more efficient for the customer. Executing process transformation also offers brands a range of points with which they can tell the story of change, of building a better business, of listening to customers and responding to needs – message opportunities often overlooked in the transformation trenches. The workplace and technology Empowering colleagues with the right tools and environment, and enough time to manage the complexities across the transformation layers, is fundamental to the optimum workplace. Harnessing the team’s insights and motivation, and liberating them to make customer-oriented improvements, is the defining prerequisite. Creating the enabling conditions for such a journey requires strong foundations, and here’s where technology fits in – not last on the list by any means. Technologists and leaders who immerse themselves in the process, proposition, engagement and workplace layers can then determine the technology required, and the operating model needed, to deliver successful transformation and a thriving organisation. The customer is the touchstone Knowing that you need to implement a digital transformation on this scale is one thing, but where to begin is quite another. Embarking on such a monumental organisational shift can be extremely challenging for even the most experienced leaders. To find a good starting point, become deeply knowledgeable about what your customers want to achieve when they engage with you, about their ‘jobs to be done’. It is not only the marketeers who should have such insight into the customer experience; everyone involved in digital transformation needs to have a forensic understanding of the customer and how your business does (or does not) facilitate them. Now that you know what you want digital transformation to achieve for your customers, you need to roll up your sleeves and ask: Are large organisational changes necessary? Do our teams require re-skilling and re-orientating? Do hard re-prioritisation decisions need to be made? You will most likely answer ‘yes’, but beware of procrastination; the time to start is now. Mobilise the effort by making the desire for better customer outcomes the focus. The customer guiding you on ‘what to do and why’ must be the unequivocal and undeniable touchstone to motivate, guide and, if required in the transformation haze, reset the mission at hand. Getting digital transformation right Since successful digital transformation is a 360° endeavour that spans the breadth and depth of the business, each organisation’s roadmap will be different. That said, there are some common principles to abide by: 1. Gain consensus from the whole team: whether your project/programme involves building the new or enhancing the existing, it’s imperative to have buy-in from everyone involved, leveraging the customer as the touchstone and data as the tinder. 2. Embrace the unknown with adaptive design: embracing an adaptive design and project management approach allows for tweaks to be made to the transformation strategy as needs arise – and they will arise. Remember, you’re building your transformation strategy around humans (customers, colleagues and investors) and humans don’t act in linear and predictable ways. 3. De-risk: delivering transformation and building a customer-centric organisation involves taking more than a few risks. Communicate the ambition and the stretch outcomes you’re working towards. Then de-risk by managing the change activity in sprints of two to three weeks. This supports decision-making, seeing progress or calling failure early and learning quickly. Leaders should allow teams to ‘learn as they do’ and build an environment of self-sufficient innovation. In the long-term, this is a great de-risker: smaller projects equate to smaller risks. 4. Initiate and react: Amazon’s game-changing ‘one-click economy’ has put just about every other industry into reaction mode, attempting to catch up with customers’ expectations. But that doesn’t mean that your whole transformation strategy should be a reactive response to the wider e-commerce forces at play. Get ahead of the game with pre-emptive or first-strike moves to truly future-proof your organisation. Larger, well-resourced organisations that are good at this often use game theory exercises; for smaller organisations, less elaborate scenario planning activities can be equally effective. Is it that easy? If it were that easy, everyone would have done it. Most organisations are trying and a few are thriving; some are just embarking and starting to grind it out, while only a few have yet to begin. But let’s be honest, it isn’t easy. It takes years. It takes vision. It takes resilience and it takes persistence. But it is necessary, and it is defining. As Albert Einstein said, “In the middle of difficulty lies opportunity”.   Garvan Callan is a strategist, innovator and transformation advisor.

Feb 10, 2020
Personal Impact

To create a culture free of groupthink, leaders must first make themselves vulnerable, writes Dr Annette Clancy. Have you ever wanted to speak up in a group, but decided that it was better not to? Or have you ever been sure that your co-workers were making a huge mistake, but felt that you couldn’t intervene to voice a dissenting view? If either scenario sounds familiar, you may have been affected by groupthink. The term was coined in 1971 by the psychologist, Irving Janis, who wanted to understand the systematic errors made by teams involved in collective decision-making. Groupthink occurs when people’s desire for cohesiveness and harmony results in faulty decision-making. Two well-known examples of groupthink are the Bay of Pigs invasion in 1961 and the Challenger Space Shuttle disaster in 1986. In the Bay of Pigs example, Janis describes the men surrounding John F. Kennedy as “one of the greatest arrays of intellectual talent in the history of American government”. There were individual dissenting voices among those men when President Kennedy gave the order for the invasion. Yet, when brought together, the group dynamic prevented them from disagreeing. The formal investigation into the Challenger Space Shuttle identified a technical fault in the o-ring, which led to the disaster. However, it also referenced “a serious flaw in the decision-making process leading up to the launch”. Concerns about the o-ring had been circulating in NASA months before the accident, but nobody took action. So, how can you spot groupthink in organisations? Janis outlined the following symptoms: 1. Invulnerability Members of the decision-making group share the illusion that they are invulnerable. This leads them to become overly optimistic and to make risky decisions. They don’t pay attention to warning signs. In the case of the Bay of Pigs Invasion, Kennedy was under the illusion that he could keep secret the fact that Cuba had been invaded by the United States – even after the news leaked to the media. 2. Rationalisations Victims of groupthink ignore warnings and begin to create a rationale to defend why they ignored the warning in the first place. This entrenched position reinforces the group’s illusion of invulnerability. 3. Morality Victims believe that they are behaving morally and doing the right thing. This allows the group members to ignore the ethical or moral consequences of their decisions. They create, therefore, a new morality out of their groupthink position. 4. Stereotypes The group splinters and the victims of groupthink stereotype those who are not in their group by denigrating them as stupid or not as good as them. In doing so, they reinforce their own identity. 5. Pressure Victims apply direct and indirect pressure to any member who expresses doubt about the group’s illusions. Uncertainty, individuality and questioning are extinguished. 6. Censorship Members censor their views to conform. 7. The illusion of unanimity Because nobody speaks out, everybody believes that there is unanimous agreement. How to avoid groupthink Janis’s optimal solution was that members of senior teams should rotate the role of critical evaluator. He also added that the director should accept the frank exchange of views. The best way to avoid groupthink is to welcome healthy dissent and disagreement. Conflict isn’t always a bad thing. Assigning somebody to be devil’s advocate can often introduce a welcome alternative perspective. Leaders who want to change a groupthink culture must lead from the front. Nobody is going to make themselves vulnerable or step out on a ledge because a leader has decided that “we’re not doing groupthink from now on”. Changing a culture of groupthink requires deft and sophisticated leadership that is tuned into the emotional tone of the organisation. A leader who makes themselves vulnerable first, who is willing to hear criticism and act upon it, and who makes it safe for others to do so without retribution or punishment will go a long way towards making their organisation groupthink-free.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

Feb 10, 2020
Personal Impact

How can organisations keep the passion going for D&I? Dawn Leane explores how businesses can do more to successfully deliver their D&I programmes.   Diversity and inclusion (D&I) seems like a simple concept: while we are all different, we are all equal. So why has D&I become such a headache for some businesses? Organisations invest significant resources into D&I programmes, such as creating specialist roles, publishing results and setting up employee groups. However, these often fail to deliver the expected return on investment. Without results, organisations can begin to experience diversity fatigue. People become tired of ideas that don’t gain traction and employees can become sceptical that D&I is little more than a PR exercise.   Creating meaningful change To create meaningful change in an organisation, there are a few things you can do: Diagnose the specific D&I challenges the organisation is facing instead of just rolling out a standard set of programmes or initiatives. Find out what issues need to be addressed and how to measure them successfully. Are the organisation’s D&I programmes and initiatives authentic? Unconscious bias training and inclusion workshops can sometimes be implemented in order to mitigate complaints or, when poorly designed, can treat participants as if they are intolerant, which is ultimately counterproductive. Resist the temptation to tag everything as D&I. Most employees don’t want to be labelled as ‘diverse’ even in a positive way as it can create a sense of ‘otherness’. Make D&I relevant to everyone in the organisation. D&I initiatives often focus exclusively on diverse groups and fail to engage a wider audience of people. This can mean that functional and business unit leaders do not know how to support D&I within their individual areas. Embedding diversity, inclusion and belonging requires an organisational culture change – D&I values and associated behaviours must become part of the organisation’s DNA. This can only happen, however, when there is a sustained focus over a long period of time. Often, small changes have the biggest impact. Developing successful D&I programmes is not a one-size-fits-all approach, it is much more nuanced; organisations and the people who work for them are complex and dynamic. Individualised training An individualised D&I training, which involves a combination of coaching and mentoring, can be hugely beneficial to organisations. These sessions create the space for individuals to talk openly about their challenges and ask questions which they may not feel comfortable doing in a group setting.  A coaching conversation elicits, without judgement, the individual’s attitudes, beliefs and any of the issues or questions they may have. A mentoring conversation then takes this further to identify specific actions and behaviours that will make a difference. In my experience, forcing the D&I agenda in an inauthentic manner only serves to make people know which boxes to tick to be compliant. It doesn’t change attitudes or lead to sustainable change, which is essential for D&I to be successful in any organisation. Dawn Leane is Principal Consultant at Leane Leaders, Developing Inclusive Leadership. She will deliver a workshop on Leadership for Professional Women as part of Chartered Accountants Ireland's CPD programme on 25 March.

Jan 24, 2020
News

How can SMEs prepare for the severe economic shock that is going to hit? Ger Foley outlines how businesses can adapt and continue in a different way. I will not pretend to be an advisor who has all the answers for business owners on this. I absolutely don't. However, as a business owner myself, I can relate to all the uncertainty that business owners are facing. Short-term actions Things are clearer when viewed in front of you – on a spreadsheet or even just on paper – it doesn't matter what you use, but it is essential for business owners to make the financial state of their business visible. This will help with the decision-making process and will continue to be critical in the future. You should approach this by: Determining the cash reserves of the business. Finding out how much is owed to you from customers, and what exposure you have to debtors that are unable to pay in the short-term. Finding out the sales pipeline or order book for the short-term (three to six months). Risk profile this pipeline based on the customer, their industry and how their business might be impacted. Determining what the profit margin will be on certain sales. Finding out the current fixed weekly/monthly costs of the business – rent, lighting and heating, insurance, etc. Ignore wages/loan repayments for now. Establishing your payroll cost on a weekly/monthly basis. Determining business loan repayments on a weekly/monthly basis. You are now armed with data to allow you to make decisions. It may be possible to defer or get some extension from suppliers concerning the fixed costs mentioned. The banks will help, although this situation is evolving clarity is needed on exactly what this help will look like. Contact your bank and tell them you are trying to understand your position and will need support. Request a holiday or some other short-term reprieve from your loan repayments. Have a very transparent and open conversation with your team regarding payroll. Allow them to look at the numbers and ask for suggestions or input to the discussion. Longer-term actions We are in for a severe economic shock in the short-term. We are all in the same boat. All we can do in the immediate term is to survive but, more importantly, help each other and our communities. Business owners need to have practical positivity and approach the next chapter with the same level of enthusiasm they had when they started their business. Businesses have been built to where they were pre-COVID-19 so they can be built again. Will they look the same? Possibly not, but the SME sector is excellent at being agile. There are certain approaches that can be followed by the business community: Show leadership as business owners in following HSE advice and return to work protocols. Support their local economy where possible by using local products and services. Local businesses able to operate also need to support the community, e.g. ease of access, quality of service, coming up with innovative ways of ensuring the community has access to the products and services they want. How do you make your product or service relevant in these new circumstances? Businesses that remain strong have a responsibility not to take advantage at this time. They need to pay suppliers quicker than they have previously. Local and national government need to continue to help business owners with whatever supports are needed. We need a period where SME owners can focus on reinventing and adapting their business without the immediate pressure of cash flow and liquidity concerns. Over the coming weeks, as we understand more about what the medium-term future environment will look like, all business owners are going to have to consider their business models and how they can adapt to a new environment. Ger Foley is a Partner at Comerford Foley.

May 21, 2020
News

The hospitality sector has been hit hard by the COVID-19 pandemic. Adrian Crean explains how, with innovation and forward-planning, this sector can overcome the challenges it faces. As a well-known boxer once said, “Everyone has a plan until they get punched in the face”. March’s lockdown announcement saw the hospitality and food service sectors decimated, a sector that employs 260,000 people, over 10% of total employment, and significantly supports regional employment. According to the CSO, 70% of these businesses ceased trading temporarily or permanently. Protecting staff, minimising ‘cash burn’ and managing liquidity became the immediate priorities. Even with the phased re-emergence from lockdown, it’s clear that things will be much different to before. The health crisis has become an economic crisis, and many businesses will not see a return to their 2019 levels until 2022, at earliest. Others will not return at all. Businesses are having to think, plan, adapt and act fast. The impact of COVID-19 Higher unemployment, less disposable income, reducing consumer confidence and much lower overseas tourism numbers will have a significant impact on the hospitality and food service sectors in the months ahead. If our own domestic travel restrictions could be safely lifted during June rather than July, it could provide a meaningful and much needed domestic tourist season. As it stands, however, significant planning and investment is being invested to give customers and staff the reassurance needed that the sector will be employing the highest operating standards in a safe, hygienic and welcoming environment – even if it comes at a cost. For example, the implications of social distancing on businesses are enormous. Michelin starred chef, JP McMahon, recently highlighted that at his Aniar restaurant in Galway, setting a two-metre distancing rule in the restaurant will see capacity reduced by approximately two-thirds. Even a one-metre distance will see capacity reduced by one-third. Social distancing in restaurant kitchens and back of house will result in simpler menus and reduced staff numbers. These SMEs will have accumulated four months of debts without any trade and face many more months at subdued levels. Businesses will not be financially viable without burden-sharing on fixed costs, especially rent and rates. Landlords, local authorities, government, and business will all need to participate. Innovating In times of great crisis, we also see great innovation. Customers will need to see a renewed emphasis on value for money. People will be more careful where and how they spend their discretionary income. All businesses should be considering three tiers to their offer – value, mid-tier and premium. The adoption of click ‘n’ collect, curbside collection, grocery and delivery are great examples of channels that hospitality and food service businesses have opened to allow them to reach their customers, but partnering with delivery aggregators is expensive. Charges typically range between 20% and 30% of sales value. This might be manageable of it’s 10% of your business but not at 50% of it, as businesses are now facing. Home working is here to stay. With office capacities reduced by 30% to 40%, expect businesses to rethink their location strategies. This will benefit more suburban and regional locations. Also expect to see leases with rents pegged to turnover becoming the norm. They are a far more equitable solution. Lastly, businesses must invest in their brands. Authentic and memorable storytelling that excites and engages their customers communicated across the right platforms has never been as important. As CS Lewis said, “You can’t go back and change the beginning but you can start where you are and change the ending.” Adrian Crean is a non-executive director with LEON Ireland.

May 21, 2020
News

In these uniquely challenging circumstances, how can accountants support non-profits? Patricia Quinn and Paula Nyland tell us that thoughtful and clear-eyed planning is needed to mitigate the challenges facing these organisations. Stories from the non-profit sector can paint a bleak picture of services threatened, vulnerable people at risk, fundraising decimated, and mature non-profit businesses facing unprecedented challenges to their viability. The emergency €40 million funding package provided by Government for the non-profit sector will go a ways towards buying some much-needed time, allowing these non-commercial businesses to take stock, regroup and renew their operations. If you look at the thousands of non-profits listed on Benefacts public website, you can see that the sector is highly diverse. At one end, there are heavily staffed health and social care service providers that derive most of their funding from the State in exchange for providing essential services. At the other end, there are thousands of small, local associations and clubs that rely mostly on donations and volunteer effort. These are uniquely challenging circumstances for non-profits and accountants have an important role to play in supporting them – whether as professional advisors or as voluntary Board members. As analysts of sector data, these are the kinds of situations Benefacts has encountered: Dependency on fundraising and donations is high, with almost €0.9 billion reported in the most recent financial statements of all the companies in Benefacts Database of Irish Non-profits. The pandemic has decimated traditional interactive fundraising in its many forms – whether event-driven, church gate collections or calling to homes to sign up to direct debits. Some high-profile campaigns have mitigated this, such as Pieta House, which raised €2 million after a push on social media, but this is only a third of the €6 million raised by last year’s ‘Darkness Into Light’ walk, with no alternative project to fill the €4 million gap. Online fundraising simply does not have the same impact. Many non-profits do not hold an adequate level of reserves. A good rule of thumb accepted by some Government funders is 10 weeks of operational expenditure. Sadly, few non-profits enjoy this level of security. In fact, many Government funders actively discourage the holding of reserves, with the result that several non-profits operate a ‘hand-to-mouth’ existence in terms of cash. Although the cost base of larger non-profits reflects the labour-intensive nature of their work, Benefacts analysis shows that in the case of many smaller non-profits (i.e. less than €250,000), non-payroll expenditure amounts to some 70% of their cost base. This means the COVID-19 subsidy will be of limited value. The demand for services is higher, and the costs of delivery will increase with the cost of delivering care with social distancing restrictions still active. This will have far-reaching effects in homelessness services, respite, residential care, and many more service areas dominated by non-profits. In the voluntary housing sector, income support payments have helped maintain rent payments but, without a further injection of funding, it will become harder to meet the demand for housing given the likely consequences for the coming recession for the building sector. Inevitably, the current focus is on the immediate issues, but for the medium-term, thoughtful and clear-eyed planning will be needed. Directors and trustees need to be looking at cash flow projections, potential increases in demand, and commitments to continued government support. Without this, sector leaders are telling us that tough decisions may be needed to cut services as early as Q3 2020. Although the emergency fund is very welcome, many organisations will need an early commitment of future government funding into 2021 and beyond to maintain essential services. The alternative could be closures, with all the unthinkable consequences for the most vulnerable in our society.   Patricia Quinn is the Managing Director of Benefacts. Paula Nyland is the Head of Finance at Benefacts.

May 14, 2020
Strategy

How can business leaders and entrepreneurs take pole position after COVID-19? John Stapleton explains how they can thrive in uncertain times and drive competitive advantage from the emerging new normal. The Irish Government issued its Roadmap for Reopening Society & Business over a week ago. So, Ireland has a plan. Sometimes plans raise more questions than answers – but it is a plan nonetheless and a lot more than many other European countries have in place. For business leaders in general, particularly entrepreneurs, any form of a plan is a good thing. A plan delivers clarity. A plan removes (at least some) uncertainty. This plan comes with lots of caveats (e.g. that infections and death rates remain under some degree of control) but businesses can at least now figure out some scenarios of how to prepare for recovery and re-instigate their businesses given the enforced eight-week hibernation. I can imagine financial directors and controllers up and down the country have been pumping out spreadsheets outlining scenarios ‘X,Y,Z,’ given the different effects the lockdown relaxations will have on their particular business and how quickly they can take advantage of the new business and market ‘freedoms’. While some industries have been more affected than others, all our feeling the impact of COVID-19. My industry is food and drink. Many think this has been booming during COVID, but it depends on your route to market. If you supply food service (e.g. hospitality/restaurants/events), you have been in a very deep hibernation. If you supply retail, it is a mixed bag. It’s all going to be a different story for each business across all sectors. One thing for sure is business will not return – ever – to what it was like in January or February. Everyone’s behaviour has been significantly and suddenly affected. While the rules are about to relax and, with them, our behaviours, many new attitudes will stick, at least in part. Just like empty retailer shelves in March were not really driven by panic buying, but rather by every shopper placing a few extra items in their basket (because everyone was cooking at home significantly more). This shows that a slight shift in behaviour by many people can have a profound effect; ultimately, we all need to figure out what this means for our industry and our business going forward. Working within the new normal One thing that unites all entrepreneurs, however, is that we are used to adversity. We court adversity – even in the good times. Entrepreneurs also tend to be quite good at seeing the opportunity in uncertainty and turning that uncertainty into competitive advantage. The status quo favours the corporate, who has the resources to drive efficiencies and growth in more certain and predictable times. Entrepreneurs are much more agile and can react and take advantage of new market forces. The real trick for entrepreneurs now is to understand what is coming round the corner – to begin to define the “new normal”. How many people will continue to work from home – just one day per month more than they did before? How many people will continue to work out at home to something they streamed on YouTube in the last few weeks? How many businesses will decide they don’t need such a large, swanky office in the centre of town and down-size, move to the suburbs or decentralise? How many businesses will reduce travelling to physical meetings and move to web-conference? Do you really need to physically be at that quarterly meeting in New York, or will an annual visit do just as well while the rest are held on Zoom? You only need many people doing a few of these things 5% of the time to move to a “new normal”. These days, I work with a range of small, early-stage businesses. My message to them is that the Government’s plan is great (and it is great), but the Government doesn’t run your business. That’s your job. This is the time to take control of your business’s destiny. Take the time to define what the “new normal” means for your industry and position yourself to take best advantage of this shift. Entrepreneurs are agile, so play to this strength. Entrepreneurs thrive in uncertain times, so take the opportunity this presents to get to into pole position to be able to kick on purposefully and drive competitive advantage from the emerging new normal. You don’t need to be the best in the world; you just need to be better than your competition (who haven’t recognised the new normal yet). John Stapleton is an entrepreneur and speaker. He is also a business adviser for Bord Bia.

May 08, 2020
News

As exit plans for the COVID-19 lockdown start to emerge, businesses need to focus on how best to manage the ‘new norm’, says Teresa Campbell. Remote working became normal for thousands of office workers in recent weeks as businesses turned to modern technologies to continue operating during the COVID-19 lockdown. As restrictions are lifted, a priority for businesses in the coming months will be to provide a safe environment for employees and customers. However, it will also be important to not lose sight of the overall culture within the business. Undoubtedly, the quick shift to remote working has caused anxiety within workforces. The right culture within a business needs to embrace this change, recognise the new challenges employees are facing and provide the right level of support and encouragement. As working from home is likely to continue, at least for some workers, this will be a new challenge for businesses whose culture up to now may not have involved managing remote teams. Good communication will be more important than ever with regular check-ins between managers and their teams. Team engagement mechanisms will also be needed – for example, virtual team meetings, virtual coffees and other social interactions. This is important to ensure that staff do not feel isolated and everyone feels part of a team. While technology is the key enabler of remote working, it also presents risks that need to be identified and managed. Homeworkers may be targeted by cybercriminals seeking to gain access to an employer’s network, routers may be attacked, data may be compromised, or video conferencing security may be breached. IT teams will likely need additional resources to protect data, defend against cybercrime and ensure policies are up-to-date and communicated to staff. Returning to the workplace Employees may feel anxious about returning to work while there are still cases of COVID-19 in the community. Employers will need to be sensitive to these concerns and put procedures in place for a phased return of staff. At a practical level, office spaces may need to be reconfigured to accommodate physical distancing between workstations, in meeting rooms and common areas like canteens and coffee stations. Perspex screens between workstations may need to be installed along with hand sanitising stations. Staggering return dates and working hours may also be necessary, depending on operational needs.  Looking to the medium- and longer-term, businesses may need to move away from open plan, accelerate the adoption of new technologies, and introduce processes such as thermal screening to monitor employees and visitors and keep workplaces safe. Changeable working environment Retaining culture within the “new normal” workplace will have to recognise that the new working environment will be a mixture of home, office and online. Interacting with staff through the use of collaborative tools, supporting staff with more flexible work patterns, and communication practices will all be key to enable staff to adapt their personal work structure and routine, which will ultimately be productive and effective. The most successful businesses will adapt quickly to the new norm and the challenging demands COVID-19 presents, by putting measures in place over the coming days and weeks, positioning their business to respond faster than competitors to the rise in demand, once restrictions are lifted. Teresa Campbell is the People and Culture Director at PKF-FPM Accountants Limited.

May 08, 2020
News

Business is never going to be the same after COVID-19. How can we prepare for the aftermath? Eamon Murphy offers us lessons to cope with the future ‘new normal’. I was working in Milan when the authorities announced the lockdown of a few small towns in the Lombardy and Veneto regions in late February. The action was designed to prevent the spread of the virus to the industrial north of the country and beyond. It was a sunny Sunday afternoon and the square outside Milan’s famous Il Duomo cathedral was filled with tourists (some masked) and well-fed pigeons. The Milan fashion week and three Serie A matches had just been cancelled. I did not feel that I was sitting in a front row seat watching the start of a pandemic outbreak, but I was. Since then, I have returned to Ireland and have witnessed how this most democratic, pernicious virus has planted itself among us without any sign of leaving. Governments around the world have struggled to respond to the scale of the health and economic collapse. It is a wartime endeavour with the frontline shifted to attack the most vulnerable ­­– the elderly in nursing and care homes and those who are already dealing with health concerns. The economic impact has been swift and brutal. Thriving enterprises have seen turnover fall to zero overnight. In Ireland, the numbers dependent on state support has rocketed to over one million. All conventional economic forecasts have been jettisoned in favour of scenarios – educated guesses as to how bad the deficit, unemployment and contraction might be. This is where we find ourselves in early May – just two months after the first tentative Italian lockdown. We are unsuspecting innocent travellers who find ourselves caught up in this terrible car crash of history. As professionals in business, we have no choice but to confront our historic appointment. There will be a post-COVID phase and it’s time we prepare for our ‘new normal’. I have been working remotely for the past few months and would like to offer the following lessons from lockdown: Do not assume that your business post-COVID future will be just like it was in the past. Events of this scale always leave behind great change. Even if you think your business will not change, your customers and supply chain will. Act now. Do not wait for the crisis to end. Normal business rules have been suspended. Be bold, imaginative and innovative. Create your own future. ("What did you do in the Great War, Mr Joyce?" "I wrote Ulysses. What did you do?") Help is available. Maximise assistance from the Government schemes and agencies – wage subsidy, unemployment support, Strategic Banking Corporation of Ireland loans, Sustaining Enterprise fund and financial planning grants. Find someone to talk to. Cash trumps everything. Forecast early and often. Remote working works. Trust your staff to work from home. (Right now, you may have no choice). Ask yourself if you really need all that office space when this is over. Online meetings are not the same as in-person meetings. They are filled with peril for wafflers and the unprepared. We miss the social interaction cues. These meetings require more than an effective broadband and technology. Above all they need an effective chair with excellent listening skills. Go online and find Andrea Bocelli singing on Easter in the empty Duomo di Milano. Soul music. Eamon Murphy is a member in business and of Chartered Accountants Interim Managers.

May 06, 2020