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Can you bring your organisation into the future?

The unprecedented disruption of the past two years has transformed the way many organisations operate. The question is: how adaptable is your business, and what happens if you can’t keep up? Paul O’Donnell has five tips to help business leaders embrace transformation. As firms slowly remove the dust sheets and move beyond this extraordinary and disruptive pandemic period, two potential futures emerge for firms and their employees. In the first of these two futures are those organisations intent on returning to the pre-pandemic workplace. Their employees are likely to experience difficult working conditions, outdated work practices, and eroding culture. In the second category are those firms that see a future in which there is no going back. They understand that we have never before undergone a period of such collective transformation in working arrangements, cultural practices, applications of technology and business value propositions. These businesses will not only respond to new demands, but will also create new markets. Their leaders will re-purpose resources and pivot to new ideas over the next 18 months. Their employees will experience real innovation, considerable learning, and meaningful opportunity. The difference between these two types of organisation is agility — the ability to think differently and decentralise decision-making — and it is in the agile organisation that the best talent will want to work. In this environment, leaders will take what they have learned during the pandemic and blend it with the best of their existing work practices. Here are five questions for leaders to consider as they figure out how to make their organisations more responsive to the changes brought about by the pandemic. 1. Who led your firm during this extended crisis period?  These are not necessarily the senior employees in your firm, but those key influencers with a reach that extends throughout your organisation. You may want to consider them for future leadership development. They are the people who bring others with them by demonstrating resilience, raising morale and showing commitment and adaptability. Which of your senior “leaders” let you down, failed to deliver consistently, or kept away from the fire? These are the people you need to move on. 2. How will you ‘de-layer’ your organisation?  Adaptable companies are flat structured. Information moves freely, enabling fast decision-making and error correction. No matter what your organisation chart says, you are a hierarchical firm if you tolerate egotistical leaders. They are driven to avoid any change or action they perceive may diminish their status. To be a flat structured, agile organisation, only hire leaders with humility. 3. Does your organisation make good use of talent-on-demand solutions?  The speed at which the shutters came down on the economy, as the pandemic took hold, meant many essential projects were shelved overnight. If these projects are still relevant to the business, get out of the blocks and have them delivered by hiring contractors. Additionally, bring in contractor support for operational HR or HR project delivery. Don’t wait until essential people services fail, creating down the line problems for your customers and other critical stakeholders. 4. What is the most creative move your firm has made during this crisis?  For many leaders, struggling with current challenges makes contemplating the future version of their business almost impossible. That said, innovation is at the heart of adaptation. What has your firm learned to do more efficiently? What has changed for your clients and how is that impacting their needs now? 5. How has your workplace changed for the better?  Learning needs to be fun and change set up as a challenge. Some of the more complex issues to be managed centre around formal and informal organisational design, particularly if you incorporate hybrid working. How will you create structure and effective operating practices for employees in the future? How will you replicate the essential social elements of your culture and maintain a high-productivity ethos? Engaging employees in addressing these difficult questions can elicit productive solutions. Unlike previous global economic shocks, there are not many ready-made answers to these new challenges. Leaders who lean on their employees to work out how they can most effectively get from where they are now to where they want to be next, will have the greatest outcomes. Paul O’Donnell is the CEO of HRM Search Partners.

Feb 18, 2022
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Embedding a culture of integrity

While many organisations stand proudly behind their ethical ethos, there is always room for improvement. Julie Fenton tells us how important it is to embrace technology and new ways of working to ensure a genuine culture of integrity. Most Irish organisations set out to conduct their business with integrity. Indeed, most senior leaders believe their organisations adhere to the highest ethical standards. It is only when they measure those aspirations and beliefs against independent benchmarks that potential weaknesses and shortcomings are exposed. The EY Global Integrity Report revealed that many organisations find gaps between what they say is important and how they behave. This 'say–do' gap can have severe implications in critically important areas like employee engagement and customers' perceptions of the organisation. Bridging that gap can present challenges for even the most well-resourced organisations. Integrity is not simply a question of laying down rules and protocols; it must permeate the organisation's culture. Organisations that successfully build a culture of integrity take more than a 'tick box approach' to compliance. Senior people lead by example, engage with their teams, and follow through on any issues that may arise.  For a high integrity culture to thrive, values must be shared across every level and function within the organisation. Those values must include a commitment to a high degree of transparency and zero tolerance for transgression. There are several steps leaders can take to embed a high integrity culture. Act at speed to address issues Data-enabled and robust fraud and corruption risk assessments are essential tools for protecting your organisation. Still, these assessments will be of little value if they are not followed up with prompt action to address any weaknesses or poor behaviours uncovered. Take a human-centred approach While they may facilitate it, systems and processes do not commit fraud. Even the best and most rigorously enforced compliance frameworks can be compromised without a strong culture of integrity. Unlock the power of your data Many organisations see the growth in data volumes as a threat due to the increased compliance obligations placed on them by GDPR. This is the wrong way to look at it. More data means more power to combat fraud. Organisations can apply analytics and other technologies to use their data to detect irregular behaviour, assist in its investigation, and guide future measures to prevent recurrence. They can also use their data to support their sustainability journey and environmental, social and governance reporting. Prioritise education ahead of training Training people on the implementation of processes and procedures is important but does not encourage the behaviours that will support the integrity agenda. Training must be augmented by communication and education, ensuring everyone understands why integrity is critically important to the organisation's success. Implementing these actions can not only help to embed a culture of integrity in organisations but can also add to the bottom line. Organisations that leverage data analytics and technologies such as artificial intelligence to monitor integrity performance and gain insights into anomalous events and behaviours can move beyond compliance to create long-term value for the business. Julie Fenton is Head of Forensics & Integrity Services and Global Operations and Talent Leader Forensic & Integrity Services at EY.

Feb 18, 2022
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Irish insolvencies and the recovery ahead

As restrictions ease and businesses fully open again, what does the future hold for Irish insolvencies? Ken Tyrrell explains.   Given the hardship businesses have faced over the past two years, a rise in insolvencies in Ireland would be no surprise. A recent PwC report examining 18,000 business failures over the past 17 years sheds further light on the current state-of-play for companies around the country.  Measuring the correlation between key economic indicators and other trends with rates of insolvency, the report found that Government pandemic supports saved at least 4,500 Irish companies from going bust during the pandemic, representing an average of 50 companies per week during the period. A new enhanced measure for business failures developed as part of the research identified the ‘insolvency rate per 10,000 companies.’ When looking at business failures per 10,000 companies per county in Ireland, Kilkenny had the highest number of insolvencies in 2021, with 25 business failures per 10,000. Dublin ranked second with 24. Cork averaged 12 failures per 10,000 companies. Irish insolvency rates Overall, the Irish insolvency rate (number of liquidations and receiverships per 10,000 companies) stood at 14 in 2021, down 87 percent from its 2012 peak of 109 per 10,000 companies. The arts and entertainment sector was the most heavily impacted last year, with 85 insolvencies per 10,000 companies. Other sectors to feature at the higher end of the scale included travel and transport (47) and health (36). The research shows that retail (8), hospitality (16) and construction (15) had a much lower than expected rate of insolvency, an indicator that Government supports targeting these job-intensive service sectors were effective. At the other end of the spectrum, analysis of the report shows that the lowest insolvency rates per 10,000 in 2021 were in the information and communications, professional, scientific and technical sectors. This is likely due to the strong performance of FDI-heavy sectors, and the ability of people employed in these industries to transition to working from home during the pandemic.  Comparing the Irish results with those of our UK neighbour, Ireland’s rate of liquidation in 2021 (11 per 10,000 companies) was significantly lower than the corresponding UK figure of 26. The analysis also revealed that, over the past 17 years, the liquidation rate in the UK has historically trended 35 percent higher than in Ireland. Debt overhang of at least €10 billion  The pandemic and its successive lockdowns have certainly resulted in many businesses struggling to survive. PwC estimates that there is currently a debt overhang of at least €10 billion among SMEs in Ireland, made up of warehoused revenue debt, loans in forbearance, supplier debt, landlords, rates and general utilities.  Small Company Administrative Rescue Process (SCARP)  Based on the relatively low rates of business failure in the retail and hospitality sectors during the pandemic, it is clear that many of the 4,500 companies buoyed by the Government’s COVID-19 supports are in these sectors. While they have not gone bust, many are on life support and will need additional financial support to repair their balance sheets as the service economy fully reopens. Some businesses will agree to new terms with lenders and trade suppliers. Others will need to repair their balance sheets proactively. Many of these companies will need to restructure their debts and will look to formal processes such as the Government’s recently launched SME restructuring SCARP process, as well as traditional processes such as examinership. I expect to see a step-up in restructuring activity throughout 2022. As businesses recover and the economy fully reopens, critical areas for review will be liquidity, working capital and new funding avenues to finance growth.  Ken Tyrrell is Business Recovery Partner at PwC. Read the full PwC report.

Feb 18, 2022
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Digital marketing checklist for accountants

Staying on top of the latest marketing trends in a digital age is essential for any company. Mary Cloonan outlines several ways you can keep ahead of the curve. As a professional services firm, it's crucial to ensure you are putting your best foot forward in digital marketing. The digital age has made it very easy for clients to find the services they need immediately. And you're not just competing against other professional services firms in your area –  you're competing against every business, big and small, that has an online presence. When it comes to digital marketing for accounting firms, there is no one-size-fits-all approach. Every firm is different, and each firm will need to tailor its marketing strategy accordingly. However, a few general tips can be helpful for all professional services firms. The empty chair Let's begin with an exercise that will help you to better understand your target audience. Imagine you are sitting at your desk with an empty chair opposite you. Picture your ideal client seated in that chair. What are their personality traits and interests? What do they care about? What kind of services do they need? How are they finding information? What are they reading? Once you have a good idea of who your ideal customer is, you can begin to tailor your marketing efforts accordingly. You want to make sure that your brand and messaging resonates with them, and that you are easily found online when they need your services. Search for your business online One way to gauge how well your digital marketing is working is to search your name and firm after clearing your internet cache. If you’re not happy with the results, then it’s time to make some changes. You may need to focus on search engine optimisation (SEO), create more content, or invest in paid advertising. It may even be an issue with your website design or user experience. Whatever the case may be, it's crucial to identify and address any weaknesses that your online presence may have. For example, Google will often rank businesses higher in search results if they have a complete and up-to-date Google My Business listing. Take the time to fill out all of the information requested, and post new content on a regular basis. Ask for online reviews Professional services firms should aim to build Google reviews. When clients leave positive reviews about your firm, it will help to boost your ranking in search results. Plus, it assists in increasing trust and credibility among potential clients. You can ask clients to leave a review on Google by providing them with a link. These reviews are useful for your website as testimonials, when doing proposals or tenders as validation of your engagement with clients. Don't forget about LinkedIn LinkedIn can be a powerful tool for marketing professional services firms. It's a great place to share your content, connect with potential clients, and even generate leads. If your target audience includes businesses, it’s wise to ensure you have a strong profile. Use LinkedIn to its full potential by creating a solid profile, sharing relevant content, and connecting with as many people as possible. Your contact details on your LinkedIn profile must include your email, telephone number, web address and office address. LinkedIn can also be a great way to build your firm’s brand. You can do this by creating a LinkedIn firm profile. Administrators to the firm account can invite their personal LinkedIn connections to follow your page, which is a useful way to harvest personal connections from multiple individuals. Regular posting, tagging, and hashtags When it comes to digital marketing for accounting firms, one of the most important things you can do is post regularly on your social media accounts. This includes sharing fresh content, tagging people and companies in your posts, and using relevant hashtags. Pay-per-click advertising Paid advertising can be a great way to generate leads and focus on robust marketing strategies for service providers. You can use pay-per-click (PPC) advertising on Google AdWords, Facebook Ads, and LinkedIn Ads. When setting up your PPC campaigns, make sure you target the right keywords and use relevant ads. You should also track your results and make changes as needed. Hiring a reputable digital expert is highly recommended to get help with all these aspects of marketing. Review analytics and your progress One of the most critical aspects of digital marketing is regularly reviewing your analytics and progress. This will help you determine what's working and what's not and make changes as needed. It's also a good idea to set some goals and track your progress towards these goals. This can help you to stay on track and ensure that you're making progress. Use expert copywriters and digital gurus Last but certainly not least, you may want to consider hiring expert copywriters and digital gurus. This can be a great way to get help with your marketing efforts and ensure that you're doing everything possible to reach your target audience. With marketing, it's essential always to learn and evolve with the times. Make sure you stay up-to-date on the latest digital marketing trends and make best use of them to ensure your firm’s success. Mary Cloonan is the owner of Marketing Clever.

Feb 11, 2022
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Getting the job with a growth mindset

Tara Higgins demystifies the growth mindset and provides tips on how to best demonstrate your growth mindset in interviews. We hear the term ‘growth mindset’ more and more these days, and it has even become part of some mission statements. But what exactly is a growth mindset, and why is it important? What is a growth mindset? A growth mindset is often incorrectly defined as an inherent trait. Many people believe that if you are positive, flexible, open-minded and enthusiastic, you are showing that you naturally have a growth mindset. The reality is that a growth mindset means something entirely different. The good news is that it can be both taught and learned. Psychologist Dr Carol Dweck developed and popularised the term “growth mindset" in her 2006 book, Mindset: The New Psychology of Success. She describes it thus: “In a growth mindset, people believe that their most basic abilities can be developed through dedication and hard work – brains and talent are just the starting point. This view creates a love of learning and a resilience that is essential for great accomplishment.” She describes the core of the growth mindset as: “The passion for stretching yourself and sticking to it, even (or especially) when it’s not going well, is the hallmark of the growth mindset. This is the mindset that allows people to thrive during some of the most challenging times in their lives.” Why is a growth mindset so important? It’s helpful to look at the opposite of a growth mindset – a fixed mindset – to understand why having a growth mindset is so important, not just for an individual but for any organisation. A fixed mindset is where you believe that your talent and intelligence is static, that you are born with a certain level of ability and unable to improve your levels over time. Workplaces that cultivate a growth mindset culture are often more innovative, inspired, efficient and have a more positive outlook that encourages new ideas. Employees in a growth mindset culture take more risks and demonstrate growth throughout their careers. Growth mindset in interviews Because of this drive to create a growth mindset culture, organisations often look at how new hires can demonstrate their growth mindset during the interview process. Here are a few ways you can do that: Give examples of how you have learned something from scratch, be it a new language, how to build a macro on Excel, etc. Highlight how you have successfully completed a new task you had never done before despite being out of your comfort zone. Demonstrate examples of times you were resilient and kept problem-solving when something challenging came up at work. Show your commitment to continuous learning by outlining courses you have completed since qualifying. Highlight the goals you have set for yourself personally and professionally, and outline your plan to achieve them, showing motivation. Discuss any failures or shortcomings from the past and what you will do differently in the future. Demonstrate how you embrace feedback and view it as an opportunity to learn. Ask solid and well-formed questions to show you are inquisitive and eager to learn more. Tara Higgins is an Associate Director with Barden Cork.

Feb 11, 2022
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Seven ESG themes to watch in 2022

While 2021 was a big year for ESG pledges, climate ambitions and keeping the 1.5°C target within reach, 2022 will be the year of action. Russell Smyth outlines the seven ESG themes we will likely see this year. The global emphasis on environmental, social and governance (ESG) issues increased significantly in 2021 among governments, NGOs, the business sector, and other stakeholders. Given the remarkable momentum achieved last year, mainly stemming from the run-up to, and discussions at COP26, we expect the ESG growth trend to continue apace in 2022. Here are seven ESG themes we expect to see throughout the year. 1. Moving beyond the pledges At the close of the year, more than 2,000 companies worldwide had set or committed to setting emission reduction targets in line with the Paris Agreement climate goals through the Science Based Target initiative (SBTi). At COP26, global leaders agreed to the Glasgow Climate Pact, securing a near-global net-zero with over 90% of world GDP now covered by net-zero commitments. These actions have kept the 1.5°C target alive, but 'its pulse is weak', as stated by COP26 president Alok Sharma. In the year ahead, there will be increased pressure and scrutiny on corporates and countries to deliver on these (often vague) commitments, with regulators and stakeholders seeking transparent and robust evidence of tangible action, quantifiable progress, and interim targets well in advance of 2050. Companies failing to act on their climate and broader ESG goals risk suffocating the already weakening 1.5-degree target as well as experiencing the expanding impact inaction will have on business continuity. 2. You've got to bring your supply chain with you For companies, a key opportunity to deliver effective change in 2022 sits within their supply chain. Supply chain emissions, or so-called ‘Scope 3’ emissions, are typically the most difficult emissions for companies to track and influence depending on the complexity of their supply chain. However, tackling them can be transformational for corporate climate action. This stems from the fact that supply chain emissions often significantly outweigh a company's direct emissions – on average, supply chain emissions are 11.4 times that of operational emissions. Decarbonising Scope 3 emissions will require a rethink and possible redesign of current value chains but also provides a significant untapped opportunity in the drive towards a net-zero carbon economy. 3. Quantifying climate risk The corporate ESG agenda has to date focused on quantifying and reducing the impact companies have on the environment (e.g. carbon emissions, waste production). Now, however, the focus is shifting to the impact of ESG, particularly climate change, on companies. This will include quantifying, in monetary terms, both physical risk (e.g. flooding risk to factories) and transitional risk (e.g. new regulations, changing consumer sentiment) to a business, driven by the requirement to report against frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD) and investor demands. This will involve moving beyond qualitative assessments of climate and environmental risk to the provision of quantified and financially-based risk assessments to inform investors on the business's risk profile and assist management in business planning and strategy. 4. ESG reporting is coming of age The ESG disclosure and reporting rhetoric has been dominated by the challenges posed by the proliferation of competing metrics and, subsequently, the lack of consistency in measurement and disclosure. In 2022, however, a tipping point has been reached, and the next phase of ESG reporting is unfolding rapidly. This includes: EU Taxonomy: A new type of classification system which establishes a list of environmentally sustainable economic activities. The Taxonomy will require financial market participants and companies to disclose their climate change mitigation and adaptation performance in a comparable way by the start of 2022 and other environmental objectives by January 2023. The Task Force on Climate-Related Financial Disclosures: Provides a framework for companies to issue climate-related financial information. Corporate Sustainability Reporting Directive (CSRD): CSRD will come into effect in December 2022 and will entirely replace the NFRD. The proposed changes made by the CSRD include the extension of reporting requirements to include additional categories of companies and the inclusion of the 'double materiality concept'. International Sustainability Standards Board (ISSB): The ISSB is tasked with developing mandatory corporate ESG disclosures. 5. Biodiversity Biodiversity is fundamental to long-term business survival. Businesses depend on highly-functioning ecosystems for important inputs into their production processes and essential services like air, soil and water quality. This year will see the global biodiversity conference, COP15, take place in China after two years of delay due to the pandemic. The conference aims to set a Paris Agreement-style global goal for nature, with many organisations calling for a worldwide goal for businesses to be "nature-positive." A nature-positive world requires no net loss of nature from 2020, a net positive state of nature by 2030, and full recovery by 2050. To mitigate impacts on biodiversity, businesses are asked to avoid and reduce pressures on nature loss, restore and regenerate, so that the extent and integrity of nature can recover, and transform underlying systems to address the drivers of nature loss. It will be easier for companies to solve these issues by setting science-based targets for both nature and climate.   6. The emergence of the green consumer According to the Harvard Business Review, consumers want more sustainable products, but when faced with them, they don't consistently buy them and "keep reverting to old, habitual behaviour". The tide seems to be changing in 2022 as consumers become more aware of how individual actions can be part of climate change mitigation. In addition, governments are increasingly pressuring businesses to nudge consumers towards making that sustainable purchase. 7. The role of the circular economy In 2022, all businesses should investigate measures for enhancing waste management, increasing product durability and quality, and seek to involve recycling/take-back schemes for product end-of-life. These methods, among others, are examples of how companies can begin to implement circular economy principles into their day-to-day processes to become a more sustainable business. In Europe, the Commission has estimated that adopting circular economy principles could increase EU GDP by 0.5 percent by 2030 and create an additional 700,000 jobs. In the context of Ireland, EPA estimates suggest a 5 percent material reduction in the 100 million tonnes used annually could correspond to an annual €2.3 billion opportunity. In December 2020, Ireland launched its first Whole of Government Circular Economy Strategy, in which it estimates that annual savings of €2.3 billion could be achieved by boosting Ireland’s circularity. Russell Smyth Sustainable Futures Partner in KPMG.

Feb 11, 2022
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What’s the goal for 2022?

After two years of lockdowns, restrictions and anxiety, Ireland is opening up. Three members explore how their goals have changed – both personal and professional – in 2022. Jennifer Nickerson Owner Tipperary Boutique Distillery Limited In 2021, our goals were focused on survival. We had been hit hard by COVID-19 and were trying to keep our heads down to make sure that we would make it through the year. Everything was about existence. Our focus has definitely changed in 2022. We are thinking about growth and opportunities; the conversation is about breathing life into new ideas and developing critical markets. We have some fantastic product ideas and interesting distillation projects, but I think the most interesting and novel opportunity will be tourism in 2022. Our distillery has been operating for over a year now but hasn’t been open for tours. I think the opportunity to welcome visitors will allow people to understand our distillery and allow us to tell our story naturally. We are an entirely authentic business, a true field-to-bottle distillery, and people will be able to experience this for themselves when they visit us. My main challenge this year is both personal and professional. I will be coming back into the business from maternity leave with fresh ideas and will need to figure out how to make these work with a small child in tow.  I poured my life into Tipperary Distillery for six years and barely took a day off – I took a laptop on every holiday and even worked on our honeymoon. We have been lucky to get a good crèche space for our little boy, but I’ll need to work smarter this year to make everything happen for our business and still be present for our baby when he needs me. In some ways, COVID-19 has helped in this regard, setting the stage for more online meetings and showing how much we can achieve remotely, but I still see this being the main challenge as we try to find a new normal. I’m feeling hugely optimistic about the year ahead. There are so many opportunities as life begins again in 2022, and while some challenges will crop up as we emerge back out into the post-COVID world, for us, they bring infinite possibilities. Mark Lawther Assurance Director EY I think it’s safe to say that we all hoped 2021 would be the year that we managed to emerge from the pandemic. While things didn’t work out that way, I feel a real sense of optimism as 2022 gets underway.  While challenging, the great ‘work from home’ experiment has genuinely proved just how effective we can be when working remotely. Before COVID-19, I wouldn’t have considered the possibility of delivering complex global audits in an entirely remote way! But by using cutting-edge digital technology and integrating that into our audit processes, we were able to continue to provide high-quality audits, enhance the way we look at risk and offer unrivalled insights to our client throughout the process. We haven’t just adapted our working approach with clients, we’ve also had to modify how we work internally. We have a fantastic culture of collaboration at EY, and of course, we are a training firm, so a lot is learned by observation. Having fewer days in the audit rooms meant our newer staff had fewer opportunities to learn by osmosis from senior colleagues, so we were mindful that we had to find creative ways to continue to nurture junior talent. Leveraging the latest tech, we were able to find plenty of opportunities for people to learn from each other while tapping into our extended networks to help people make valuable contacts.  My hope for 2022 is to fully embrace hybrid working and give our newer team members greater access to the ‘on the job’ learning that I was lucky to benefit from in my early career.  Overall, when reflecting on the past two years, the most significant benefit of the disruption has been the opportunity to be much closer to those that matter at home. I have spent two years at home on time for dinner with my kids, and my travel and commuting time has been virtually zero. As we move into 2022 and adopt a new hybrid approach to work, I plan to keep these benefits going a few days a week. Isabelle Cairns Tax Manager James Hardie International Finance DAC 2021 brought with it a new role in a new organisation, and although it’s been a year, we haven’t yet been working in the office at full-team capacity. Mastering the balance of the hybrid work model and building strong team connections are worthy challenges that lie ahead for businesses and their employees. The most significant change from last year is the specificity of my goals. What was previously pencilled in for ‘one day’ has now been given an actual timeframe. A positive taking from the pandemic was having time and space to reflect on what matters, which, in turn, helps decision making going forward. Working in tax in a growing global business, combined with the ever-changing international tax landscape, certainly keeps one on their toes! Right now, navigating international tax reform and its associated implications across business operating jurisdictions is a key focus. While some things are out of our control, it’s great to get back into planning for life beyond lockdown. Now that international travel is on the cards, adventuring to far-flung destinations is something I look forward to. Climbing Mount Kilimanjaro, a long-term resident on my bucket list, is a more realistic prospect this year. In 2022, I look forward to in-person meetings and other opportunities to connect face-to-face with colleagues.  Personally, I hope to get my foot on the property ladder. Aside from, I have signed up to cycle the Ring of Beara with a group of friends. Two very different challenges, both of which I look forward to with a degree of apprehension.

Feb 09, 2022
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Time up for CAPM?

Could the underperforming Capital Asset Pricing Model be replaced by a new, shinier model? Cormac Lucey examines the theoretical contender – the Holistic Market Model. For decades, the Capital Asset Pricing Model (CAPM) has been the foundation stone of modern financial theory. Its cost of capital formula is routinely used to estimate the corporate cost of capital. And that, in turn, is used to value companies. It lies at the base of the architecture of asset allocation models and “efficient frontiers” that dominate investing today. The trouble is that the CAPM doesn’t work very well. Actual returns bear only a limited relationship to the CAPM’s predicted returns. The CAPM is a bit like a banger of a car that is still driven by an impecunious student. They don’t drive the car because it’s any good – they drive it because it’s the only car they’ve got. Modern finance sticks to the CAPM even though it isn’t very good for the simple reason that it has nothing better to put in its place. But that may be about to change. Jacques Cesar of the consultancy Oliver Wyman has spent the last five years working out an alternative to the CAPM. He and his firm have introduced the Holistic Market Model (HMM), which they describe as a radically inclusive blend of finance, accounting, analytics, economics, history, and sociology that explains the stock market’s past performance and frames the future. The HMM involves rejigging several key finance variables. Earnings The HMM moves EPS (earnings per share) from GAAP to what are called “Buffett earnings”. This refers to the surplus that can be distributed to shareholders once all reinvestments needed to keep the business going have been made. When Cesar applies a cyclical price-earnings multiple to the revised earnings numbers, the market is revealed not to have been as extremely cheap as it appeared in the 1970s and 1980s, and not as expensive as it appears now. Discount rate Cesar comes up with a Really Truly Risk-Free Rate (RTRR), which is the current risk-free rate converted into real terms by subtracting inflation expectations. It also removes what Cesar calls a “Treasury Risk Premium”, which reflects changes in the incentives to buy bonds. Equity risk premium Cesar reckons we can account for almost all differences in the equity risk premium (and therefore all variation in the valuation put on stocks relative to bonds) using five factors: first, business cycle and sub-cyclical variations in economic and financial risk – a quantitative risk-aversion indicator shows where market crashes will happen; second, inflation falling outside the ‘Goldilocks’ zone – extremes of inflation and deflation cause problems for equities; third, intergenerational increases in risk aversion driven by long secular bear markets (like the one from 1929–1942); fourth, “imperfect risk arbitrage between equities and Treasury bonds” – the equity risk premium tends to be even higher than it should be when the RTRR is extremely low, like it is today; and fifth, a factor that explains periods of speculative excess. Supply and demand for equities Recent decades have seen ageing populations and increased inequality in the developed world, both of which have sustained increased demand for equities. Model the moves in supply and demand for equities successfully, and you can capture an important influence on share prices. Oliver Wyman is now publishing a series of detailed research papers explaining and validating its analysis. Key questions that the model poses for the next decade are: whether the four-decade decline in the RTRR will be reversed; whether inflation will remain in the Goldilocks zone; and whether a change in the regulatory regime will put pressure on corporate profit margins. Maybe the world of finance is about to get a theoretical car it likes driving, as opposed to one it has to drive for lack of a better alternative.   Cormac Lucey FCA is an economic commentator and lecturer at Chartered Accountants Ireland.

Feb 09, 2022
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Driving consistency in sustainability reporting and standards

With an increased demand for sustainability reporting, many have called for a consistent approach driven by consolidated reporting. Dee Moran explains recent developments and what it means for organisations. Historically, business performance was measured through analysing financial statements. However, non-financial information is becoming increasingly important to corporate stakeholders for understanding how a business addresses environmental, social and governance (ESG) issues. Several regulations, voluntary frameworks and standards, and a substantial amount of guidance have provided a structure for the measurement and reporting of this information. In many jurisdictions, mandatory disclosure requirements have been introduced in law.  However, the lack of comparability and consistency makes it almost impossible to compare entities, and cross-framework mapping is difficult and costly. Consequently, many stakeholders have called for a consolidation of sustainability reporting standards to increase the reliability and comparability of corporate reports by companies on ESG issues across the world. Two significant sustainability reporting developments were announced in 2021: the proposed EU Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB). Both proposals include ambitious timeframes for their introduction. This is unusual in a standards development process, as typically changes happen over a more extended period allowing for lengthy consultation periods and a testing period to carry out impact assessments. The speed of progress, in this case, is a strong indicator of the perceived urgent requirement for new standards, but it also takes into account that these are not starting from scratch but building upon existing frameworks and voluntary requirements.  EU Corporate Sustainability Reporting Directive In April 2021, the EU adopted the CSRD, intending to replace the current Non-Financial Reporting Directive (NFRD) implemented in Ireland and the UK in 2017, and has now been adopted into national law by all EU countries.  The CSRD will improve the reporting requirements for all the ESG elements. It is expected that the new directive will apply to approximately 50,000 companies in Europe, compared to the NFRD, which applies to about 11,000 entities. The directive will apply to large companies that meet two of the following three criteria: 250+ employees; €40 million+ turnover; and €20 million+ total assets. The proposed directive includes the concept of double materiality. This requires an entity to report on the sustainability risk from two perspectives: how sustainability factors affect the company (financial materiality); and the company’s impact on society and the environment (societal and environmental materiality). It will be mandatory to disclose the assessment of this materiality. Further guidance on this concept is expected when the standards are published. The proposed directive requires more information to be disclosed on targets, strategy details, the role of the board and senior management, and intangibles and adverse impacts connected to the company and its value chain. It specifies that qualitative and quantitative information should be disclosed and include forward-looking and retrospective information and cover short-, medium- and long-term horizons. Reporting should be in accordance with the EU Taxonomy Regulation and, if applicable, in line with the Sustainable Finance Disclosure Regulation. The European Financial Reporting Advisory Group (EFRAG) has been tasked with developing EU sustainability reporting standards. The timelines for implementation are ambitious, with draft standards expected by June 2022. Depending on negotiations in the EU Parliament and European Council, the Commission could adopt the first set of reporting standards under the new legislation by the end of 2022. That would mean that the disclosure requirements would apply from January 2023, with the first reports in 2024, covering the financial year 2023. According to the proposed Directive, sustainability must be included in the management report rather than the currently common practice of issuing a separate sustainability report. The report must also be digitally tagged and prepared in XHTML format per the European Single Electronic Format (ESEF).   Concerning statutory audit, the proposal introduces a general EU-wide assurance requirement for reported sustainability information for the first time. To ensure the reliability and accuracy of sustainability reporting, the European is initially proposing that companies would seek limited assurance for reported sustainability information. Global standards and disclosures The other significant development in 2021 was concerning global sustainability standards. In 2020, the IFRS Foundation (the Foundation) issued two separate consultations: one focused on the demand for global sustainability reporting standards and what role the Foundation might play in its development; and the other focused on amendments to its constitution that would enable the creation of an international sustainability standards board. A significant number of responses to the consultations have satisfied the Foundation that there is strong support for both initiatives. In one of the major announcements at COP26 in November last year, the Foundation confirmed the creation of the ISSB.  The Foundation also announced it had completed the acquisition of the Value Reporting Foundation and the Climate Disclosures Standards Board (CDSB). These will merge into the new board, and the acquisitions will be completed by June 2022. It is very encouraging that the organisation is not starting from scratch and, instead, is building on the experience of these organisations, as is the fact that it will also build on standards developed by the Task Force on Climate Related Financial Disclosures (TCFD). This expertise and experience will assist in the creation of standards in a timelier manner.   The Foundation also announced the publication of two disclosures prototypes prepared by the Technical Readiness Working Group (TRWG), a working party set up by the ISSB. One prototype is climate-related, while the other focuses on general sustainability-related financial information disclosure requirements. The general requirements for disclosure of sustainability-related financial information prototype are inspired by IAS1: Presentation of Financial Statements. The four pillars of the TCFD’s recommended disclosures are as follows:  Governance – the governance processes, controls, and procedures the entity uses to monitor and manage climate-related risks and opportunities; Strategy – the climate-related risks and opportunities that could enhance, threaten, or change the entity’s business model and strategy (including how it informs strategy, the impact of climate-related risks and opportunities on its financial position, performance, and cash flows, as well as on the resilience of the entity’s strategy); Risk management – how climate-related risks are identified, assessed, managed, and mitigated by the entity; and Metrics and targets – the metrics and targets used to manage and monitor the entity’s performance in relation to climate-related risks and opportunities over time. The draft standard includes a requirement to disclose significant risks and opportunities of the entity, a definition of materiality to be used, a consistent approach for the disclosure of information about significant sustainability-related risks and opportunities and guidance on the provision of comparable and connected information. The climate-related disclosures prototype sets out the requirements for identifying, measuring, and disclosing climate-related financial information. It applies the approach for the disclosures set out in the first prototype and applies to:   (a) climate-related risks the entity is exposed to, including but not restricted to: (i) physical risks from climate change (physical risks); and (ii) risks associated with the transition to a lower-carbon economy (transition risks); and (b) climate-related opportunities available to and considered by the entity. In common with the SASB standard, cross-industry and industry-specific metrics have also been incorporated into the prototype. Standard-setting cooperation The EU and international developments outlined above should expedite the realisation of unified sustainability reporting standards that are reliable, comparable and promote transparency and consistent measurement of sustainability activity.  It is critical that the EU, the ISSB and other international initiatives work together to build on and contribute to each other’s developments. As European Commissioner for Financial Services, Financial Stability and Capital Markets Union, Mairead McGuinness, outlined during COP26: “Global standards should be a common floor, not a ceiling that limits those that want to go further and faster. Global processes should be flexible enough to accommodate the need for different countries and jurisdictions to go further according to their own rules and priorities. So two-way cooperation between global and regional standard-setters is critical. We need to ensure coherence between frameworks.” The CSRD and the ISSB apply to large companies. So, what does this mean for companies even if they are not legally required to adhere to the standards? There is no doubt that there is more pressure on companies to assess their current sustainability reporting – it could be they are part of a supply chain that will require them to report on their ESG activity, they need it to access funding, or because they think it is the right thing to do. Regardless, all entities should begin to think about who will be responsible for the ESG data in their organisation and the processes and procedures for capturing, collecting, and measuring that data. All entities will soon be required, whether by standards, lenders, investors, customers, suppliers or law, to report on their ESG activity to some extent. Dee Moran is the Professional Accountancy Leader at Chartered Accountants Ireland.

Feb 09, 2022
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A view from the UK

It is fair to say that Brexit and COVID-19 have bashed small businesses over the past 18 months. But for many, the experience has made them more resilient and fit for the future. When the first lockdown was mandated in the UK, I read of people on furlough who took time to learn new languages and pursue long-forgotten skills. Not so for millions of business owners who were thrown into turmoil, first wondering how they and their teams would financially survive and then, having made it through the first tense months, figuring out how to stay connected to customers. It’s a remarkable fact that the UK witnessed a start-up boom during this time. Companies House recorded the highest number of new company formations in June 2020. This was, in part, necessity entrepreneurship as those who could not find work were forced to create their own employment. But mostly, it was opportunity entrepreneurship where people with time on their hands spotted gaps in the market or took a side-hustle (a business run alongside the day-job) and turned it into a full-time venture. The task now is to ensure that these lockdown start-ups get access to the right support and have every opportunity to keep trading. For existing businesses navigating massive change, the ones that have survived reacted fast and pivoted to serve the changing needs of customers – which mainly required going online. At Enterprise Nation, we saw high demand from small businesses for education and training on how to build websites, master social media, accept online payments, onboard to delivery apps and marketplaces, and achieve all this while being cyber-secure. When the economy and High Streets re-opened, demands changed again to where online sellers wanted to test physical retail and meet customers in person. When buffeted, founders showed strength by simply figuring out how to trade through. Challenges remain in the logistics of getting products into and out of the UK – and the cost of doing so. Added to this are rising energy and supply chain costs, while a changing landscape of health and safety restrictions causes confusion. Yet, businesses are in the position of having faced this before. As we start the New Year, small business owners feel more in control of their finances (as they had to take a closer look at the books when there was the risk of no funds coming in). They are digitally more capable of responding to shocks as work has been done to polish websites and plugin e-commerce capability. And possibly most significant of all, resilience levels are at an all-time high. Founders feel that if they can navigate lockdowns and Brexit, they can take on anything. This bodes well for the year ahead. Emma Jones is the Founder of Enterprise Nation, a business support platform and provider that operates in the UK and Ireland.

Feb 09, 2022
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Accounting for cloud computing costs

Richard Howard and Ryan Mathers share their insights on the cloudy topic of accounting for software-as-a-service costs. Accounting for software costs has traditionally lagged behind technological developments, so it is little wonder that there is some uncertainty around accounting for cloud computing costs. A recent International Financial Reporting Standards Interpretations Committee (IFRIC) agenda decision on cloud computing costs, while employing a sound decision-making framework, gave an answer at odds with the perception of many financial statement preparers. Before IFRS, we had FRSs, and FRS 10 set out that software that made a computer productive was classed as a fixed asset. Software was viewed as an integral part of the hardware. This standard was introduced in 1997, when software was only beginning to become a differentiated product from the computer or server it sat on. Even at this early stage, accounting standards lagged what was happening in practice. We have recently seen the move to cloud computing and software-as-a-service (SaaS). To illustrate the importance of cloud-based expenditure to the global economy, a Gartner survey from October 2021 estimated global IT expenditure of $4.47 trillion. Hardware constituted 18% of this spend, with the remainder spent on software, communications and data centres. Most of that will be spent on implementation and ongoing services for cloud-based software, cloud-hosted data, infrastructure as a service, and platforms. We have seen two recent IFRIC decisions on the topic of SaaS. The first agenda decision, published in March 2019, concludes that SaaS arrangements are likely to be service arrangements rather than intangible or leased assets. This is because the customer typically only has a right to receive future access to the supplier’s software running on the supplier’s cloud infrastructure. Therefore, the supplier controls the intellectual property (IP) of the underlying software code. On its own, many would see this as a logical conclusion. The second agenda decision, published in April 2021, deals with specific circumstances concerning configuration and customisation costs incurred in implementing SaaS. In limited circumstances, certain configuration and customisation activities undertaken in implementing SaaS arrangements may give rise to a separate asset where the customer controls the IP of the underlying software code. For example, the development of bridging modules to existing on-premises systems or bespoke additional software capability. In all other instances, the IFRIC agenda decision is that configuration and customisation costs will be an operating expense. Accordingly, they are generally recognised in profit or loss as the customisation and configuration services are performed or, in certain circumstances, over the SaaS contract term when access to the cloud application software is provided. The March 2019 decision largely endorsed what was general practice. Companies were receiving a service over a period, and companies agreed with the substance of that. The April 2021 decision, however, has been heavily debated. In discussions with many preparers of financial statements, few have agreed with the decision. While CEOs are talking about their digital transformation, this IFRIC decision tells the CFO how to account for the up-front configuration and customisation of that digital transformation, which in most cases is to expense it as incurred. This is at odds with a simple view expressed by many that the benefit of these costs accrue over a period, so why would they not be capitalised? The April 2021 decision, however, is based on various principles that, in aggregate, gives a decision at odds with the view of many CFOs. To understand their decision, it is helpful to summarise the difference between on-premise software and software as a service (see Table 1). In March 2019, IFRIC observed that a right to receive future access to the supplier’s software running on the supplier’s cloud infrastructure does not, in itself, give the customer any decision-making rights about how and for what purpose the software is used. Nor does it, at the contract commencement date, give the customer power to obtain the future economic benefits from the software itself and restrict others’ access to those benefits. Consequently, IFRIC concluded that a contract that conveys to the customer only the right to receive access to the supplier’s application software in the future is neither a software lease nor an intangible software asset, but rather a service the customer receives over the contract term. Some scenarios were set out where the SaaS expenditure may meet the criteria for being an intangible asset, including where the customer is allowed to take ownership of the asset during the contract or where the customer is allowed to run the software on their own hardware (consistent with FRS 10 in 1997!) The April 2021 decision led on from this train of thought, which can be summarised as: “If you incur expenditure connecting your business to a cloud-based solution, you do not own that asset. As it is not your asset, you cannot capitalise costs you incurred in customising or configuring that software.” So, the question arises: are there any scenarios where an entity may capitalise configuration and customisation services? The simple answer is yes, and this occurs when the entity can control the software. For example, this may arise where the customer has the right to keep the software on-premise on their own servers or behind their own firewall. For on-premise software, the activities likely represent the transfer of an asset that the entity controls because it enhances, improves, or customises an existing on-premise software asset of the entity. While IFRIC only discussed configuration and customisation activities of implementing a SaaS arrangement, the full SaaS implementation includes various activities. Table 2 illustrates some examples (not all-inclusive) of typical costs incurred in SaaS arrangements and the likely accounting treatment of each. Practical implications Beyond complying with IFRIC’s meeting agenda decision, there are some considerations for the many companies who have undertaken, or are undertaking, SaaS implementation projects: IAS 8 requires an entity to retrospectively apply an accounting policy change as if the entity had always applied the new policy. Companies may need to determine if they have capitalised costs that IFRIC may suggest should not have been capitalised and if this impacts comparative periods. Budgetary decisions may have been made based on digital transformation projects being largely capital in nature. However, with such costs now being expenses, it may impact performance when reviewed against budget or external forecasts. Some banking covenants contain EBITA or capital expenditure requirements, so the impact on covenant compliance may need to be assessed. Conclusion Interestingly, while the IFRIC Committee agreed with the interpretation from April 2021, out of the 19 comment letters received, only five respondents agreed with the analysis and conclusion. This would suggest that many see an issue with practicality in the decision. Many companies we have spoken to point to the long-term benefit of such costs as the reason they view capitalisation as the appropriate route for configuring and customising software. Others have cited that it is an upgrade on the previously on-premise capitalised costs, hence appropriate to capitalise. As we continue to use assets such as SaaS or other cloud-based solutions, it will be interesting to see how GAAP develops to recognise that software and hardware are no longer interdependent. Other topics such as accounting for open-source software development, open network cooperation, and platform arrangements will be interesting when they become material in the business world. Richard Howard is a Partner in Deloitte’s Technology, Media and Telecommunications industry group. Ryan Mathers is a Manager in Deloitte’s Technology, Media and Telecommunications industry group.

Feb 09, 2022
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Accounting faculties and the future of the profession

Professor Anne Marie Ward and Professor Niamh Brennan, both Chartered Accountants, make the case for diversified accounting faculties with a healthy proportion of accounting academics who are professionally and doctoral qualified. The accounting profession comprises three pillars: research, policy, and practice. Rigorous research should inform policy, which leads to best practice. Accounting faculties in higher education institutions can foster links between the three pillars. They prepare students for entry to the accountancy profession; hence, they have the potential to influence future practice. They also undertake research that can inform policy, including regulation of the profession, standard-setting, accounting education, and ethical approaches. What is the problem? Some argue that accounting education is too focused on techniques, rules, processes, and procedures, with insufficient focus on the ethical implications of accounting and its role in the economy and society. Some also argue that accounting research is too academic, unrelated to accounting practice and hence has little impact on policy formulation. In academic circles, this is referred to as the ‘theory-practice gap’. We believe that having a healthy proportion of accounting academics with both a professional qualification and an academic qualification (i.e. PhD) within accounting faculties can help resolve these problems. As these individuals have experience in practice, they can better inform student learning. In addition, they are best placed to identify research areas that would benefit the profession. Unfortunately, however, the proportion of professionally trained and research-trained academics within accounting faculties across the globe is dwindling due to retirements and a dearth of accounting doctoral graduates. University ranking metrics have not helped. For example, recruitment policies in the UK since the 1980s have largely ignored the professional accountant pool due to pressures from higher-education performance metrics. Research scoring systems, such as the UK Research Excellence Framework, feed into university rankings and influence university funding. Consequently, university managers focus on recruiting individuals with PhDs who are more likely to achieve the research outputs required to enable the university to move up the rankings and optimise funding. Therefore, there has been a shift to recruiting PhD graduates from other disciplines, for example economics and engineering, to accounting posts because of a lack of accounting doctoral graduates. However, these individuals are not equipped to service technical accounting subjects. Thus, university managers employ non-research trained professional accountants as teaching associates/part-time lecturers to service professionally accredited modules. As a result, accounting faculties in some universities comprise two cohorts: those academically trained (i.e. PhDs) and those professionally trained and qualified (e.g. Chartered Accountants). This dichotomy is concerning for the future of accounting as an academic discipline, as it serves to widen the gap between theory and practice. Indeed, academics argue that the future of accounting as a separate academic discipline is at a crisis point, with accounting departments increasingly seen as service providers (‘cash cows’) that help to finance other academic subject areas, as opposed to being a premium academic subject in its own right. International interventions Accounting profession representative bodies and policymakers in the US, England and Wales consider it strategically important to retain accounting as a quality academic subject area that actively produces research to inform accounting policy and practice. To this end, they have implemented strategies to reduce the shortfall of academically trained professional accountants. For example, the American Institute of Certified Public Accountants’ (AICPA) Accounting Doctoral Scholars (ADS) programme manages the largest investment ever made by the accounting profession to address the shortage of accounting faculty members (www.adsphd.org). This started in 2008 when accounting firms, state CPA societies, the AICPA Foundation and others invested over $17 million in the programme. By 2020, this funding had helped more than 100 CPAs transition into academic careers. In the UK, the Institute of Chartered Accountants England and Wales, (ICAEW) Livery Charity provides four grants every year to successful ICAEW members who decide to pursue a career in academia and undertake doctoral studies. The total grant is £15,000 per successful applicant and is paid on a pro-rata basis throughout the doctoral programme. The situation in Ireland In Ireland, the links between the accounting profession and higher education institutions are strong and recruitment policies to accounting faculty posts have historically favoured professionally qualified candidates. Thus, most Irish higher education institutions have a diverse mix of accounting academics, including those who are: Both professionally and research trained; Research trained only; and Professionally trained only. This diverse range of backgrounds should foster communion between research, policy, and practice. However, increasing pressure on higher education institutions to meet the performance targets required under university quality ranking systems means that recruitment strategies now favour doctoral qualified candidates. Care is needed to ensure that the dichotomy observed in other countries does not become a feature of Ireland’s accounting faculties. A balance between the three pillars is necessary to ensure that accounting remains an important academic subject in its own right within higher education institutions and not a cash cow that generates income to fund other academic subject areas. Lecturers with both professional and academic skills can serve as a bridge between academia and practitioners and between non-professionally qualified, research-focused academics and teaching associates. Combining the skills of a professionally orientated faculty alongside relevant and high-impact academic research not only prepares students for the future of work as professionally trained accountants, it also contributes favourably to the development of accounting, business, society, and the broader economy. The UK Research Excellence Framework places a premium on research that has impact, where research can be proven to have informed society or business. This is more achievable if accounting faculties include professionally qualified individuals with links to the profession who are also research trained. Research has shown that university managers identify an ideal academic as someone who can produce “rigorous and high-quality research, to teach to a high standard, to fuse academic and professional knowledge and experience, and foster relationships with the wider accounting community”.1 This suggests a market for accounting lecturers that are both professionally and academically trained. Why do professional accountants enrol for doctoral education? Research has not examined what drives professionally qualified accountants, who have an established career, to start again at the bottom rung of the ladder in academia. In response to this gap in knowledge, we addressed two questions in our research: What motivates students to enrol in accounting doctoral programmes? Is there a difference in the motivation of professionally qualified and non-professionally qualified accounting doctoral students to enrol?2 To investigate these issues, we surveyed and interviewed 36 accounting doctoral students enrolled at higher education institutions on the island of Ireland. Of these, 13 were professionally qualified. In total, 14 reasons for enrolling for doctoral education were uncovered. Interviewees reported that their main motivations for enrolling for doctoral education were expectations of a career in academia, enjoyment of research or interest in their doctoral topic, the status of the PhD qualification and work-life balance. In terms of differences, non-professionally qualified doctoral students were predominately motivated to enrol by the pursuit of knowledge and financial rewards. In contrast, most professionally qualified doctoral researchers were initially motivated to enrol because of dissatisfaction with their professional careers. In the main, they felt they lacked autonomy over their work and work-life balance. Autonomy is a key psychological need. When individuals consider that they do not have autonomy over their life, it can affect their well-being and happiness. In addition, about half of the 13 professionally qualified interviewees felt that they did not have a sense of belonging in the profession. Those dissatisfied with their professional career anticipated that an academic career would enable them to have more autonomy over their work and work-life balance. In addition, they were attracted by the status of the PhD qualification, and most interviewees identified that they were interested in researching a topic in depth. A career in academia? We end this article with a call to Chartered Accountants wishing to change careers. If you enjoy learning new things, working independently, and being challenged, you will enjoy research. If you enjoy developing other people, you will enjoy teaching. Finally, if you are ambitious, you will be given plenty of leadership opportunities. Most lecturers are course directors or have other leadership positions from early in their careers. Therefore, if you are considering a career change, why not consider a career in academia? 1 Paisey, C., and Paisey, N.J. (2017). The decline of the professionally-qualified accounting academic: Recruitment into the accounting academic community, Accounting Forum, 14(2), 57–76. 2 Ward, A.M., Brennan, N., and Wylie, J. (2021) Enrolment motivation of accounting doctoral students: Professionally qualified and non-professionally qualified accountants, Accounting Forum, 1–24.  This research was funded by the Chartered Accountants Irish Educational Accountancy Trust, CAIET Grant number 201/15. Full details of our research study are available at the following link: https://doi.org/10.1080/01559982.2021.2001127 Anne Marie Ward FCA is Professor of Accounting at Ulster University. Niamh Brennan FCA is Michael MacCormac Professor of Management at University College Dublin.

Feb 09, 2022
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Designed to fail?

Dr Brian Keegan explains why the OECD’s Pillar 1 scheme (to have the largest multinational companies taxed in part in their market territories) is far more ambitious than Pillar 2’s 15% minimum effective corporation tax rate – and may achieve its goal without necessarily having to take effect. Governments across the EU will be watching the progress of the new directives to give effect to a 15% minimum effective corporation tax rate within the trading bloc. Few of these governments will be watching developments unfold quite as closely as the British government. While no longer obliged to adopt EU directives, the British government have, nonetheless, signed up to the essence of the 15% proposal. Given that the UK headline corporation rate is well in excess of 15%, every EU change might bring opportunity for the British economy. There were, however, always two parts (or pillars, in the jargon) to the OECD-backed grand plan for the taxation of the major multinational sector. The current focus of the 15% project (Pillar 2) has taken the spotlight off the far trickier topic of where the largest entities pay their taxes (Pillar 1). Large multinationals have created problems for governments since the time of the Dutch East India company. In the 1600s, the Dutch East India company quite literally became a law unto itself. Having an accounting period of a decade rather than a year was only one of its idiosyncrasies. Ever since, governments have walked the fine line between maximising revenue from their multinationals while not losing control of them. The Pillar 1 scheme (to have the largest companies taxed in part in their market territories) is far more ambitious than Pillar 2. It overturns the right to charge tax based on the residency rule – a fundamental principle of tax law. Pillar 1 was devised as a blocker for digital services taxes currently threatened, if not implemented, in many countries. A digital services tax is, in effect, an excise duty on services (and thus overturns another fundamental principle of taxation, namely that excise duties are charged on goods). Pillar 1 was sponsored by the US to sidestep a disproportionate burden on its largest digital services companies. From an Irish perspective, the proposed relocation of taxing rights under Pillar 1 may pose a greater threat than the 15% minimum effective rate. The threat extends beyond exchequer receipts. Large multinationals employ an unusually high proportion of Irish workers compared to most other countries. Pillar 1 may make it more efficient for some multinationals to relocate jobs to their market destinations to manage their overall tax bills. But before anyone starts checking their visas and work permits, I’d suggest that the prospects of Pillar 1 happening any time soon are poor. Pillar 1 implementation requires countries to change their double taxation agreements. Previous OECD-backed reforms have also required treaty changes to stop tax avoidance using mismatches in the tax treatment of so-called hybrid instruments and the like. Yet, the US, which is the principal architect of Pillar 1, has yet to sign up for this kind of treaty change for any purpose. This US reluctance to modify its own treaty network can be ascribed, at least in part, to Washington gridlock. Now, implementing Pillar 1 presents the additional political challenge of whether the US will be happy to lose tax to high-population market destinations like Brazil and China. It may well turn out that Pillar 1 is a proposal primarily designed to block a digital services tax without ever having to come into effect itself. If this is the case, the current focus on the Pillar 2 15% rate is well-placed. There will be opportunities, not just in the UK, but in Ireland as well. Dr Brian Keegan is Director of Advocacy and Voice at Chartered Accountants Ireland.

Feb 09, 2022
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Brexit and the Northern Ireland Protocol: where are we now?

In the nearly six years since the UK public voted to leave the EU, negotiators have yet to come up with a plan that meets the needs of both sides with regards to Northern Ireland. Tony Connelly outlines the negotiation issues, the problem with the NI Protocol and what could change in the future. As 2022 gets underway, it is striking to realise that it is nearly six years since the Brexit referendum and a full year since Britain’s formal departure from the European Union (EU). Despite the desires among fervent Brexiteers for a clean break, the past year has taught us that Britain and the EU will remain entangled in each other’s affairs for some time to come. The problem of the NI Protocol The Northern Ireland Protocol remains at the heart of that entanglement. While European capitals are growing weary of the perpetual antagonism over Britain’s departure – including the Irish question – the incoming French Presidency of the EU has made it clear the first step in normalising a post-Brexit relationship is a resolution to the Protocol standoff. The EU’s support for Ireland’s position remains striking. Irish diplomats have always feared that the Irish border question would end up as the “stone in the shoe” – a minor, regional irritation that should not stand in the way of a broader EU–UK relationship. So far, that has not come to pass despite some reliably-sourced occasions where the UK has appealed bilaterally to capitals for a more pro-British understanding of the Protocol. Dublin, indeed, remains alert to the UK’s efforts to place the problems of the Protocol in a broader geopolitical context. In her first detailed remarks on the subject, the UK’s new Brexit negotiator, Liz Truss, specifically linked the Protocol negotiations to conflicts elsewhere. “I believe that the United Kingdom and the EU, as believers in freedom and democracy, are capable of working out a solution which delivers for the people of Northern Ireland,” the Foreign Secretary wrote in the Sunday Telegraph on 8 January. “This will enable us to focus our energies on major external threats – such as Russia’s aggressive activity towards Ukraine – and building our economies following this pandemic.” The EU would undoubtedly like to deepen its strategic relationship with the UK. The UK resisted any attempt to include a treaty-based relationship on foreign and security policy in the Trade and Cooperation Agreement (TCA). However, Brussels would still like one to develop. “There is a common-sense willingness and political will [among member states] to engage with the UK…and having the UK as a partner,” says one EU diplomat. “It’s simply been blocked by the noise of the TCA, the Protocol, and the fact that the Brits say they don’t want to have a formal agreement. I’m not hearing people saying, ‘over our dead bodies’, ‘the Brits have nothing to offer’, ‘Brexit means Brexit’. We were never hearing that.” For now, no such relationship is maturing. The EU invests a lot of energy in its economic and security relationship with the United States, but there is no outline of what a long-term partnership could look like with the UK. London has refused to articulate what it wants, and the EU lacks the tools (the “scaffolding”, as one diplomat puts it) to construct one.  What is the economic damage of Brexit? The COVID-19 pandemic has obscured the true economic impact of Brexit, and that means it is hard to predict.  1 January 2022 saw the full introduction of customs checks and controls on EU goods entering the UK, meaning a more realistic picture of trade friction will emerge, but it is not fully apparent yet. “As the UK starts phasing out all of its derogations and starts actually implementing checks, we will see how things bite and the impact that will have on trade flows,” says one EU official. “As the pandemic starts to lift and people start to travel again, that will be the moment that the penny really drops: just what is the damage here?” The UK has exempted goods from the Republic of Ireland from its new checking regime. This is good news and bad news: while it keeps trade – especially the agri-food trade – flowing, it has caused frustration for many companies that have invested heavily in preparing systems and training staff. Many Irish companies have been looking beyond the UK, not least because of the uncertainty about London’s intentions. Irish food, drink and horticultural exports to other markets have increased. Although exports to the UK are still significant (Bord Bia recently reported sales worth €4.4 billion or 33% of total export value), there was a 9% decline in volume between January to October 2021 compared to the previous period in 2020. This was partly due to stockpiling in late 2020; however, it also suggests that food exports to the UK will suffer. The big concern is the requirement for UK export health certificates on Irish beef, cheese, lamb and other valuable commodities, due from 1 July.  Irish companies importing goods from the UK have adapted after a challenging first quarter in 2021. “As companies got used to the new controls, particularly food companies, where they’re having to get their heads around [EU] health cert requirements, month-on-month it’s probably just got better and better,” says Carol Lynch, a partner in BDO Customs and International Trade Services department. The major development of 2021 was undoubtedly the decline of the UK landbridge as the preferred route into Europe (and vice versa) as direct, two-way sea crossings to Europe increased from a pre-Brexit level of 12 to 44 crossings last year. This growth reflects the real-world adaptation by companies. What is harder to predict is Brexit’s overall impact on the island of Ireland economy. The deadlock of the Northern Ireland Protocol means that exporters and importers, and foreign direct investment remain in a holding pattern while the politics remain unresolved. As is so often the case, Ireland is hostage to the internal dynamics of the Conservative Party – the same dynamics which gave rise to the referendum in the first place.  May UK elections and the Protocol Liz Truss has introduced a more cordial style to the relationship with the European Commission, in contrast to the antagonistic approach favoured by her predecessor Lord Frost. The EU delegation warmly appreciated her welcoming of the EU’s chief negotiator Maros Sefcovic to Chevening House in Kent for their first face-to-face meeting. Still, once the pleasantries were out of the way, both sides retreated to well-worn positions on the Protocol. The fact that Truss is a front-runner in any contest to succeed Boris Johnson as Conservative Party leader will undoubtedly restrict her room for manoeuvre. Suppose there is to be a leadership challenge after the May local elections. In that case, Truss will need the support of the hard Brexit European Research Group (ERG) to get into the second round, so she is unlikely to sign up to a deal on the Protocol which does not meet its sovereignty yardstick. For his part, Boris Johnson is launching a raft of right-wing initiatives, from reducing the number of migrant boats crossing the English Channel to freezing the BBC licence fee, to expressly appeal to the kind of Tory backbenchers who have been the most unyielding on the Protocol. This does not bode well for an agreement by the end of February, which the Irish government had recommended to avoid the issue colliding with the Northern Ireland Assembly elections scheduled for May. The UK government, leadership contest or not, will also be determined to ensure that the DUP maximises its vote. Will London play hardball and refuse to compromise on its maximalist Protocol position in order to give the DUP a rallying point? Or, will Truss decide that a quick deal on the Protocol can be dressed up as a win for Jeffrey Donaldson (the Foreign Secretary has not shied away from championing post-Brexit agreements even where the detail does not quite match the hyperbole)? Moving negotiations forward So far, the Protocol negotiations have remained stuck. The UK believes the EU October proposals to ease the burden of the Protocol don’t go nearly far enough, and the EU says they can’t go any further, and certainly not as far as the UK Command Paper.   The EU has dealt with the issue of how to ensure the free flow of medicines (both generic and innovative) to Northern Ireland by reforming its own legislation, so the focus now is on reducing customs and agri-food controls. London believes there should be no checks or controls on British goods clearly destined only for Northern Ireland end-users. In other words, it should be as easy to move goods from Birmingham to Belfast as it is from Cardiff to Glasgow. The UK does accept there should be checks on goods heading for the South via Northern Irish ports (in that sense, London has acknowledged the need for an Irish Sea border). Differentiating the two goods streams should be up to commercial British operators through a trusted trader scheme based on enhanced product line surveillance. The EU more or less accepts this approach in principle, to the extent that Brussels would permit green lanes at Northern Ireland’s ports for such consignments. However, working out the safeguards and reassurances is proving very difficult. Brussels insists a discretionary level of checks on British goods must still happen (even if traders say the goods are staying in Northern Ireland) because a risk-based approach requires it. There must also be strict labelling of individual items to indicate that they can only be consumed in Northern Ireland. In some instances, goods would have to be manufactured according to EU standards. While each consignment would have a smaller number of data lines under the Commission’s proposals, they would be backed up by detailed information – pre-notified electronically – to ensure traceability. Checks would, therefore, be reduced but not eliminated; the UK wants checks eliminated (at least for NI-only trade flows).  The retail industry in Northern Ireland insists that for smaller and medium-sized operators involved in Irish Sea trade, complying with all three requirements – labelling, conformity, pre-notification – would be too expensive or would not be worth the hassle. Frost’s insistence that the European Court of Justice no longer has a role on the Protocol did not lend itself to an atmosphere in which a deal looked doable. The question is whether or not Liz Truss can break the deadlock.   The Irish Government believes an improved atmosphere cannot but help and that a deal based on the Commission’s October proposals and packaged as a victory by Truss might be possible. But the margins will be tight. “The Commission isn’t an independent actor in this,” says one EU diplomat. “The package that’s on the table was agreed with the 27 member states, and it was agreed with considerable difficulty inside the European Commission. The member states somewhat reluctantly signed off on it, and it was made clear that we were at the limit of legal and political acceptability. “The Commission has come a tremendously long way. And yet, the British are right in saying that last year the Commission was ruling out a lot of this stuff. So, with the right packaging and the right presentation, Truss could present it as a big victory.” That suggests a lot of careful diplomacy and expectation management. Yet, the process, already under time pressure, is playing out amid the helter-skelter turmoil of Westminster. London has not abandoned the threat of triggering Article 16, although with each new survey showing Northern Ireland businesses and manufacturers acclimatising to the Protocol (or even thriving), it is a weapon that looks riskier and riskier. By January 2022, the Central Statistics Office confirmed what many had predicted: exports from Northern Ireland into the South had surged by 64% in the first 11 months of 2021, while exports in the other direction rose by 48%. The EU’s instinct at previous upheavals in the Brexit process has been to hold firm and let the Westminster histrionics play themselves out. But politics in Northern Ireland do not enjoy the same luxury. Tony Connelly is the Europe Editor at RTÉ.

Feb 09, 2022
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The professional public servant

Brian Keegan, Director of Advocacy and Voice at Chartered Accountants Ireland, talks to Gabriel Makhlouf, Governor of the Central Bank of Ireland, about the changing regulatory landscape, the challenges facing businesses after a tumultuous two years, and the need for greater financial literacy. We think of the Central Bank as a regulatory body, but it is a very large entity. Can you talk to us about your management style and your personal approach to managing a large, highly-qualified staff? The Central Bank plays a very important role across the financial system, particularly when dealing with people who work in risk and control functions. This is essential in ensuring that the financial system ultimately works in the best interests of consumers and the wider economy. We have strong, established relationships with auditors based on solid foundations with open communications and this is a crucial relationship for us. I joined the Inland Revenue in New Zealand when I finished studying and I am a public servant, essentially, by profession. I trained as a tax inspector and I had a lot of dealings with accountants in the UK before I moved on to different things. As a leader, there are a number of things that are really important to me. It is really important that the organisation is clear about its mission and vision, and that senior management makes that happen. People in leadership roles need to help the organisation to be clear on its mission and vision. This helps to promote focus and priority-setting. I would like to think that the mission and vision of the Central Bank are clear. We are responsible for monetary and financial stability; making sure that the financial system works in the interests of consumers and the wider economy. We want to be trusted by the public. This is the dominant theme that I have been engaging with staff about since I took up my role. When the Central Bank was established in 1942, the legislation establishing the bank stated that the predominant aim of the Central Bank was the welfare of the people. This is an important statement which I still use.  Are you satisfied that you are achieving this? Yes, I am. I certainly think we can do better. For the people who come to work at the Central Bank every day, I think that sense of public service is really important. I think what we probably do not do well enough is to explain to people how our various policies ultimately promote the welfare of the people as a whole. As an example, our mortgage measures have a very specific purpose which has to do with financial stability, with indebtedness and with over leveraging, among other things. Underpinning all of that, from our perspective, is promoting the welfare of the whole country. That is very important to me. As I have said previously, we need to be accountable to the public in an engaging and transparent way with key performance indicators. I put a big premium on diversity of thought and an organisation like the Central Bank must reflect this. I also think it is important for leaders to be ambitious for their organisations and I am ambitious for the Central Bank. Leaders need to focus on the stewardship of their organisations. We need to spend as much time thinking about how to ensure the organisation will be fit for purpose for our successors, as well as for us. That puts a premium on leaders to look ahead, to understand their context and also to understand what their context will be in the medium-term, not just over the next year. We need to be able to accept that change is constant and happening in our external environment faster than it has ever before. Organisations like the Central Bank are all about people and the recruitment, development of staff is crucial for any organisation. Following on from that point, can you talk about the challenges managing an organisation in a pandemic? One of the legacies of the pandemic is how we are going to manage hybrid working. I think this is an underappreciated challenge and I think, personally, that remote working is unsustainable over the medium-term.  At the Central Bank, most of us have worked from home for almost two years. A small number of us have been coming in every day because we had no option. For the first three months of the pandemic, this worked extremely smoothly.  As time has gone on, people have changed jobs. People have left the Central Bank and new people have joined us. These new recruits have not physically been in the bank or met their colleagues. They have not had the experience of learning by observing. You learn a lot by observing what other people are doing and by asking impromptu questions. Over the medium-term, organisations such as ours require a strong culture and the ability to bring fresh people in. Our strength is in our collective effectiveness. We are going to have to work out how we can get away from remote working, but we are not going to go back to where we were. We are going to move to hybrid working. This will lead to new challenges and we are going to have to try to discover how to deal with these challenges. There will be people who will prefer to stay at home, but I know there are many other people who want to come into the office. Diversity and inclusion tend to be about gender and colour, disability and sexuality, but I can see a new diversity challenge in dealing with people who don’t want to come into the office and dealing with people who do.  What is your perception of the global economy after Brexit and the expectation that a lot of business will move to places like Dublin from the UK? Has this proven to be the case and has Dublin benefited from the so-called ‘Brexit bounce’? Brexit has led to a lot of financial services coming to Ireland in terms of the arrival of new entities and the expansion of entities that are already here. It has to be pointed out that Brexit is not over and the process of financial services adjusting to whatever constitutes the ‘new normal’, is ongoing.  Brexit has had an effect on increasing financial services in Dublin and it might have a continuing effect in the future but this also applies to Paris and Amsterdam. I expect that financial services in the EU will grow more than we would have expected before the Brexit referendum in the UK. This does not mean that London and the UK will not continue to be important financial centres, but I think you will see growth elsewhere in the EU. From a financial services standpoint, the UK’s exit from the EU has been relatively smooth and well-managed from all sides but there are still issues that will have to be debated at political level.  What is the Central Bank’s view of the departure of some banks, including KBC Bank and Ulster Bank, from the Irish market? Is there a need to fill that gap in the market and have you a strategy to address this issue? That is a very interesting question. After the global financial crisis, credit availability for Irish SMEs during the recovery phase post-2013 improved dramatically. There were a lot of policy initiatives that were very helpful and, compared to a lot of the rest of the world, the Irish government’s focus in this area was pretty strong.  We had the establishment of the Strategic Banking Corporation of Ireland (SBCI), the introduction of the Future Growth Loan Scheme, the setting up of the Credit Review Office, and the Loan Guarantee Scheme. All of these things were very important for Irish business.  One of the interesting things our research has shown is that in the years preceding the pandemic and during the pandemic itself, the drag on credit flows to SMEs seemed to be driven predominantly by a weak demand for financing from SMEs rather than by a weak credit supply on behalf of lenders. In a European context, Irish SMEs had among the lowest application rates for credit. From the point of view of the Irish economy, the most important thing is that there is credit available for businesses to use when they need it and that is why it is interesting that Irish SMEs are slight outliers in terms of their demand. The departure from the market of KBC Bank and Ulster Bank poses risks for borrowers. Ulster Bank itself was the third largest player in terms of lending to SMEs. Fewer players in the market means higher prices, lower volumes and less service choice. No doubt, the Competition And Consumer Protection Commission will be paying close attention to these developments. What we are seeing is that digital operators in fintech and non-bank intermediaries are expanding their lending to business. Our own statistics team has found that the share of lending to Irish SMEs from the non-bank sector is already above one third in some sectors.  Access to alternative sources of finance will become easier, cheaper and faster. Core financing from Irish banks will continue to be absolutely key to Irish business, but it will be interesting to see what impact the competition that is now emerging will have on the wider market. The challenges for the big corporate legacy banks are not dissimilar to what large institutions in other economic sectors are facing. They become big, they become cumbersome and they are suddenly faced by competition from entities that are more agile. I suspect that the Government’s Retail Banking Review will look at some of these issues. Will these developments pose new challenges for the Central Bank? We published our new strategy in December 2021. A lot of our focus in the past has been about fixing the problems of the financial crisis. With the new strategy, we are  going to pivot and increasingly focus on the challenges we will face in the future. One of these challenges is regulating and supervising the rapidly changing financial services landscape. That is going to be a very significant focus for us. We are already seeing issues that give me cause for concern. Crypto is an unregulated market and there are real risks to businesses and consumers in this area. The regulatory world is gearing up to take action, but it is something that we in the Central Bank are going to keep a very close eye on. Technology is accelerating the need to address the issue of financial literacy. I have always been a proponent of the education system having a component that helps young people to understand how finance works. What I have seen in crypto is the ease of putting your money into some of these ventures. There is an increasing risk, in my opinion, that young people using their mobile phones to access crypto are going to get into trouble. Would it be fair to say that there is a greater awareness in New Zealand of the role of the government institutions than there is in Ireland? That may be true, but it would depend on what part of New Zealand you visit. If you go to Wellington, the capital of New Zealand, the working life of the city is dominated by government. When you meet people in the streets of Wellington, you will find that they are working in government or their partners are working in government. This is not necessarily the case in Auckland or in other parts of the country. Certainly, the Treasury, which I led in New Zealand, had a very strong brand. This stemmed from the fact the Treasury in the mid-1980s and early 1990s played a very large part in the overall reforms that New Zealand went through. I think there is a much bigger commercial sector in Dublin than in Wellington, whereas in Wellington the public sector dominates.  Can we talk about the challenges of money laundering? Are we doing enough to counter this problem and what can we do to counteract the problem? It is an issue that we need to address, and the EU has decided to set up a new agency to tackle money laundering. I think we also have to ask questions about how seriously the community views white collar crime. We need regulators, financial professionals and politicians to align themselves to dealing with money laundering. In my view, the whole issue of the conduct of financial services, particularly in banking, has to be addressed. As a community, we need to say that money laundering is unacceptable and we need to do something about it. Thank you for taking the time to speak to us today, Governor. Thank you.

Feb 09, 2022
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Why people are critical in the change process

When entering a period of organisational change, leaders need to remember that people are their most vital asset. Patrick Gallen explains how organisations can best engage with employees to transition successfully. The Greek philosopher Heraclitus said, “you can never enter the same river twice”, meaning somewhere between 535BC and 475BC, we knew that change would be a challenge we would grapple with throughout human existence. So, why do organisations still find it so difficult to change? There are several reasons but, generally, people find it difficult to leave behind old comforts, nurtured over the years and move towards something new, often unknown and not entirely predictable. We have learned many lessons since the onset of the COVID-19 pandemic in March 2020. Perhaps one of the greatest lessons has been that we must always be prepared for rapid change. For almost two years, it has been difficult to forecast the business landscape month-to-month in the way we might have been able to in 2019 and before. Another lesson organisations worldwide have learned since the beginning of the pandemic has been  that people are an organisation’s greatest asset. This is not just a headline for the careers page but a fact. Without the dedicated people who make up an organisation, you cannot meet company objectives or deliver excellent client service. People turn ideas into reality and strategy into action. So, when entering a period of organisational change, it is essential to put people at the centre of this change. To take your people on a journey with you, they must be willing to travel the distance. You must engage them, communicate your vision with them, and excite them about wanting to reach that destination. How can you do this? Communication Communicate early and often. If people are not connected to the ‘what’ and ‘why’ in the change process, it is difficult to convince them of the desired outcome. Updating staff on the status of the change and how it fits into your overall plan makes it much more likely that they will be accepting of, and excited about, it. Mobilise your change team Find the key influencers within your organisation, those who have earned their colleagues’ trust and respect. Getting these people behind your programme for change allows you to spread the word more quickly and effectively. You can use them as a sounding board to understand how change is perceived throughout the organisation.  Listen Employees may have lots of comments, questions, and worries throughout the change process. You must listen to this feedback openly, validate it, and address it honestly. Even if you can’t address their concerns right away, ensure that you listen to them and let them know you will address them when you can. Managing organisational change can be daunting, but that isn’t a reason to avoid it. When executed correctly, change will inject energy and progress into your organisation and help you and all of your people reach new heights. Patrick Gallen is Partner of People & Change Consulting in Grant Thornton Northern Ireland.

Feb 04, 2022
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Nine tips for networking in 2022

Networking isn’t easy, but it doesn’t have to be terrible either. Jean Evans outlines vital actions you can take to start successfully networking this year. 1. Make your introduction unforgettable By telling people that you are about to give your name, they are more intent on listening to hear it and remember it. It also offers the opportunity for people to ask for you to repeat it or clarify it if your name is unusual. If you start with ‘I’m…’, you could be about to say, “I’m getting a cup of coffee”, “I’m leaving”, or “I’m going to a meeting…” and people will stop engaging. 2. Default your networking The process of networking has to default into the diary. Make it a priority. I start the month by putting  networking events into my diary – they are sacrosanct. This time is my time to meet other business owners, work on my business, learn and grow. All other meetings with staff, suppliers, and customers will always be there. You can wrap those meetings around the time set aside for networking. 3. The number of networks to join People should join two or three networks. The networks you choose need to be different types of groups, as different networks will bring different value depending on where you are with your mindset, journey, career, or business. 4. The art of conversation If you are going to a networking event or meeting, plan some conversation topics ahead of time and have a few ideas in your back pocket. Small talk is the art of finding common ground and areas of interest with another person. Suppose you are interested in getting to know them. In that case, the conversation will flow, and one question posed with genuine interest could be the start of a beautiful new friendship or business relationship. 5. Invest the time in one-to-ones Take the time to get to know your fellow network members. Aim to do a one-to-one with at least one new member each week. If you accomplish this, you will steadily and consistently build up your network. What is a one-to-one? It’s where you schedule time to get to know a fellow member or networker. A one-to-one can be over a coffee or on a walk. These days, they tend to be on Zoom, but when and if it’s safe, it’s good to meet in person to pick up non-verbal cues. The second win is now you can actively follow, like, share and listen to what is going on with these businesses. It’ll help you in conversation, with small talk, showing interest and give you content for those all-important one-to-ones. 6. Learn to give A key trait of a great networker is someone who has learned to give freely. It’s essential to learn to help others without expecting to receive in return. Helping others can come in many different forms: a contact, a connection, a piece of advice, an interesting article shared, willingness to engage in one-to-ones, invitations to other networks to pay a visit, sharing a book recommendation or referring business. 7. Invest in your brand Visibility is everything when it comes to career and business success. It would help if you took some time to audit how visible you are. Ask yourself these questions: Who knows you? Who knows what you know? Who needs to know you and what you know to achieve your goals in life and business? When thinking about this, include both internal and external stakeholders. Where do these people network, and are you networking in the right places to meet people who can help you in your career or business? Next, do you have a strategy to build the right network? How you are going to nurture this network? Networking must be intentional. 8. Introverts: protect your asset Your most important asset in business is you, and the best way to protect yourself is to ensure you get enough sleep. While essential and enjoyable, networking can also be tiring and draining, especially if you are an introvert. If you know you are going to a networking meeting, whether it’s online or in-person, ensure you have had a good night’s sleep. This will give you the energy to network and remain engaged. Don’t plan meetings in advance of, or immediately after, networking. Try to keep some time for yourself. 9. Get curious While  networking, people can often meet others at events, stop at the name of the company or the person’s title and make a snap decision about whether that person is worth their time. Assumptions do a disservice to both parties. You cannot define a person by the title, role, and job they hold. Rather they are the culmination of a vast array of experiences, ideas, and connections. Networking should be about uncovering this and going on a voyage of discovery. Jean Evans is a Networking Architect and Founder at NetworkMe.

Feb 04, 2022
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How Ireland can lead circularity and waste reduction

With the introduction of the Government’s Waste Action Plan for a Circular Economy, Ireland has the opportunity to become a leader in circularity and waste reduction – but  innovation and buy-in will be needed to succeed. Michael Quille explains. The Irish Government’s Waste Action Plan for a Circular Economy outlines bold ambitions to encourage a more circular, sustainable waste management model. Ireland can be a leader in waste reduction, given our legacy as one of the first nations to ban single-use shopping bags. We need to leverage that innovative spirit to find new pathways to zero waste. The ‘Waste Action Plan for a Circular Economy’ (the Plan) outlines an ambitious roadmap for Ireland’s waste policy up to 2025. Taking a holistic view of resources, the Plan actively encourages a more circular, sustainable waste management model that will maximise the value of materials throughout a product’s life cycle, putting climate action at the core of national resource management policy. The Plan contributes to the Government’s commitment to move towards a circular economy (set out in the Programme for Government) and is complemented by several Government publications at various stages of approval. Ireland has a real opportunity to become a leader in the EU and internationally by embedding a solid circularity ethos across society and the economy. Both the private and public sectors have gradually begun to integrate process innovations into business models which design-out harmful waste, extend product lifetimes and, in some instances, prevent waste from arising in the first place. There is a growing consensus among industry leaders and policymakers as to the economic potential of the circular economy business model. However, many companies struggle to incorporate circular thinking into their corporate strategy and day-to-day operating models due to a lack of understanding and technical capabilities. The Plan provides Ireland with coherent and actionable objectives that look at how we consume materials and resources; how we design the products that households and businesses use; how we prevent waste generation and resource consumption; and how we extend the productive life of all goods and products in our society and economy. Impact on households Under the Plan, households are challenged to reduce waste, improve recycling activities, and generally embrace and expand their social responsibility efforts. To encourage engagement, a deposit and return scheme for plastic bottles was signed into regulation in November 2021 and is set to become operational during 2022. Waste bin colours will also be standardised across the country, and apartment complexes will be required to segregate waste properly. Further changes are proposed to the regulation of the commercial and household waste collection market, improving consumer protection and ultimately promoting more equitable market competition. Nevertheless, many of the measures aimed at waste collectors, such as recycling targets and the levy on waste disposal, may ultimately be paid for by the consumer as pass-through charges. To smooth out the transition to a lower-waste household economy, targeted education and awareness campaigns are proposed to encourage better-informed consumption decisions and buy-in to a shared responsibility. Impact on business All business in Ireland will be affected by the requirements for circularity and the shift to a new macro perspective of holistic, zero-waste resource management. Indeed, the impact on some may be even more acute than our carbon ambition, demanding behavioural and mindset changes that are difficult to appreciate fully as we move from the linear make, use and dispose model to something with increased circularity. In light of these headwinds, business leaders should embrace and implement a proactive and sustainable business approach, addressing any compliance or regulatory requirement risks associated with implementing the Plan head-on. Organisations should review their existing business models and integrate a focused circular economy strategy to help fulfil circular expectations, reduce resource dependencies, anticipate legal constraints, generate cost savings and drive business value. Capacity to deliver Critical to the successful implementation of the Plan will be the capacity and overall ambition of both the private and public sectors to comply with and deliver on the Government’s ambitious agenda. The culture towards waste disposal in Ireland must further regenerate and evolve, with Government ensuring that the right leadership, governance, procurements, incentives and forms of contracting are in place. The transition to a circular economy offers the real possibility of a sustainable alternative future; it is an essential step towards a decarbonised economy and will create measurable long-term value for everyone. Ireland can be a leader – we were one of the first nations to ban single-use shopping bags and move to the “bag for life” concept. We are proven innovators and adapters for waste reduction, and now we need to leverage that resilience and innovative spirit to find new pathways to zero waste. Michael Quille is Strategy and Transactions Associate Director at EY Ireland.

Feb 04, 2022
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Why engagement and belonging are more important than ever

Understanding people’s diverse needs and experiences is at the heart of every organisation. But what can organisations do to foster a genuine sense of belonging? Shauna Greely outlines five key equality, diversity and inclusion (ED&I) factors to consider. The pandemic has created a lot of change and uncertainty in both our professional and personal lives. As a result, anticipating and meeting stakeholder needs have become more important than ever; it has become imperative to understand people’s lived experience, whether client, member, student, or employee, particularly in an online environment. Organisations are balancing the time efficiencies that virtual ways of interacting deliver for busy professionals, remembering their innate wish to remain part of a connected, engaged and supportive community. Recently there has been a move by companies to understand the changing needs of stakeholders, particularly around equality, diversity, and inclusion (ED&I). Companies – especially those in the accounting industry – must note the changing attitudes and experiences regarding ED&I to determine how best to meet stakeholder needs in the future. Organisations must spend some time in understanding stakeholders needs and plan on continuing to put initiatives in place to respond to them. According to a recent survey by Chartered Accountants Ireland, there are five key factors to bear in mind when it comes to ED&I and stakeholders of an organisation: Accountancy is a profession that is open to all, regardless of background. Over 70% of accountants believe this, with three out of four accountants from minority ethnicity backgrounds agreeing. Organisations must do more to promote ED&I – not only because it is the correct thing to do, but also because it is strategically important. Furthermore, by actively and frequently promoting ED&I, stakeholders can see the value placed by companies on ED&I – not just for now, but for the future too. Organisations must aspire to be upfront about demonstrating their support. Without visibility, stakeholders will assume that organisations have little to no interest in ED&I, so it is important to continue to meet this demand. Due to the pandemic, there has been an increased pressure on the public’s mental health, which is why it’s imperative that organisations have a robust wellness and mental health support system in place. The most sought-after support among Chartered Accountants Ireland members (56%) and students (67%) is wellness and mental health support, followed by awareness campaigns. There have been fears that the pandemic could put increasing pressure on the public’s mental health, and these statistics bear this out. Recognising and fulfilling this need is critical. Having ED&I training and supports in place is very important to stakeholders, and our research shows that a majority would avail of these if possible, so make sure that not only is there visible awareness around these, but also that they are easily accessible by all. Ultimately, fostering belonging should be one of the key strategic objectives of organisations. New and improved initiatives should be considered and measured on a regular basis to generate greater awareness and promotion of ED&I across all stakeholders. Shauna Greely FCA is Finance Business Partner of Ulster Bank, and Chair of the Diversity & Inclusion Committee at Chartered Accountants Ireland. The Institute has recently launched Balance, the LGBTQ+ network group to generate greater awareness and promotion of LGBTQ+ inclusion. Read more about Balance and its inaugural event on the Chartered Accountants Ireland website.

Jan 28, 2022
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How accountants will shape the future of cybersecurity

Cybersecurity is at the top of the agenda for most companies, but what role do accountants have to play? Donal Kerr and Dr Caroline McGroary explain how accountants can help. There are daily reports in the media about large scale cyber-attacks and the devastating impact they can have on various stakeholders, from governments to individuals. Cybercrime has seen unprecedented growth in scale and sophistication, exacerbated by the business interruption caused by the COVID-19 pandemic. For this reason, it has become one of the most significant risks facing management and boards of every type of organisation, both large and small, public and private. A new era of cybersecurity However, despite widespread awareness of cybercrime and the need to be better protected, companies continue to suffer cyber-attacks. We are at the dawn of an era when risk assessment, security and data protection go hand-in-hand and have greater regulations placed on them. Cybersecurity is no longer solely an IT issue; it is fast becoming the responsibility of everyone in the organisation, with accountants playing a critical role. To use a real-world analogy: offices are mandated to carry out fire drills and practice them with regularity so that staff know what to do in the event of an emergency. Fire drills are necessary for protecting individuals in a physical office, but what happens when the same organisation suffers a malware infection, or a ransomware event, or discovers that a contractor has accessed confidential customer and business records? Does everyone know what to do? Have they received the appropriate training? Are they aware that they may have mistakenly contributed to this cyber-attack? Can the company easily recover from this incident? These are pertinent questions for all organisations to consider. Tony Hughes, Director of ANSEC IA Ltd, a cybersecurity consulting company specialising in advising firms on data protection and security, emphasises how important it is to be prepared. He recommends that “firms should take a holistic approach to cyber risk, build capacity for the long term and with the appropriate budget and plan. Then a cyber-attack will not be a black swan event that could paralyse an organisation. Rather, it can be contained and mitigated in a managed fashion with minimum cost and disruption to the organisation”. What value can accountants add? This brings us to the following question – if cybersecurity is the responsibility of everyone in the organisation, where can accountants add the most value? The answer is, of course, in risk management. After all, accountants have extensive experience assessing risk through long-established frameworks such as IFRS and GAAP. By utilising these skills, accountants can bring a unique perspective to the cybersecurity process. Padraic O’Reilly, Co-Founder of CyberSaint Security, a leading platform developer of cyber risk automation, echoed the important role accountants now have to play in this space. He stated that “the modelling and evaluation of cyber risks is becoming a key focus in many organisations and accountants are at the forefront of this trend, particularly helping to advance automation in the assessment process". The future of cybersecurity While cybersecurity is a complex issue, it requires the attention and commitment of everyone in the organisation. This shared responsibility model must be appropriately resourced through investment in appropriate IT solutions, cybersecurity audits, and regular staff training. As accountants, we also need to consider whether we have the proper skills to deliver quality cybersecurity assurance services to our clients and how we can attract the most appropriate personnel to our teams. However, where there are challenges, there are also opportunities, and we should see this as an opportunity to build cyber-resilience among our clients and our organisations. Therefore, we can act as essential stakeholders helping the cyber eco-system to evolve. Donal Kerr, Co-Founder of 4Securitas and Dr Caroline McGroary, Chartered Accountant, are currently Fulbright Scholars at Boston College under the direction of Professor Kevin Powers, Founder and Director of the MS in Cybersecurity Policy & Governance Program and Dr Robert Mauro, Executive Director of the Irish Institute and founding Director of the Global Leadership Institute.

Jan 28, 2022
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Maximising employer branding in 2022

As the number of experienced candidates shrinks and competition for talent heats up, hiring is becoming increasingly difficult. To attract the best talent, you need a strong employer branding strategy in place. Mary Cloonan outlines how. It's 2022, and employer branding is becoming increasingly important as firms compete to attract and keep talent. In the age of advert obliviousness and worldwide information access, your brand is everything. It's what makes you stand out to a shrinking pool of experienced candidates, and it's what will drive you to become a viable option in a sea of gig-based work. Not only that, but strong employer branding can also make your business more attractive to potential buyers. If you're looking to maximise your employer branding, you need to ensure that your strategy is robust and well-executed. The importance of a robust employer branding strategy Your employer branding strategy has the power to attract and retain talent, but it also makes your business more attractive to potential replacements or buyers. It is a critical part of your succession planning strategy, so you need to make the most of this opportunity. Outlined below are some advantages a robust employee branding strategy can bring: Lower employee turnover: when employees are happy and proud of where they work, they're less likely to leave. Improved recruitment: employer branding makes it easier to find qualified candidates because your firm will be seen as an attractive place to work. Increased employee engagement and loyalty: when employees feel like their voices are heard and part of something bigger than themselves, they're more likely to stay on and become loyal to your brand. Build credibility with customers: employer branding shows that you're a responsible employer, which can help build trust with customers. Increased competition: employer branding helps your firm compete for the best candidates in your industry. Higher employer reputation: employers with strong employer brands are seen as leaders in their industry and can attract talent from across the board. Increased sales opportunities: employer branding helps employers find buyers for business units or services because of your high reputation within the market. Lower cost-per-hire: by improving your recruitment process, you can reduce your spending on hiring new employees. How to implement an employer branding strategy Having established the importance of a robust branding strategy, the next stage is how to get yours in place. Consider the following three steps before you implement your employer branding strategy: Conduct an employer valuation proposition (EVP) assessment: An EVP outlines the unique set of employee benefits. It should be based on deep insight into your employees' needs so that you can ensure that they've met before and after they join your company. This will help you understand what your business offers and how it stacks up against the competition. Creating a dedicated digital presence: To maximise your employer branding strategy, you need to create a dedicated digital presence. This will help broaden your reach to potential employees. Your website and social media platforms should be designed with employer branding in mind, showcasing your company culture, values, and benefits. It's also essential to ensure that your website is up-to-date and user-friendly. If it's not, you could be losing out on potential talented applicants. Be ready for change: If the last two years have taught us anything, it's that change comes quickly. Agile companies will flourish; those who don't embrace change will find themselves out of date and behind the curve as a business. Recruitment is a volatile business; to retain top talent, your employer brand must be able to adapt and continually improve. The best employer brands can stay ahead of the curve and keep up with the ever-changing demands of the market. It's imperative to keep in mind that ignoring the branding of your firm or business isn't wise. By not taking the issue seriously, you are telling the market that you don't realise how important this is when individuals attempt to figure out why you're a viable alternative for their future. Therefore, it's essential to appreciate what employer branding is, why it matters, what your employer brand says and what steps you can take to build a unique and attractive one. Mary Cloonan is the Founder of Marketing Clever.

Jan 28, 2022
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