Instead of counting the cost of the current crisis, clients now need their accountants to help them identify and forge a way ahead, writes John Kennedy.Whatever your age or the stage of your career, 2020 is a year like no other. In recent months, your world, your life, and your practice will have changed in a way that no-one thought possible. This has brought great anxiety, stress, and pressure for many. It has disrupted virtually every aspect of life, and it has changed many long-standing priorities and perspectives.At the outset, every conversation was about COVID-19. Then the emphasis began to shift; the focus started to move to how to respond to our unfamiliar new world, to learn how to deal with a dramatic new lifestyle, get better at cooking at home, become more proficient in using technology, and adapt to meeting online.As the days and weeks went on, this shift in emphasis continued. The importance of taking care of our minds as well as our bodies, and supporting each other, came into sharp focus. It is important not to overlook the far-reaching significance of this evolution in thinking. In a world with unforeseen financial pressures, how we connect with others has taken on a revised and revitalised importance and has become established as holding significantly increased value in so many aspects of business life.Reliable, trustworthy customers and clients you can turn to when the pressure is on matter now like never before. The implications will have an impact on your practice, and business in general, for a long time to come.An important lessonOne of the good news stories during the initial stages of the crisis was the way Irish people contributed to fundraising for the Choctaw Nation. As you may know, during the Great Famine in the 1840s, the Choctaw tribe of Native Americans sent much-needed funds to help with famine relief in Ireland.When the coronavirus crisis struck, the Choctaw nation set up a fundraising website. They were at first surprised, and then amazed when donation after donation came in from the Irish community around the world. In an interview about the donations, one of the contributors told this story about an old tribal chief who taught his grandson about the important lessons in life.“There is a fight going on inside me, a far-reaching fight between two wolves. One wolf is evil; he is anger, frustration, sorrow, regret, self-pity, and doubt. The other wolf is good; he is hope, generosity, sensitivity, understanding and confidence. The same fight is going on inside you and every other person too.” The grandson was transfixed. “Which wolf will win?” he asked. The old chief smiled and said: “The wolf you feed.”This is of crucial importance to your work in the months to come. Helping your client feed the good wolf inside themselves should be a central part of your work, as many of your existing clients will feel overwhelmed. They will have come through months of stress and worry, even the optimistic ones who bear it lightly. Many will need to look again at their finances and their financial planning, as many apparent certainties have been overturned. Much has changed, much of it forever.With so much change happening in their lives, it is vital that as their accountant, your relationship with your clients also changes. Clients often have a fixed view of what they should want from their accountant. They believe that they should look to their accountant to prepare accounts, undertake audits, and give tax and compliance advice. In this time of change, your task is to guide them from what they believe they should want to what they genuinely need most.Feed the right wolfMore than ever, clients need you to help them identify what constitutes success in the months and years ahead. Your value will come as much from helping them think clearly as from the technical tasks you carry out.To fully emerge from the coronavirus crisis will take many years. The phrase the ‘new normal’ is much overused, but it holds an important truth. Things may not be normal, but they are certainly going to be new and this is true for every aspect of your clients’ experience – including how they work with their accountant.For almost everyone, the first half of 2020 has been a time of frustration, stress and doubt. If you let your clients see you as the person who will confirm and verify a deeply damaging period for their business, their finances and their lives in a harsh financial record, you are going to be the focus of much of their stress and angst. Left to themselves, it is all too easy for your clients to focus on and feed the bad wolf.For the foreseeable future, every wise accountant will take an active hand in guiding their clients to think about the things they most need. The greatest problem with the COVID-19 crisis, however, has been fear of the unknown. So when it comes to your role, you must replace the fear of the unknown with clarity, understanding, well-thought-out confidence and a path that takes them to a better place. This is the good wolf.Moving from ‘want’ to ‘need’How often have you chatted with your clients about their life, family, hopes and ambitions before ‘getting down to business’? Instead of getting down to the business of counting the cost of the current crisis, however, they now need you to help them see the way ahead. They need you to shape a clear image of a future they can reach. This is not an invitation to become a counsellor or a cheerleader; it is much more important than that.Your role is to help your clients see the commercial realities and show them how to identify each individual stepping stone to get them to the other side of this whole challenging experience. In the short-term, that may well be about survival. You may need to place a sharper focus on identifying new ways to manage cash flow and to help them understand their options in this new reality so they can more effectively chart a course as the emergency financial instruments are removed.While accurate returns and timely compliance will remain part of your role, your real value lies in helping remove your clients’ fear of a future that is worryingly unclear and unfamiliar. Many clients will need to restructure long-standing business practices, to secure new sources of purchase finance, or to change the terms of access to credit.They will need you to help them understand that this will pass, and it will pass most easily and most quickly for those who know how to plan the practical steps to get to that future. The accountants who focus on the need to actively shape the future rather than count the cost of the past or worry about the unknown will stand apart as a source of uncommon, vital value. This will provide a real, tangible return for both you and your clients in the months and years ahead.By helping your clients in this way, you will significantly improve the likelihood of their long-term financial survival. You will open up new dimensions for your relationship with them, binding them to you for years to come. And these new relationships will survive the evolution of traditional accounting as your role as an adviser continues to grow.This is a time to take a firm hand and raise your clients from what they want, to what they need. It is time to help them feed the good wolf.  John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

Jul 29, 2020

Dr Michael Hayden provides the accounting practitioner with some food for thought.The COVID-19 pandemic brings a realisation of the importance of certain sectors in our society. While many businesses cease operations, food producers and farm enterprises are acknowledged as essential services.The economic significance of the Irish agricultural industry is well documented. However, in these unprecedented times, the focus has turned to its social importance. This provides an opportunity for the accounting profession to reflect on how it can best assist and support farming businesses, not only in the current circumstances but in the future.A question worth considering is: does the agricultural community reap the full benefit of the extensive knowledge and skills the accountancy profession has to offer? While acknowledging that challenges exist for accountants in delivering their services to farm clients, there are significant opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Industry contextThe agricultural industry is an integral part of our economy and society. After the economic crisis of 2008, the government primed the agricultural sector to stimulate economic growth and set out ambitious goals for it in the Food Harvest 2020 and subsequent Foodwise 2025 strategy documents. The Department of Agriculture, Food and the Marine’s 2019 Annual Review and Outlook report outlines the importance of the industry. It claims that food produced in Ireland was exported to over 180 markets worldwide and was valued at €13.7 billion in 2018, which represents 10% of merchandise exports. Additionally, the sector contributed 7.5% of gross national income (GNI) and employed 173,000 people (7.7% of total employment) in 2018.Despite the importance of the industry, when average farm size, farm incomes and dependency on farm subsidies are examined, as well as the average age and training levels of Irish farmers, a picture of economic vulnerability emerges. The National Farm Survey (NFS) is published annually by Teagasc and highlights this vulnerability. The 2019 NFS highlights that 34% of Irish farms were deemed viable, 33% sustainable, and 33% vulnerable. It also reports that the average family farm income (FFI) in Ireland was €23,933 in 2019, which varies significantly across farm types (for example, dairy generated €66,570, tillage generated €34,437 and beef generated €9,188). Furthermore, farming in Ireland remains reliant on subsidies which, on average, accounted for 77% of FFI in 2019.Experts warn of another economic crisis post-COVID-19, and there is no doubt that our agricultural industry will attract renewed focus. Furthermore, Brexit represents a significant external risk for Irish agriculture with potentially far-reaching economic, social and cultural consequences. In this context, it is perhaps more important than ever that the accounting profession supports the agricultural community in developing sustainable farm enterprises by assisting farmers in making informed financial decisions based on sound financial management information.Challenges in providing services to farm clientsBefore exploring the opportunities for accountants to provide support to the agricultural community, it is important to acknowledge some challenges that exist in assisting farmers in managing their enterprise.Despite the economic vulnerability of many farms, research shows that most farmers spend little time on financial management. A dislike of conducting financial management activities exists in the farming community. Indeed, they are often viewed as a necessary evil and do not always fit well with the identity of what farmers see as important farm management activities. There are other identity-related issues: many farmers are quite secretive about their financial affairs; some are naturally reluctant to seek farm management advice; many tend to rely on intuition and experience in managing their business as opposed to relying on financial information.As a result of the lack of engagement by farmers with financial management in the day-to-day management of their business, book-keeping systems can be relatively unsophisticated. There is a tendency to monitor bank balances (cash flow), and only a minority maintain management accounting records.The average age of a farmer in Ireland is 59 years. This high age profile is a well-documented concern for the industry. In terms of financial management, older farmers are less likely to invest in their farm and are less likely to strive for innovation and efficiencies.Historically, farmers view accountants as providing a statutory and compliance role, such as filing annual tax returns, with little focus on value-added services. Also, the cost of such value-added services is a barrier as quite often, farmers are unwilling to pay for such services.This profile of the farming community suggests that there are limited opportunities for accountants to provide value-added services to farmers. However, there are ‘green shoots’ that give cause for optimism.Green shoots to exploreIn recent years, there has been a considerable shift in the industry. This shift is transforming the Irish agricultural landscape and providing opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Policy changes have resulted in some fundamental structural reforms, which have provided opportunities for growth. For example, milk quota abolition under the Common Agricultural Policy (CAP) has resulted in considerable investment and expansion in the dairy sector. While it is acknowledged that farmers tend not to engage extensively and/or dislike financial management, the mindset of many farmers in this respect is changing. In my research, I discovered that where farmers are making strategic farm expansion decisions, there is a considerable degree of engagement with their accountants.Many traditional farm enterprises are diversifying and exploring new markets for their produce. For example, there is an increase in the production of artisan food products directly by farmers, alternative supply chains where farmers sell their produce directly from farm-to-market, and an increased focus on organic food production. These trends and the movement from the traditional farm production system often bring a renewed focus on profit margins, cost management and overall financial management.Farm partnerships and the incorporation of farm enterprises are becoming more widespread in the industry. Such changes in legal structure provide additional opportunities for accountants who have expert knowledge in terms of tax, legal, and succession planning advice.As a result of the above developments, younger farmers are being enticed into the industry. Agricultural courses in colleges and universities have seen strong demand in the past decade, which is very positive. Numerous policy measures have also been enacted to encourage generational renewal, including changes to land leasing arrangements, while tax reliefs/incentives have been developed to facilitate younger farmers entering the industry.These transformations to the Irish agricultural landscape have encouraged farmers to be more open to engaging the value-added services of accountants. This provides opportunities for accountants to develop successful working relationships with farmers, whereby farmers could significantly benefit from the expert knowledge and skills that accountants have to offer.ConclusionThere is vast potential for accountants and farmers to work more effectively together to develop sustainable farm enterprises. Navigating the financial challenges of COVID-19 and Brexit are just two reasons why each farmer should look to his or her trusted accountant for support and expertise as the farming community strives to meet the critical societal demands for a sustainable food supply.Dr Michael Hayden FCA is Assistant Professor of Accounting at Maynooth University.

Jul 29, 2020

Sinead Moore and Paul McGarry share insights from a recent study by Deloitte’s Young Audit Professionals Group on how the next generation of audit leaders perceive their role and purpose.The role of auditors will rightly be in the spotlight during this challenging time for our economy. Auditors are expected to challenge directors and management as they assess the impact of COVID-19 on their business and make key judgements on critical areas, such as going concern and viability, to support shareholders and the capital markets.This vital role will be performed against a backdrop of intense focus on the audit profession in several countries, notably the UK, following high-profile corporate failures. While the debate covers lots of ground including competition, conflicts of interest and the growth of non-audit services by audit firms, a critical element of the debate centres on the fundamental question: what is the purpose of an audit?Consistently defining the purpose of the audit has always been difficult. The profession has often been accused of hiding behind the expectation gap (i.e. while legislation and regulation have a narrow definition of what an audit is, the public has a broader expectation). If you ask a practitioner to define an audit, you will typically get the standard definition: ‘to provide an opinion on whether a set of financial statements present a true and fair view’. In embarking on this study, we therefore approached the question from a different perspective – what do young professionals perceive their role to be? What is their purpose, and how do they see themselves?The responses tell us that practitioners have a more nuanced and more in-depth view of their role as an auditor, in contrast to the narrower definition of an audit. The findings indicate that practitioners have a common view that, in addition to providing assurance over the financial statements, it is their role to:understand the business models of the entities they audit;understand the organisation’s internal controls and provide challenge and insight to improve those controls;provide expertise on financial reporting matters;use technology to increase the assurance the auditor is providing; andlook to the future, understand the risks facing the business, and provide relevant insights.Practitioners believe that they are completing the tasks above in their day-to-day activities, though not necessarily in a consistent fashion. There is a clear appetite to fulfil these roles more comprehensively going forward and in doing so, bridge the expectation gap. But much more importantly in the eyes of the young professionals is ensuring that the role of the auditor is meaningful, valued by stakeholders, and attractive as a career.Internal controlsLet’s explore some of the themes that emerged in more detail – first, internal controls. Young auditors firmly believe that understanding the control environment is a key part of their purpose. Furthermore, they view the provision of insight and opinion on those controls as an essential part of their job and believe that they provide this insight to the management of their audited entities in their current role. However, they perceive an inconsistency in how this role is fulfilled across different types of entities given their size, their industry or their ownership structure.The study also pointed to a perception that the more structured framework for internal control reporting for entities subject to the requirements of the US Sarbanes-Oxley Act is effective. This contrasts with the legislative framework in Ireland, where there is no formal reporting on internal controls. Indeed, participants in the study highlighted the following shortcomings:a lack of detail in audit reports on which procedures were performed to obtain an understanding of the control environment; andthe areas where the auditor was unable to obtain assurance over the internal control environment and therefore conducted substantive, detailed testing.A key conclusion, therefore, is that a formal testing and reporting framework, including the specifics of the procedures performed and results obtained, should be reported not just to management and those charged with governance, but also publicly to the users of the financial statements.TechnologyEven before COVID-19, the use of technology in the audit was increasing. Respondents were unanimous in their view that increased use of technology can improve audit quality, improve the efficiency of the audit process, and enhance the insight auditors offer to management and those charged with governance.However, the study highlighted several challenges. First, obtaining data in a usable format to enable technologies is a fundamental issue in facilitating the more widespread use of tools and technology. Privacy and security concerns have made it difficult to get large datasets or continuous access to entities’ systems and have slowed the adoption of many audit tools.Second, the competencies required to use innovative technologies, including enhanced analytics, are different from the current core skills of many practitioners. To reap the full benefit, auditors therefore need to develop new skills and firms must continue to invest in embedding technology into internal training and methodology. Also, third-level institutions and professional bodies have a responsibility to integrate technology and analytics into course curricula, as Chartered Accountants Ireland has done with the introduction of data analytics, artificial intelligence and emerging technologies as part of the FAE Core syllabus.Business model and future risksArguably the most interesting findings of the study were related to understanding the business model and the future risks faced by the audited entities. At its most basic, this was what defined auditor purpose in the eyes of the young audit professionals – the job of the auditor is to understand the business, the risks it faces, and ensure that the financial statements present that reality. This aspect of the role gave them the most satisfaction: understanding the business, challenging management on their judgements, assumptions and outlook; and ensuring that the disclosure in the annual report reflected this in a fair and balanced way.In their day-to-day work, the young professionals felt that, while the audit process frequently resulted in entities making changes to their reported numbers and improving disclosures in the financial statements, this was mostly unseen by the broader users of financial statements. The participants highlighted that the pass/fail nature of the audit report did not adequately reflect the challenge and output of the audit and that, to date, the expanded audit reports had not improved this significantly.According to the study, the critical barrier to disclosing more tailored information in audit reports was the ingrained concept of a ‘clean’ audit opinion – auditors and preparers alike found it difficult to move to a less binary conclusion. A variety of themes emerged around this, including developing different forms of assurance over elements of the annual report and in particular, how audit reports may evolve to include more detail on audit judgements without creating the risk of a perception of a qualified audit. The young professionals concluded that audit reporting must evolve to accommodate more information for users on judgements.ConclusionOverall, the study provided some powerful perspectives on how our young auditors see themselves. It demonstrated that the next generation of audit leaders are passionate about their profession and are not satisfied to hide behind the expectation gap to defend the role of the auditor. Indeed, they have a strong desire to develop the role of the auditor to meet the expectations of the public and believe that this is achievable.We also concluded that as a profession, we must focus on further developing the theme of ‘auditor purpose’ to curate some simple messages and language that aligns with this deeper purpose and value of audit. In particular, we should encourage a proactive discussion and debate on auditor purpose to ensure the role of audit is understood, continues to have public interest value, and is an attractive profession.Sinead Moore is an Audit Partner in Deloitte and chairs the Young Audit Professionals Group.Paul McGarry is an Audit Senior Manager in Deloitte and a member of the Young Audit Professionals Group.

Jul 29, 2020

The UK Government has recently made urgent and radical changes to insolvency laws, which may help companies survive the COVID-19 crisis, write Michael Drumm and Sean Cavanagh.The Corporate Insolvency and Governance Act 2020 represents the most significant reform of insolvency legislation in over 20 years. It was fast-tracked through Parliament and became law on 26 June. The laws apply to the whole of the UK, and specific clauses relating to Northern Ireland have been included.Some of the new changes are permanent, and some are temporary. The permanent changes focus on reforms in three key areas:A moratorium;A ban on termination provisions; andA new restructuring plan.The temporary measures relate to the suspension of the wrongful trading regime, the suspension of statutory demands and winding-up petitions where financial difficulties arise directly from the effects of the COVID-19 pandemic, and some temporary extensions concerning company filing requirements.This article is necessarily high-level, and readers are encouraged to speak to their advisors to explore the detail.Permanent changesA new ‘free-standing’ moratoriumThis mechanism differs from existing moratoria in that it is a standalone procedure and does not necessarily need to be a gateway to any formal insolvency process.The application In most cases, the moratorium can be initiated by merely filing the application with the court (a court order is not required). The application must contain:• a statement by the directors that, in their view, the company is, or is likely to become, unable to pay its debts; and• a statement from the proposed monitor (who must be an insolvency practitioner) that the company is an ‘eligible’ company and that, in their view, the moratorium would likely result in the rescue of the company as a going concern.Length of the moratoriumIt will last for an initial period of 20 business days, which can be extended to 40 business days by the directors (no creditor approval required). This 40-day period can be extended for up to one year, but only with creditor or court approval. A further extension beyond one year is also possible by applying to the court.Each application for an extension must be accompanied by a statement from the directors and the monitor.Effect of the moratoriumIt will prevent the enforcement of security, the crystallisation of a floating charge, the commencement of insolvency proceedings or forfeiture of a lease.The company will not be obliged to pay most pre-moratorium debts during the moratorium, but there are some exceptions (e.g. wages and salaries, finance loans and leases). However, debts falling due during the moratorium must be paid so access to cash or funding will be vital.The monitorDuring the moratorium, the directors remain in control of the business and a monitor oversees the process. The monitor is an officer of the court and as part of their role, they must protect creditors’ interests while also ensuring compliance with the conditions of the moratorium.For the period of the COVID-19 crisis (at present, up to 30 September 2020), the monitor can disregard any worsening of the company’s financial position that is attributable to the pandemic, providing a going concern rescue is still likely.How will it end?The moratorium can come to an end via:an agreement/restructuring with its creditors, possibly via a company voluntary arrangement (CVA);a scheme of arrangement;a court order;termination by the monitor if he/she determines that the conditions have not been fulfilled; orautomatically, on expiry of the time limit.The hope is that the company will emerge from the moratorium having achieved a rescue, but if this is not the case, a winding up or administration might happen. Where this insolvency procedure happens within 12 weeks of the end of the moratorium, certain unpaid debts in the moratorium and certain other debts have ‘super priority’ for payment ahead of other debts.A new restructuring planThis new procedure will closely resemble the existing scheme of arrangement, which is a statutory legal process that allows a company to restructure its debt. It is not an insolvency procedure but must be approved by the court.The restructuring plan will require two court hearings, is likely to be technically complex, and will be expensive as a result. Thus, it may not turn out to be a practical solution for smaller SMEs in distressed scenarios.The principal advantage of the new restructuring plan is that it will offer the ability to cramdown one or more classes of dissenting creditors or shareholders. In effect, this means that even if a class of creditor does not vote for the plan, the court may still sanction a cramdown provided certain conditions are met, including that no creditor is worse off than the relevant alternative.The procedure is more likely to be used in more complex and larger distressed company scenarios, particularly with bond-holder involvement, meaning it is unlikely to be used regularly in Northern Ireland.Suspension of termination clauses for suppliers of goods and servicesWhen a company enters an insolvency or restructuring procedure, suppliers will often stop or attempt to stop supplies by virtue of the terms of its supply contract.This new Act prohibits the termination of any contract for the supply of goods and services to a company by reason of the company entering into an insolvency procedure. This will include the new moratorium procedure outlined above, administration, CVA, liquidation or a restructuring plan. However, this prohibition does not apply to schemes of arrangementAlso, a supplier company cannot insist on any disadvantageous amended terms (e.g. significant price increases). There are some exceptions to this suspension, however, such as contracts for the supply of services from insurers and banks.A temporary exemption (available during the COVID-19 period) to this supply restriction will be available to ‘small’ businesses. This may be of importance to Northern Ireland supplier companies, as many of them will qualify as ‘small’ for this purpose.A company can also apply to the court to terminate supply where it can prove ‘hardship’. ‘Hardship’ is unfortunately not defined as yet.Temporary changesThese temporary changes only apply during the period of the COVID-19 crisis.Suspension of the offence of wrongful tradingThis new Act directs the courts to assume that a director is not responsible for the worsening of the financial position of the company that occurs during this period (currently to 30 September).This reduces, but critically, does not remove, the threat of personal liability on company directors arising from ‘wrongful trading’. This temporary suspension only applies to ‘wrongful’ trading – it does not exempt directors from possible personal liability arising from ‘fraudulent trading’.Temporary suspension of statutory demands and winding petitionsThe Act temporarily removes the threat of statutory demands and winding-up proceedings, but only where COVID-19 has had a worsening effect on the company. In these circumstances, statutory demands will be void if served on a company during this period. However, a company will not be protected from the making of a winding-up order where the financial difficulties of the company would have arisen regardless of the effects of COVID-19.AnalysisThese new measures will be welcomed as they have the potential to help many viable companies that have been directly impacted by the effects of this unprecedented crisis.The intention of the new moratorium is that it will be a ‘debtor-in-possession’ process whereby the monitor acts in a limited capacity as overseer. This follows recent trends in some administrations (e.g. Debenhams) where administrators have provided consent to directors to make certain decisions via a ‘consent protocol agreement’ in what many are calling ‘light touch’ administrations.Only time will tell whether this new moratorium procedure is preferred over the traditional administration process, but recent developments certainly indicate a move towards a more rescue-orientated restructuring culture, which will surely be required to save viable businesses and address the unique nature of the upcoming economic environment.Michael Drumm is a licensed insolvency practitioner and an advisory partner at CavanaghKelly.Sean Cavanagh is a Founding Partner of CavanaghKelly, a licensed insolvency practitioner and Chair of the Insolvency Technical Committee at Chartered Accountants Ireland.

Jul 29, 2020

In 2010, Neil Hughes set out the seven Cs framework to help businesses navigate the great recession. Fast forward a decade, and these principles remain more pertinent than ever.Are you familiar with the old story of the two hikers in the woods? They come across a bear who starts to chase them. One hiker stops and begins changing from hiking boots to running shoes. The other hiker says, “I can’t believe that you think you will outrun the bear just because you change your shoes!” The first hiker replies, “I don’t need to outrun the bear. I just need to outrun you!” The moral of the story? When trading through difficult times, those who are best prepared are most likely to survive.Considering that the current community mentality and enthusiasm is likely to fade when the effects of the recession start to bite and businesses are striving to outperform their peers, this sentiment is even more significant. Many business owners are currently trying to adopt the best strategies to save their businesses. A common characteristic in many business failures is mismanagement. Although not deliberate, many people do not take advice, make the wrong decisions, and incur avoidable losses.With so many external factors at play, how can you best position your business on the road to recovery? What course of action do you need to take to ensure that your firm not only survives, but emerges stronger than before? The seven Cs present a blueprint for business owners and managers who are working hard to beat the competition and overcome significant challenges.1. CounselMaking well-informed and rational decisions under increasing pressure and uncertain conditions borders on the impossible, which is why seeking counsel at an early stage is the first step to pivoting a business during a crisis. How has my business been affected by the fallout from the COVID-19 pandemic? What financial shape is it in? How can I tackle the ‘here and now’ while turning my focus to the future? Avoid falling into the trap of taking unqualified advice; seek guidance from a select group of professionals such as your Chartered Accountant, your solicitor, and your funder. Work with them to formulate a practical and comprehensive recovery plan.2. CommunicationDon’t underestimate the importance of honesty, especially when things are uncertain. Communicate your financial position with the people and groups to whom you are indebted – the taxman, lenders, landlords and suppliers. You will be amazed at the goodwill this generates. Not only are your creditors likely to appreciate your honesty, but it will also take some of the pressure off, which may facilitate better decision-making. Unbridled transparency builds trust, which will help you maintain your integrity. This, in turn, will buy you more time and with time, many things become possible. Start with the truth and go from there.3. CooperationThe current crisis has changed the way we work. With businesses now forced to rely on different forms of communication, relationships between business owners and employees may have changed. Now is not the time for ambiguity. Your staff play a crucial role in helping your business stay afloat during unstable times. Communicate with them clearly and frequently. Be forthright about the condition of your business; they will respect you for it and are likely to show loyalty in return. Failure to secure their cooperation will significantly dilute your business’s chance of survival.4. Clarity of purposeCreate a new business plan that will provide greater clarity on all functions from marketing, finance and accounting to operations, products and services, and distribution. Adopt an entrepreneurial attitude. While there is no doubt that this crisis has presented grave difficulties, it also provides plenty of scope for innovation. Business leaders are stepping out of their comfort zones and thinking outside the box. There are opportunities to be found if you look hard enough. Ask yourself: “how can I ensure my business not only survives, but thrives?” Rediscover the sense of excitement you felt when you first set up your business. This will drive you forward with clarity of purpose.5. CostCost reduction should be a crucial part of your business strategy. Many business leaders will find themselves implementing cost-cutting measures in response to declining revenue, profitability, and reduced access to credit. Instigate a company-wide series of targeted cost cuts. Don’t make arbitrary or general cuts that may adversely impact long-term goals. The main areas for potential savings in any business lie in eliminating waste, seeking out and demanding the best prices for supplies and services, and carrying out certain tasks in-house that were previously contracted out to third parties.6. CashA swift recovery often boils down to one thing: cash flow. Credit controllers work hard to bring in the money and are instrumental in keeping businesses ticking over. Cash control means releasing the ‘lock-up’ of your business (i.e. the latent profit that is locked up in your stock, work-in-progress and debtors). It is a lack of cash that causes many businesses to fail during times of hardship, not a lack of profit. And even profitable businesses will fail if they run out of cash.7. CustomersWith normal operations out of whack, it may be harder for organisations to focus on exceptional customer service. However, now more than ever, customers are exceedingly important. Engage with your customers, ensuring you are adapting to their changing needs. A business owner must strive to continually ensure that the customer’s experience of a product or service is as pleasant, straightforward, and satisfying as possible. During an economic slump, it is your customers who will carry you through.Neil Hughes FCA is Managing Partner at Baker Tilly Ireland and author of Beating the Recession: The Seven Cs of Business Recovery, which is published by Chartered Accountants Ireland.

Jul 29, 2020

John Convery discusses the critical elements of an investor-grade business plan and what investors and venture capital firms look for in an investable business.The saying “paper never refuses ink” can certainly be applied when business plans are being written. Entrepreneurs and business owners have license to include what they want and can go overboard in producing great looking (and sounding) documents, but to what end? Venture capital firms will tell you privately how many plans pass across their desks but are discarded very quickly because they are not grounded in reality or properly thought through.There is any number of sources that proclaim to give you the formula for “how to write a perfect plan” or “how to write a winning plan”. Thanks to the web, there are now templates galore you can use in tandem. There are also multiple sites that outline what a great business plan should contain.Writing a good plan is not an exercise in producing grandiose business models and frameworks, with dazzling technical language and 2-D diagrams in brilliant, sharp colours and padding the whole lot off with forecasts and various scenarios. This sort of approach might win you a prize in a visual design contest, it will not help you raise investment.A business plan clarifies what a business is going to do, and how it is going to do it. For any start-up or established business, the process of writing a business plan is a discipline in explaining this. The article will therefore focus on what is required to produce an investor-grade business plan, what should go into the plan,     and what investors or venture capital firms look for before they invest in a business.Function and roleThe business plan is a blueprint for a business; it is essential if you are thinking of starting a business and is also an important tool for any established business. It is not static; rather, the business plan for any business will change over time as the business develops and as objectives change. For any start-up business, here are strong reasons why you need to write one:the process of writing a business plan will challenge owners to critically examine the business potential. It will test and serves to clarify the feasibility of the business idea;it allows you to set out your goals and prioritise business objectives;it allows you to measure what progress is achieved; andit is required to attract investors and secure funding.ContentsIn terms of length, an investor-grade business plan of 10-20 pages is reasonable. The key elements and content should include the following:1. Executive summary: the most important part of the business plan, the executive summary is generally the last section to be written. The objective is to grab the reader’s attention, sell the investment opportunity, and to get the potential investor to read the entire plan. It should be succinct and no longer than two pages. The key elements are:Opportunity: in a nutshell why is your product great and what customer problem will you solve? Explain the pain-point, your solution, and what are you offering.Product: describe its benefits and what it can deliver.Value proposition: who is the target market, your customer, and why will they want to buy it? What are the benefits?Marketing strategy: how will you reach your customers and what are your distribution channels?Competitive advantage: who is the competition? What is your competitive advantage?Business model: how will you generate revenue, and from whom? Why is your model scalable?Team: who are the management team, and why will they succeed?Financials: include highlights from the P&L for the next three years, cash balances, and headcount. Explain how you will reach your revenue targets.Funding: how much funding is required, and what will it be used for? Outline plans for future funding rounds.2. Product/service solution: what is it, what does it do, how does it work, who is the typical customer, and why is it different?3. Value proposition: explain the problem your business aims to solve. Where is the pain? Quantify the benefits for your customer in terms of money or time – and remember, the pain must be large and the benefits meaningful to convince a customer. Skip the technical jargon and be customer-centric.4. Market and opportunity: explain the overall industry and market dynamics. Segment the market by customer group and identify your target customer. Quantify the total market size and market opportunity of your addressable market. Use charts or graphs if necessary but remember that all figures should be from accredited sources and referenced.5. Competition: list and discuss all your competitors. Include any product/service that could be a substitute or alternative for your customer and outline how you compare with competitors.6. Competitive advantage/edge: some call this the secret sauce. How are you differentiated from your competitors? Detail your sustainable competitive advantage, highlight any barriers to entry that might keep your competitors away, and explain why any customer would buy your product/solution.7. Business model: how will you make money, who pays you, and how much do you keep after any expenses? Explain all sources of revenue from your customers and explain how your model is scalable.8. Marketing/sales strategy: this is your ‘go to market’ strategy. How will you reach your customers? Will you choose direct sales, partners, resellers or web? Include pricing and how much will go to channel intermediaries; provide a timeline of key milestones.9. The team: detail founders and key members, their qualifications, experience, track record, and domain knowledge. Include any advisory board members or industry figures involved with the business.10. Financial projection: for a start-up, include one-year detailed P&L data, cash flow prediction, balance sheet by month, and annual summary figures for three years thereafter highlighting key figures in P&L, cash flow and headcount. Also, what and when is your peak cash requirement? Cash is critical, and the cash flow statement is the key one. For an established business, include P&L, balance sheet for the last three years, and project P&L, cash flow and balance sheet by month for the next three years. For any financial projection, outline all key assumptions used. These must be based on sober and pragmatic reasoning, clearly justify growth assumptions, and highlight the peak cash requirement and break-even point.11. Funding requirements: explain the amount of funding required for the business. How much is being provided by other investors? State what the funds will be used for and show how much existing founders and owners have provided to date.12. Exit strategy: discuss the opportunities for investors to exit such as an acquisition, trade sale or IPO (beware, IPOs are only for the very best companies). Highlight trends in the market and give examples of valuations relevant to your business, but don’t go overboard and perhaps discuss your aim to build a truly sustainable business.Business plan pitfallsDo not make exaggerated claims. Business plans are meant to inform and reassure, not entertain, readers. Avoid the following types of statements or claims unless you can back them up with robust evidence:according to Gartner, the market is worth X billion; we only need Y% of this.we have no competition.our product is vastly better than anything else available.we can be number two in the market within 12 months.our technology is superior.customers will switch to our product.we will be profitable within 12 months.we can repay our investors after three years.our mission-critical kit is best of breed.we plan to target multiple overseas markets.we need to pay top salaries to attract top people.we want to retain the maximum amount of equity possible.It generally takes at least four years to reach €1 million in annual turnover, and that is if you are exceptionally lucky. It generally costs twice as much and takes you at least twice as long as you think it will to get there.Raising financeA start-up will typically go through different stages of funding sources as it moves from idea stage to product development, testing, initial customer validation and on to generating revenue. Initial funding will be provided by the founder, family and friends. Sooner or later, the founders will need to seek seed funding, which might be provided by an angel investor or seed venture capital fund. When a business seeks to raise outside finance from an investor or venture capital firm, they will look for the following criteria:Team: investors ultimately back people, not ideas. This is the number one criterion. They especially like those with deep knowledge and great experience; they will focus on track record and achievements.Market: they will seek a large market opportunity and strong growth rate. If the market has barriers to entry, better again. It needs to be big to support the returns many venture capital firms seek.Sustainable competitive advantage: a clear competitive advantage or unique selling point over others.Technology: great technology is a fundamental requirement now.Scalability: clear potential to grow in overseas markets.High gross margins: this reduces the amount required for working capital.ConclusionWithout a well-prepared and researched business plan, there is little chance of attracting outside funding. For a reader, the plan should be:credibleplausibleimplementableinvestableIt goes without saying that the plan should be grammatically correct, with no spelling errors. It should also be page referenced with no mistakes in the financials and look professional overall.John Convery is a business adviser to start-ups and small businesses. In the October issue, John will consider why so many start-ups fail, and how to improve the chance of success.

Jul 29, 2020

Michael Clohosey considers the economic impacts of COVID-19 based on a series of interviews with business executives in the Zurich region.Switzerland shares some similarities with Ireland. Both are small countries with very open economies and punch above their weight on the global stage. Both economies also have a high reliance on the services sector, with the pharmaceutical/healthcare industry a large proportion of the industrial sector. Based in the Zurich area for almost ten years, I thought it would be interesting to share some perspective from this part of Europe, focusing on the impact of COVID-19 on businesses in Switzerland. I interviewed finance leaders from various industries, and this process provided some interesting perspectives on the current crisis and offered a view of its medium-term impact.The type of industry in which businesses are active is the main determinant of the impact of COVID-19 in Switzerland. For example, one domestic electrical supply company involved in electrical installations for both commercial and residential property felt only a marginal impact on demand. Another company involved in the production of control devices for heating and ventilation systems, and which has a much larger global presence, is forecasting a slight decrease in demand in the medium-term. On the other hand, an international education company suffered an immediate, almost complete drop in revenue. Once countries started to impose restrictions and prohibit essential travel, this required enormous effort and collaboration from their external partners to ensure that their students abroad were safe and could find a way to get home. While facing a severe decline in revenue and an uncertain future, the firm needed to focus solely on the welfare of its customers stranded in locations like South Africa, China and Australia.Business responseThe logistical response of the Swiss Government, including the travel restrictions, is well-covered in other sources. I will instead focus on the Government’s economic response to the crisis, which was quite strong – even if it was not immediate. One must remember that Switzerland is not part of the EU and does not, therefore, have ready access to the financial safeguards and protection the EU provides. In total, the Swiss Government set aside more than €61 billion to support the economy. This will create a massive deficit in the national budget, but the amount that must be borrowed is significantly lower due to the Government’s large cash reserves. Some economists estimate that the debt to GDP ratio will increase from 26.7% in 2019 to approximately 34% in 2020, easily meeting the eurozone’s Maastricht criteria. The Government’s measures, which focused on different target groups, aimed to safeguard jobs, guarantee wages and support the self-employed. Measures were also taken in the field of culture and sport to prevent bankruptcies and to cushion the financial consequences. Furthermore, there were provisions to delay payment and temporarily waive late payment interest on social security contributions and various taxes.Many businesses availed of this support, especially those in the travel and tourism trade. I know of many companies that eased their liquidity concerns by quickly accessing interest-free government loans of up to CHF 0.5 billion. Companies affected were also entitled to apply for what is termed “short-term working”. This was extremely helpful to the restaurant sector, from which employees were made temporarily redundant. Provided employees were still paid full salaries, employers received 80% of the cost from the Government. Rental payments remained privately managed. Some landlords were open to negotiation, especially where there were obvious financial difficulties on the tenant side. This flexibility to negotiate seemed to vary depending on whether the landlord was a private or commercial institution. Solutions found included deferral of rent payment. In an apparent contradiction, there appeared to be cases where landlords were more open to negotiating when they saw that the tenants were granted access to the Government’s interest-free business loans.There were short- and medium-term impacts on business, including the supply chain. One company that supplies leather to Asia for shoe manufacture suffered a drop in production due to the difficulty in exporting raw materials. Ship cargo returning from Asia was almost non-existent, and any possible exports were therefore changed to air cargo. An educational travel company I spoke to needed to review agreements with all educational partners abroad due to the number of re-bookings where students sought to change school. As we see with the airline sector, re-bookings are preferable to cash refunds. However, this is cumbersome in the educational travel industry due to the number of actors involved. Some firms changed their business models. Third-level institutions, for example, were in the main very quick to react. They established management task forces and brought their curricula online. Online education is one of the fastest-growing global industries, and the pandemic has only increased its expansion.Focus areas also changed in finance departments. The old maxim of “cash is king” was never as important as it is now. Companies that were not so well accustomed to short-term cash planning even hired external consultants to create 13-week cash forecasts. Fixed yearly budgets increasingly became rolling forecasts, with new scenario planning to account for the effects of the pandemic.Seven insights from the COVID-19 crisisA comprehensive review of organisations’ state of preparedness for such an unforeseen circumstance, their reactions to it, and the enforced planning for a new economic reality produced many new lessons. It also underlined the importance of established business principles.Business agility: we saw the importance of agility in how quickly some educational establishments brought their curricula online. Many advanced education establishments are already planning to generate a greater share of revenue through e-delivery.Securing the supply chain: it is very difficult to plan for an almost total transport shut-down. However, we saw in the example above of the shoe production company that alternative methods of transport can be put in place, albeit at a higher cost and risk. This same firm also discovered and used shoe manufacturers closer to the source of the raw material.Strong partnerships: strong business relations, especially with suppliers and customers, are more important than ever in times of crisis. One company I interviewed closed one of its largest partnership deals through online meetings. This was mainly due to the trust already created.Working from home: many firms, especially those in the financial services industry, have identified that productivity has not decreased while employees have worked from home. This has allowed them to offer it as an alternative for the future. In some cases, property leases can be reviewed due to the resultant decreased need for office space. It is therefore expected that the dynamics of cities like Zurich, which until now had large office space occupied by banks and financial institutions, will partially change in the future.Discretionary travel: discretionary costs, especially travel, were already in focus before the lockdown. The fact that many businesses functioned quite well without travel has led to a further appraisal of its value.Cash is king: the funds disclaimer says “past success does not guarantee future performance”. However, past success in the form of cash reserves can guarantee business survival in such times. Even more attention should be paid now to short- and medium-term cash planning.Scenario planning in forecasting: we have seen how macro events can have a drastic impact. Businesses can increase their ability to respond by replacing traditional budgeting with frequently updated forecasting models, which include scenario planning for changes in the economic environment. The conventional practice of involving all departments for budgets or forecasts can be reviewed to facilitate the agility required. Responsibility for financial planning and forecasting cannot be delegated from the finance function.A snapshot of the economic impact of the crisisAs Switzerland and Ireland are (at the time of writing) emerging from travel and business restrictions, I thought it helpful to review some key indicators of the financial impact of the recent upheaval. According to projections from the OECD’s latest economic outlook, similar to the world economy, Switzerland and Ireland are not expected to be at Q4 2019 levels of GDP until Q4 2021. This is projected for each of the two scenarios, which they estimate are equally probable. One scenario anticipates a second wave of infections with renewed lockdowns before the end of 2020. The other scenario anticipates the avoidance of another major outbreak. Refer to Table 1 for the historic percentage changes to real GDP and forecasted changes to real GDP based on economic projections for a single wave of infections.Switzerland and Ireland are expected to suffer similar declines in GDP. This perhaps is logical, given that both economies are driven mainly by the services and pharmaceutical/healthcare sectors. Interestingly tourism, one of the most severely affected industries, is not a very significant part of total GDP; it represents approximately 3% in both countries. Table 1 shows that Switzerland and Ireland have recorded quite different increases in real GDP in the last 20 years. Switzerland’s growth rate has been very stable at an average of 2% per annum, and almost exactly replicates the growth rate of ‘advanced economies’. Ireland’s growth rates, on the other hand, have been higher and much more variable.Putting recent lessons to workIt is not surprising that the global pandemic has impacted the economy in Switzerland as much as it has in Ireland and the rest of the world. People have changed their behaviours, both involuntarily and voluntarily. I have acquaintances who, up until the crisis, never purchased items online. I am sure that countless others in Ireland have just recently started shopping on their electronic devices.The online education industry is booming. Businesses have been quick to change their supply chains and include alternatives. They have also altered their business models, which we see most markedly in the education sector. Perhaps the increased effective use of video communications tools like Zoom and Skype has brought the possibility of education for the masses to greater prominence.The importance of classic principles, like strong partnerships based on trust and communication, has not diminished with decreased face-to-face contact. In fact, the opportunities for many more partnerships have actually increased in line with people’s confidence in, and use of, the internet. Global industry round-tables can be attended from one’s own home and without all the time and travel that was before deemed necessary. Amid the adverse effects of recent months, let us aspire in Switzerland, Ireland and elsewhere to consolidate and develop the positive aspects and put the lessons to work in our businesses.Michael Clohosey FCA is a senior finance executive based in Switzerland.

Jul 29, 2020

Gemma Donnelly-Cox, Mary-Lee Rhodes, Benn Hogan and Mary Lawlor make the business case for corporate human rights reporting and outline critical issues for businesses to consider.Businesses can impact human rights in every context in which they operate. These impacts can be positive: delivering employment, infrastructure and furthering development. They can also be negative, bringing risks, including forced and child labour, pollution and corruption.Since 1 January 2017, all companies in Ireland to which the Non-Financial Reporting Directive (NFRD) applies have been required to disclose information relating to respect for human rights, including human rights risks and due diligence processes. Over the same period, there has been an increased interest among investment managers, most notably in Europe, in the human rights performance of companies. Furthermore, mandatory human rights due diligence is coming down the tracks. On 29 April, the European Commissioner for Justice, Didier Reynders, announced his intention to bring forward a legislative proposal in 2021 on mandatory human rights and environmental due diligence.It would seem to be in the clear interest of companies to have a human rights policy and to undertake human rights reporting. Richard Karmel, Global Business and Human Rights Partner at Mazars UK, makes this case in saying (in correspondence with the authors): “Reporting on human rights isn’t a compliance area; it is about being authentic and meaningful in disclosing not only the actions that you have taken to address your greatest risk areas (salient risks) but also reporting on how you know this information. Companies shouldn’t view addressing human rights as an internal cost for external benefit; there is huge internal benefit – greater productivity, improved quality of supplies, less staff turnover and absenteeism, and the attraction of new recruits, for example. This is not a cost area, but one of investment and companies are very good at monitoring their return on investment.”However, when we looked at human rights reporting by Irish companies, we found a significant information gap. Very few of the companies we studied in Ireland include human rights performance in the policy statements or company reports they publish, including those prepared under the NFRD. This may be due in part to the limited guidance within the Directive on how companies should report on human rights, including due diligence.We consider here some of the factors driving human rights reporting, what is required in such reporting, and what it looks like when companies do it well.The UN Guiding Principles and the Irish national planIn December 2011, the United Nations Human Rights Council unanimously adopted the Guiding Principles on Business and Human Rights (UNGPs). These principles were the first agreed statement by UN member states following 40 years of attempts to clarify the relationship between business and human rights. Embedded in the UNGPs is the three-pillar ‘Protect, Respect and Remedy Framework’, which sets out the duties of states to protect human rights, and the responsibilities of businesses to respect human rights and remedy failures. At a national level, a range of laws and ‘national action plans’ (NAPs) were created by member states seeking to embed these principles in company law and practice.Ireland’s NAP, published in 2017, recognises the need to, among other things, “encourage” companies to “develop human rights-focused policies and reporting initiatives”, “conduct appropriate human rights due diligence” and to consider a range of matters regarding access to remedy. An implementation group involving a wide range of stakeholders was established by the Department of Foreign Affairs and Trade to progress the NAP and a baseline assessment of the Irish legislative and regulatory framework was produced.The Corporate Human Rights Benchmark and Irish company performanceIn 2019, the Trinity Centre for Social Innovation published Irish Business and Human Rights: Benchmarking Compliance with the UN Guiding Principles. Mark Kennedy, Managing Partner at Mazars Ireland, has described the report as “a first and important assessment of how companies are dealing with what is a vitally important business issue”. We reported on the results of our pilot study in which we applied the benchmarking methodology developed by the UK-based Corporate Human Rights Benchmark (CHRB). The CHRB conducts an annual assessment of 200 of the world’s largest publicly traded companies on a set of human rights indicators. The indicators consider:Commitments: what commitments does a company make to respect human rights, engage with stakeholders and remedy shortcomings?Responsibility, resources, and due diligence: what steps does a company take to embed responsibility and resources for day-to-day human rights, and to establish a due diligence process that encompasses:identifying human rights risks; assessing them; taking appropriate action on the assessed risks; and tracking what happens after action by monitoring and evaluating their effectiveness?Grievance mechanisms, remedy and learning: what grievance mechanisms are established for staff and external stakeholders? How are adverse impacts remedied, and how are the lessons learned incorporated?Our report applied these indicators to analyse human rights policies and reporting in 22 Irish companies that have international operations. Our source materials for the study were the companies’ publicly available information, as listed in Figure 1.We found that, by and large, the Irish companies in our study are not reporting fully or systematically, and therefore are failing to make their human rights performance visible. No company disclosed a human rights due diligence process, and no company had a publicly reported formal commitment to remedy adverse impacts caused by it to individuals, workers or communities.Where companies are reporting, what does an ‘exemplar’ look like? Adidas AG was ranked first in the 2019 global CHRB (see corporatebenchmark.org). Bill Anderson, Vice President, Global Social and Environmental Affairs at Adidas notes (in correspondence with the authors) that excellence requires transparency about human rights failures as well as successes: “John Ruggie, the author of the UNGP, offered a simple but powerful message to business: in order to meet societal expectations, businesses must both know, and show, that they are respecting human rights. Building policies and due diligence systems on human rights is only half the journey. If a company is to be accountable for its actions and decisions, it must strive for transparency. This can start with small steps, the publication of a statement and a commitment to uphold rights and in time, lead to more dedicated reporting measures on issues and remedies. It is always easy to present the good one is doing, but much harder to account for the negative impacts a company’s operations may have on people’s lives.”Human rights reporting is here to stayWhile few companies in our sample of 20 Irish companies reported systematically on human rights, and despite an apparent lack of awareness among them of the UNGP, and a lack of explicit compliance, our view is that awareness of the requirement to report is slowly gaining strength in Ireland. It makes business sense to know how to report and how to address areas that indicate less than ideal human rights performance.Companies reporting under the NFRD are likely to face a shifting environment in the coming years. The European Commission is currently conducting a review of the NFRD, with a proposal expected in Q4 of this year. As mentioned above, the EU is committed to bringing forward legislation on mandatory human rights and environmental due diligence in 2021.Companies that get the basics right now by implementing policies and due diligence to prevent human rights abuses, instigating appropriate systems to remedy harms caused, and communicating their actions through non-financial reporting mechanisms will be well-placed to respond to this evolving regulatory landscape.We continue to benchmark Irish companies and in autumn 2020, will report on an expanded sample. We hope that benchmarking in Ireland will contribute to the impetus for improved corporate human rights reporting. Richard Karmel shares this view, noting that benchmarking “has an important role to play in the world of human rights reporting; after all, few companies want to be seen in the bottom quartile. Naturally, human rights benchmarks should stimulate a race to the top and ultimately encourage better treatment by business of those who are most vulnerable in our supply chains.”Gemma Donnelly-Cox, Mary-Lee Rhodes, Benn Hogan and Mary Lawlor represent the Centre for Social Innovation at Trinity Business School.

Jul 29, 2020

Barry Dempsey outlines Chartered Accountants Ireland’s new path to real change – for tomorrow, for good.“Real change, enduring change, happens one step at a time” – the words of the inimitable Ruth Bader Ginsburg. You could argue that the change we have seen in the way we all work and live our lives since March has happened far quicker than she could have foreseen. The unprecedented aside, however, her words have real resonance for our Institute as we embark on our own period of real change as an organisation of over 28,500 members.Real change for Chartered Accountants Ireland will be guided over the coming four years by a plan that I am excited and proud to launch, Strategy24. Change is not new to the Institute; when you are more than 130 years old, it tends to become a necessity for survival! It is change by our members and for our members, and as my colleagues who have worked alongside me can attest, engagement with members has been extensive. It has also been frank and honest; we did not want members to pull any punches. Our profession is changing all around us, so we want to be on our toes, working harder than ever to be the Institute that members need. Strategy24 will help us to do this.Our vision and valuesOur vision for Chartered Accountants Ireland is that of a vibrant, modern and highly relevant organisation with a network of digitally connected members who have a strong sense of belonging, no matter what their industry or where in the world they are. While in some ways, COVID-19 has made the world suddenly feel like a much bigger place, it has also accelerated the digitisation of the Institute, giving members that sense of connection even though they are apart. This direction of travel will continue through Strategy24.The values guiding Strategy24 are:Innovation with ambitionCollaboration for impactSpeed and simplicityInclusionTrustThe final value of “For tomorrow, for good” is the hub around which all the other values exist, driving home the “enduring change” that Ruth Bader Ginsburg spoke of, and through which we will create opportunities for members and students as well as ethical, sustainable prosperity for society.Origins of Strategy24Strategy24 builds on the success of our previous strategic document, Strategy 2020, which proved an effective roadmap for us. It identified what set the Chartered Accountancy profession apart and worked to build these differentiators for the benefit of our members.The themes that underpinned Strategy 2020 were attracting the brightest and best to the profession, being relevant to our members, and being the authoritative voice of the profession.Strategy24 will build on these achievements and seek to drive some broader strategic priorities, which represent a more significant change for our Institute, all developed through extensive consultation with members and relevant key stakeholders over the last year. Again, I cannot overstate the importance of this frank and honest engagement. The resulting plan represents all members and is robust enough to guide us – even at this time of heightened uncertainty. Strategy24 is the product of collaboration, trust and new ways of thinking. It is the very manifestation of the values that will guide us towards 2024.The building blocks of Strategy24Connecting: ‘redesigning the member experience’ and ‘amplifying our voice’. We aim to be a member-centric, vibrant and relevant organisation that facilitates a diverse, digitally connected and engaged network with a strong sense of belonging. We must be the effective and leading voice for members – consulted with, and influential on, key issues affecting the profession and the broader economy.Empowering: ‘educating members career-long’ and ‘building trust’. We will design and deliver high-quality, student- and member-centred, future-focused education that develops the capabilities sought by employers, equipping our members and students to excel at all career stages. In everything we do, we will aim to be recognised as an appropriate and effective regulator that drives value for members, stakeholders and the public, ensuring confidence in – and respect for – the Institute and the profession.Evolving: ‘elevating the brand’ and ‘becoming a high-performance organisation’. We will equip members, firms and employers with a contemporary brand that consistently reinforces and epitomises the values of the Chartered Accountant profession. Under this strategy, our Institute will focus on being a financially sustainable, digitally-enabled organisation with an agile culture that supports innovation and collaboration.A strategy for uncertain times When we started work on this strategy over a year ago, it was hard to imagine a threat more real and wide-ranging than Brexit. Indeed, for most of the duration of the development of this plan, COVID-19 did not have a name, having emerged as a ‘novel coronavirus’ on the other side of the world. Contemporary business language like ‘disruption’ has taken on a whole new meaning when, in weeks, entire industries have been decimated and other, never before imagined, niche industries are up and running.From a broader perspective, globalisation and technology have transformed access. Access to markets, knowledge, expertise, learning and capital has expanded exponentially. At the same time, connections and attachments have become lighter and more transient. Where people belong and what they belong to is blurred.Strategy24 is nevertheless a strategy for this uncertain time, and our ambition matches the scale of the challenge. The impact of the global pandemic on our economies and our societies, as well as the shape of our future relationship with our nearest neighbour, are just two of the unknowns that will become more fully known throughout the life of Strategy24. The reference to ‘24’ of course refers to the strategy taking us successfully through to the year 2024, but it deliberately implies more than that. It marks the prioritisation of an always-on, responsive Institute that is attuned to – and motivated by – members’ needs, whether virtually or in person.I hope that members can support, engage with, and see tangible benefits from Strategy24 as we move forward. The collaborative approach does not end with the launch of the document, however. I will continue to encourage your feedback in the weeks and months ahead so that our strategy can achieve what it is intended to, one step at a time. Barry Dempsey is Chief Executive at Chartered Accountants Ireland.

Jul 29, 2020

Imelda Hurley has had a challenging start to her role as CEO at Coillte, but her training and experience have proved invaluable in dealing with the fallout from COVID-19, writes Barry McCall.Imelda Hurley’s career journey to becoming CEO of Coillte in November 2019 saw her work on every continent for a range of businesses spanning food to technology. That varied background has helped prepare her for the unprecedented disruption caused by the COVID-19 pandemic.“We have been working remotely since March, and the business has kept going throughout the pandemic,” she says. “We closed the office straight away and have had 300 people working remotely since then. Our primary focus since has been on the health, safety and wellbeing of our colleagues, and against that backdrop, on ensuring that a sustainable, viable and vibrant Coillte emerges from the crisis.”A diverse challengeThis has not been as straightforward as she makes it sound. “Coillte is a very diverse business,” she adds. “We are the largest forestry business in the country, the largest outdoor recreation provider, we enable about one-third of Ireland’s wind energy, and we have our board manufacturing business as well. We needed to continue operating as an essential service provider. That remit to operate was both a challenge and an opportunity.”The company’s timber products are essential for manufacturing the pallets required to move goods into and out of the country. “Some of our board products were used in the construction of the Nightingale Hospital in London,” she adds. “And the wind energy we enable provides electricity for people’s homes and the rest of the country.”Organisationally, the task has been to enable people to continue to do their jobs. However, the challenge varied depending on the nature of the operation involved. “In forest operations, people usually work at a distance from each other anyway, so they were able to keep going. That said, we did suspend a range of activities. We needed to continue our factory operations, but we had to slow down and reconfigure the lines for social distancing. And we kept the energy business going.”Those challenges were worsened by an ongoing issue associated with delays in the licensing of forestry activities and by the unusually dry spring weather, which created ideal conditions for forest fire outbreaks. “Even a typical forest fire season is very difficult,” she notes. “But this one was particularly difficult. In one single weekend, we had 50 fires which had to be fought while maintaining physical distancing. Very early on, we put in place fire-fighting protocols, which enabled us to keep our colleagues safe while they were out there fighting fires, and to support them in every way possible.”The lure of industryHer interest in business dates back to her childhood on the family farm near Clonakilty in Cork. “I was always interested in it, and I enjoyed accountancy in school and college at the University of Limerick. I did a work placement in Glen Dimplex and that consolidated my view that Chartered Accountancy was a good qualification that would give me the basis for an interesting career.”She went on to a training contract with Arthur Andersen in Dublin. “The firm was one of the Big 6 at the time,” she recalls. “I availed of several international opportunities while I worked there and worked in every continent apart from Asia. I really enjoyed working in Arthur Andersen, but I always had a desire to sit on the other side of the table. Some accountants prefer practice, but I enjoy the cut and thrust of business life.”That desire led her to move to Greencore. “I wanted to be near the centre of decision-making and where strategy was developed. I stayed there for ten years, learning every day.”And then she moved on to something quite different. “Sometimes in life, an opportunity comes along that makes you pause and think, ‘if I turn it down, I might regret it forever’. The opportunity was to become CFO of a Silicon Valley-backed business known as PCH, which stood for Pacific Coast Highway, which was based in Hong Kong and mainland China with offices in Ireland and San Francisco. It was involved in the supply chain for the technology industry and creating, developing and delivering industry-leading products for some of the largest brands in the world.”The experience proved invaluable. “It changed the way I thought. It was a very fast-moving business that was growing very quickly. I got to live and work in Asia and understand a new culture. I took Chinese lessons and the rest of the team took English lessons. There were 15 nationalities on the team. It was remarkably diverse in terms of demographics, gender, culture, you name it. That diversity means you find solutions you would not have found otherwise.“I spent three years with PCH and ran up half a million air miles in that time. It had a very entrepreneurial-driven start-up culture. The philosophy is to bet big, win big or fail fast. It was a whole new dynamic for me. I also got to spend a lot of time in San Francisco, the hub of the digital industry, and that was a wonderful experience as well.”Returning to IrelandImelda then returned to Ireland to become CFO of Origin Enterprises plc. “As I built my career, I always had the ambition to become CFO of a public company. And I always believed that with hard work, determination and a willingness to take a slightly different path, you will succeed. Greencore and Origin Enterprises gave me experience at both ends of the food and agriculture business; they took me from farm to fork. A few more years in Asia might have been good, but Origin Enterprises was the right opportunity to take at the time.”Her next career move saw her take up the reins as CEO of Coillte on 4 November 2019. “I always wanted to do different things, work with different organisations and with different stakeholder groups,” she points out. “Coillte is a very different business. It is the custodian of 7% of the land in Ireland, on which we manage forests for multiple benefits including wood supply. It is a fascinating company. It is an outdoor recreation enabler, with 3,000km of trails and 12 forest parks. We get 18 million visits to forests each year. We also have our forest products business – Medite Smartply. We operate across the full lifecycle of wood. We plant it and it takes 30-40 years to produce timber.”Imelda’s varied career has given her a unique perspective, which is helping her deal with the current challenges faced by Coillte. “Throughout my career, I have worked in different ownership structures and for a variety of stakeholders. I worked for public companies, a Silicon Valley-backed business, and have been in a private equity-backed business as well. Now, I am in a commercial semi-state. That has taken me across a very broad spectrum and I have learned that a business needs to be very clear on a set of things: its strategy, its values, who its stakeholders are, and how it will deliver.”Entering the ‘new’ worldWhile Coillte has kept going during the COVID-19 pandemic, it is still affected by the economic fallout. “We are experiencing a very significant impact operationally, particularly so when building sites were closed,” she says. “There has been some domestic increase in timber requirements since then, and there has been an increasing demand for pallet wood. That has had a significant financial impact and it’s why I’m focused on delivering a sustainable, vibrant and viable Coillte. We remain very focused on our operations, business and strategy. In the new post-COVID-19 world, we will need a strategy refresh. We must look at what that new world looks like, and not just in terms of COVID-19. We still have a forestry licensing crisis and Brexit to deal with.”The business does boast certain advantages going into that new world. “Our business is very relevant to that world. The need for sustainable wood products for construction is so relevant. Forests provide a carbon sink. The recreation facilities and wind energy generated on the land we own are very valuable. It may be a difficult 12-18 months or longer, but Coillte is an excellent place to be. In business, you manage risk. What we are managing is uncertainty, and that requires a dynamic and fast-paced approach. Time is the enemy now, and we are using imperfect information to make decisions, but we have to work with that.”Coillte will begin the first phase of its office reopening programme in line with Phase 4 of the Government’s plan. “We have social distancing in place and it’s quite strange to see the floor markings in the offices. We are doing it in four phases and carried out surveys to understand employee preferences. We then overlaid our office capacity with those preferences. Our employees have been fantastic in the way they supported each other right the way through the crisis.”Words of wisdomDespite the current challenges, she says she has thoroughly enjoyed the role since day one. “It would be wrong to say it’s not a challenge to walk into a business you were never involved in before and take charge, but I have a very good team. None of us succeeds on our own. We need the support of the team around us. The only way to succeed is to debate the best ideas and when there isn’t alignment, I make the final decision, but only after listening to what others have to say. You are only as good as the people around you. You’ve got to empower those people and let them get on with it.”Imelda believes her training as a Chartered Accountant has also helped. “It facilitated me in building a blended career. The pace of change is so incredibly quick today and if we do not evolve and learn, we lose relevance. Small pieces of education are also very valuable in that respect. Over the years, I did several courses including at Harvard Business School and Stanford. I love learning and I’m not finished yet. I’m a firm believer in lifelong learning.”Her advice to other Chartered Accountants starting out in their careers is to seek opportunities to broaden their experience. “Learn to be willing to ask for what you want,” she says. “Look for opportunities outside finance in commercial, procurement or operations. Look through alternative lenses to bring value. Make sure you are learning and challenging yourself all the time. Keep asking what you have added to become the leader you want to be someday.”And don’t settle for what you don’t want. “Be sure it is the career you want, rather than the one you think you want or need. It’s too easy to look at someone successful and want to emulate them. You have to ask if that is really for you. This role particularly suits me. I love the outdoors and I get to spend time out of the office in forests and recreational areas. That resonates particularly well with me.”

Jul 28, 2020

Rachel Hussey encourages leaders to see this crisis as an opportunity to create firms that are truly equal.As many offices begin to reopen and people take the first tentative steps back to their workplace, there is a lot of talk about getting back to ‘normal’, the ‘new normal’ or the ‘new abnormal’. Whatever way we refer to it, this next period is going to be very different to what went before and we all have an opportunity to reimagine or reframe our ideas of work and the workplace.Over the past few weeks and months, the focus on diversity has resurfaced and sharpened, and is generating considerable discussion. The Black Lives Matter movement catapulted the issue of race to centre stage and caused many organisations to state or restate their commitment to diversity. The importance of authenticity in this commitment is key, as we saw when some companies leading the charge were called out as having no diversity on their boards or senior management.Many organisations in Ireland, and their leaders, are genuinely committed to diversity and really want to move the dial. They believe that their organisations aim to be meritocracies in that everyone has the same opportunities to advance and that the ‘best person for the job’ gets the job. They are committed to diversity but also believe that if you are good enough, you will succeed. When women or minority groups don’t succeed, the belief is that it is because of choice, lack of ability, or lack of representation. The truth may be that the environment or the experience is not welcoming or encouraging of difference.The starting point is for leaders to acknowledge that inequality exists in every organisation. With that frame of mind, leaders can keep a razor-sharp focus on diversity every day, in every decision that is made for the business, including around promotions and team composition. The tone is set at the top and when the rest of the organisation realises the importance of diversity to its leadership, equality is taken more seriously as a business imperative.The next step is to lead open and honest debate about how merit is determined and judged. If we are convinced that opportunities are decided solely based on merit and the best person for the job, are we satisfied that there is no inherent bias in the merit criteria, the merit decision process or how we classify a ‘job well done’? And does our sponsor culture reinforce historical stereotypes and work styles as the meritocracy we would like to maintain, or is it more open to balanced styles, skills and opportunities?These conversations regularly lead to debates about the value of targets and quotas, particularly for female representation. Such debates can, in isolation, unfortunately lead to the view that targeted promotions are tokens and not a genuine reflection of talent. It also risks majority groups, which in most business situations are men, seeing it as a zero-sum game driving reduced opportunity for their own careers, which then makes it less likely that men will support diversity initiatives. If we want to increase the pace of change, while targets have value and may be the best kick-start in many ways, leaders must treat managing equitable opportunities in the same way as they manage costs and revenue – close attention to detail, reporting and measurement; but targets by themselves should not be the only long-term option for genuine progress.Finally, to learn more about the reality in an organisation, leaders can and should have open conversations with their teams to find out more about people’s experience of working at the firm. Having roundtable discussions with people at all levels to gain an understanding of the visible and invisible barriers that women and minority groups face is key to understanding and to making the changes necessary to dismantle those barriers.To make this change sustainable and meaningful, particularly in relation to gender, we need to ensure that women who reach senior positions are valued in the same way as men for their talent and their contribution to the role. That’s where leaders have a real opportunity, by their approach and expectations of everyone in the organisation to practise equality in their daily work lives.So let’s not waste this crisis. Let’s use it to make a real impact on creating firms that are truly equal.Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

Jul 28, 2020

Swift and immense fiscal stimulus has driven equities to all-time highs in some cases, but inflation and interest rates could yet spoil the party.Having entered 2020 at nosebleed valuation levels, equities reacted sharply and suddenly to COVID-19 by falling by over 40% in Ireland, by over 35% in the UK and by just under 35% in the USA. But then stocks bounced right back. By mid-July, the Irish Stock Exchange index was down 16% compared to the beginning of the year, the FT 100 index was down 21% and in the USA, the S&P 500 index was down just 6%. The Nasdaq has even managed to hit new all-time highs.What is going on? The simple answer is that the world is witnessing an unprecedented level of official policy stimulus that is expected to trigger a sharp rebound in economic activity while interest rates (and corporates’ cost of capital) go lower than would otherwise have been expected. This stimulus is being felt first by financial markets but, if the past is an effective guide to the future, it will soon spread to an economy near you.The scale of the pandemic-induced fiscal stimulus announced by government treasuries and finance ministries is vast. According to BCA Research, a Toronto-based investment research boutique, it is more than double the level of stimulus the global economy got in the wake of the global financial crisis over a decade ago. Not only that, but it’s happening much more quickly. There was initially a delayed element of “crisis, what crisis?” to the last big downturn. The reaction this time has been swift and immense.The size of the fiscal response is dwarfed only by the scale of the monetary response. Even in Japan, where the annual rate of money growth has been under 3% for most of the last 30 years, M3 went up at an annualised rate of 10.5% in the three months to May. In the eurozone and the UK, the corresponding figure is about 20%. But the explosion in fresh money creation has been most evident in the USA where, in the three months to May, M3 rose at an annualised rate of almost 90%. The equivalent year-on-year rate of growth was the largest in modern peacetime history.Commenting on recent monetary policy, Tim Congdon and John Petley of the Institute of International Monetary Research concluded that unless the US Federal Reserve decides to withdraw or reduce some of that money injection, “upward pressures on asset prices, and then on prices of factors of production, and goods and services, will be a marked feature of 2021 and 2022.” Ironically, valuation levels may help contribute to yet higher equity values, despite most people believing that equities are currently levitating.A standard long-run measure of an equity’s value is its cyclically adjusted price earnings (CAPE) ratio. This eliminates the cyclical variability of profits as a factor that can distort the standard price earnings (PE) ratio by using average (inflation-adjusted) earnings over the previous ten years rather than earnings from just one year. Doing this compares a share’s price to an underlying ‘through the cycle’ measure of its earnings. The CAPE for the entire US market is nearly 30. It has only ever been this high twice before: in September 1929, just before The Great Crash, and during the 2000 tech bubble.However, it is not enough for us to look at PE ratios in isolation. We need to compare them to the valuation of competing assets. And right now, the value of the equities’ main asset competitor – bonds – are sky-high. Steve Sjuggerud, the author of investment newsletter True Wealth, charts the US 10-year bonds rate minus CAPE. This measure’s current level suggests that equities are relatively cheap! BCA Research has looked at that measure going back to 1955. They reckon it shows that US equities are historically cheap, relative to government bonds!To me, there are two key conclusions to take from this. First, the tsunami of fresh central bank liquidity being pumped into the global economic system means that, over the next 18 months, an equity melt-up (similar to those seen in Japan in 1989 and on the Nasdaq in early 2000) is far more likely than a meltdown. Second, this party will end abruptly if inflation stirs and interest rates start to rise significantly.Cormac Lucey FCA is an economic commentator and lecturer at Chartered Accountants Ireland.

Jul 28, 2020

Construction has been hit hard by the pandemic, but with the right initiatives and supports it could also play a pivotal role in the country’s eventual recovery, writes Annette Hughes.Ireland entered 2020 in a reasonably strong economic position – preliminary GDP figures for 2019 suggest it was the fastest growing economy in the EU27 over three years, with almost full employment. However, the shock following COVID-19 has been unprecedented.The latest EY economic forecasts (released in May) expect GDP to fall by 11.1% this year. It is envisaged that government borrowing, as opposed to tax increases and public spending cuts, will finance the restart of the economy, predicted to rebound by 6.7% in 2021. Consequently, a benign international lending environment will be crucial, and a budget deficit close to €30 billion – around 10% of GDP – will be required in 2020 (Department of Finance), depending on the evolution of the virus.While the construction sector had been enjoying a consistent, healthy performance at the start of 2020, it was halted abruptly following the onset of the pandemic. All construction and housebuilding sites closed for seven weeks on 28 March, apart from around 35 social housing sites that were deemed essential. Although sites have been re-opening since 18 May, only a slow recovery can be expected. EY-DKM projections based on initial assessments (in May) across housing, non-residential buildings, offices, industrial use and public sector construction show that the volume of construction output by 2022 is forecast at just below 80% of the corresponding volume in 2019. The overall volume of construction output is forecast to decline by 37.7% this year, followed by a rebound of 17.6% in 2021 and 7.6% in 2022.The latest assessment from Euroconstruct has the Irish and UK construction sectors as the poorest performers across 19 countries. The value of construction is estimated to have reached €27.7 billion (8% of GDP) in Ireland in 2019, but the crisis is expected to result in a contraction in construction output by almost 34% in 2020 (5.9% of GDP). In the UK, construction volumes are expected to contract by over one-third. Both Ireland and the UK have the strongest recovery prospects in construction output in 2021 at 17.6% and 22.8% respectively.Meanwhile, the closure of sites is expected to reduce levels of new house building substantially. Notwithstanding supply challenges that existed pre-COVID-19, housebuilding is expected to fall to 14,000 units in 2020, down from 21,138 in 2019 and well below the requirement of 35,000 units per annum.The hope is that the industry recovers more strongly than expected, but there are downside risks, notably uncertainty regarding the virus and fear of a second wave. As such, housing supply constraints could be more significant than they were pre-COVID-19, resulting in an even greater challenge for affordability, the private rented sector, and homelessness.Ireland has the potential to lead the way in a European rebound and there is a substantial commitment of resources for public infrastructure projects by Government in the National Development Plan 2018-2027 and Project Ireland 2040.The new partnership of Government also promised to make “transformative changes” with various actions set out to drive economic recovery and place Ireland as an exemplar in decarbonising our economy. At the time of writing, the immediate actions awaited are the July Stimulus and the distribution of the EU Recovery Fund for Ireland. For construction, it will be essential that funding focuses on capital and labour-intensive projects as well as other essential pre-committed infrastructure projects. As an open economy, Ireland’s recovery is dependent on developments in our major trading partners, notably in the UK. Investing in infrastructure must be ramped up straight away and will deliver substantial economic benefits, as the multiplier spending impacts reverberate through the rest of the economy. But while the Government can transform our country economically, the responsibility for suppressing the virus ultimately rests with the whole of society.Annette Hughes is Director, EY-DKM Economic Advisory.

Jul 28, 2020

Des Peelo explains why Chartered Accountants have a responsibility to work hard at good communications.Accountants produce figures; that is our professional function. However, the ability to analyse and communicate those figures is the important role. The circumstances that give rise to the necessity of a report or analysis obviously range widely, but all result in the compilation and sharing of information to be understood by others.If you are in an accounting position and want the world to understand and appreciate your good work, remember that accounting figures – no matter the circumstances – are no more than an outcome and are not in themselves a decision, a conclusion or an explanation.Figures are just that, figures. They carry no intrinsic knowledge or purpose. The real skill for a Chartered Accountant (and in my opinion, we are not good at it) is to present an understandable interpretation and communication of the figures.The higher or greater the decision to be made in business, and sometimes in politics, the more the figures will influence the decision. In my experience, however, you cannot assume – even at the highest levels of business or political life (or, for that matter, in a courtroom) – that all are capable of looking at an array of numbers and knowing what they mean.Financial illiteracy is widespread and rarely admitted. I believe that this illiteracy explains many poor business and economic decisions. It is up to us as Chartered Accountants to work hard at good communications, and as a skill, it should be top of the continuing professional development agenda.In presenting figures, remember the audience. What is the purpose of compiling the figures? Who will read them and what is expected of the audience having read the figures? This last question is most important of all. The accountant must be very careful indeed when it comes to interpretation and presentation as the outcome decision, based on the figures, may be significant capital outlays, a court judgment, a misdemeanour identified, a monetary claim pursued, and so on.What sometimes gets lost in translation is the difference between presenting facts and presenting conclusions. It is important to know and understand whether the accountant, in presentation, is being asked to present facts for the audience to make a decision or draw a conclusion, or whether the accountant is being asked to make that decision or conclusion, as supported by the facts in the presentation. A muddled financial analysis without a clear purpose is of little help to anyone, but in my experience, this is a common scenarioThe audience is not there to be impressed by the detailed calculations or workings in the presentation. A straightforward one- or two-page summary should clearly state the outcome as to the purpose of the presented figures. The detailed calculations or workings should always be shown as appendices and cross-referenced in the summary.Compiling and interpreting figures usually involves making some assumptions. These too should be listed in a separate appendix. Figures are only as good as the likely validity of any assumptions underlying them. Outcomes do not always have to be precise. A range based on valid assumptions such as ‘best’ and ‘worst’, or ‘high’ and ‘low’ is often wise as singular figures, in themselves, can give an impression of being definitive.An enduring bugbear in poor presentations is the numbering of paragraphs. The use of sections, sub-sections and Roman numerals can end up with the likes of “Paragraph 5,2(B)iv”. Most reports require cross-referencing such as “please refer to paragraphs 10 and 16 above”.There is nothing to prevent someone from presenting an entire report as simply paragraph 1, 2, 3 and so on. There can be interspersed chapters or section headings as the report goes along, but the simple numbering is continued. Some readers will be aware that simple numbering is common practice in Germany, the United States, and within multinationals and international organisations. This is standard practice when it comes to emails, as it allows for easily cross-referenced responses.Des Peelo FCA is the author of  The Valuation of Businesses and Shares, which is published by Chartered Accountants Ireland and now in its second edition.

Jul 28, 2020

The pandemic and Brexit both provide momentum for bigger government – but don’t expect any protestations from the public, writes Dr Brian Keegan.The late US president, Ronald Reagan, never tired of giving out about big government. It’s a crude measure of the influence of government, but the level of national debt gives us some indication of the gap between what it costs to run a nation and what that nation can legitimately collect in taxes from its citizens.National debt suffers from spikes and fluctuations from wars, recessions and – as we are now seeing – pandemics. Such things are outside our control. But even when they are within our control, the national debt can grow unexpectedly. Despite Reagan’s protestations, the US national debt grew almost threefold during his eight years in office.The current pandemic will not grow the national debt of either Ireland or the UK by a comparable amount, but that is a factor of the scale of the existing national debt. Perhaps a better way to assess the impact of government is to look at the number of government agencies we now must deal with. Ireland’s Comptroller and Auditor General has almost 300 departments and organisations to scrutinise during his audit and assurance work. The UK National Audit Office looks over 400 or so UK government entities. As if to catch up, the new Irish Government’s programme makes over 20 references to the creation of new agencies or to increasing the remit of existing ones.The creation of agencies drives public sector jobs. The Institute of Public Administration recently noted that public sector employment in the Republic of Ireland exceeded 300,000 back in 2018, thus restoring staffing to pre-great recession levels. Before the pandemic struck, public sector employment in Northern Ireland exceeded 200,000. While most of our fellow citizens in the public sector are involved in service delivery, a lot of them are involved in regulation.We are already seeing how the pandemic is driving government size. Over the past few months, much of the Institute’s advocacy work has been about brokering arrangements with government – both north and south – to make things like the Temporary Wage Subsidy Scheme and the Job Retention Scheme work better on the ground. Ensuring that these schemes work well is vital, but they take up time, eating into the capacity of both our members in business and our members in practice to deliver other added-value services. Other business supports like state-backed loan guarantee schemes are also going to bring an additional burden of compliance, assurance and red tape.Brexit too is providing momentum for bigger government. The UK Government is duplicating many control and regulatory functions that were previously unnecessary because of EU treaty arrangements or because they were within the purlieu of European institutions. This pattern is being replicated across Europe. For instance, the Revenue Commissioners were to hire 500 additional customs officers to do the additional cross-border trade checks along with apparently 750 in the Netherlands, 700 in France, and close to 400 in Belgium.By and large, business on the island of Ireland benefits from the degree of State regulation. Yet, its role in attracting and securing foreign direct investment by creating a safer investment environment can get overlooked. On the other hand, businesses do not exist to carry out paperwork. This tension was always there. What the pandemic has changed is the political appetite to increase regulation.I think any Reaganesque political campaign promising smaller government would be unlikely to succeed these days. Even if politicians were minded to rein in the regulatory horses, the pandemic has created a greater willingness among the general public on this island to be governed, as evidenced by the almost blanket acceptance of the strictures of lockdown.Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Jul 28, 2020

This is my first Accountancy Ireland comment piece as President. First off, I would like to say that it is a tremendous honour to be elected President of our Institute.I would like to thank my predecessor, Conall O’Halloran, for his exceptional leadership throughout a tremendously successful year. Conall can look back with great pride on his term in office.Bouncing backThe current priority remains one of public health but soon, the huge economic challenge of preserving jobs and rebalancing public and private finances will emerge. This has been made even more difficult by the constraints on both consumption and production.As we move to the next phase in continuing to suppress COVID-19, we as Chartered Accountants will have a pivotal role to play in helping to drive the economy forward and in generating growth.Working in collaboration with business, political leaders and the public sector, Chartered Accountants Ireland will be a strong supporter and advocate for the business community and the positive impact that a renewed economy can have for all in our society.I believe that our 28,500 members working in leadership, finance or advisory roles throughout Irish business will play a key role in kick-starting the recovery and ensuring that businesses bounce back strongly.Priorities for the year aheadAs President, I want to harness the ability, experience, and expertise of our membership network to support economic recovery in the aftermath of the pandemic.The strengthening of our role with the public sector will be the first of my key themes for the year. I see our profession having a much stronger role to play here.The second priority will be maintaining and enhancing the relevance of the Institute to our members from the start of their career through to retirement. We must stay connected. It is good to feel part of something, to feel a belonging to the family that is Chartered Accountants Ireland. I am proud to belong.Members will see that this sense of belonging and active participation is at the heart of the Institute’s new Strategy24, the document that will direct our work over the next four years.As Strategy24 is rolled out, members will see their Institute become more digitally driven. We believe that members will find a greater sense of connection and will see the Institute focus on being a financially sustainable, digitally-enabled organisation with an agile culture that supports innovation and collaboration.My final priority is access to our profession for potential students. We will continue to work to highlight the opportunities available to a new generation of potential trainees within an innovative, forward-looking profession.Looking forwardFollowing May’s annual general meeting, the gender balance of the Institute’s Council now stands at 50:50. I will seek to promote balance more widely across the Institute. It is worth noting that the overall membership is currently 42% female and 58% male.I am looking forward to the year ahead. Of course, there are challenges – but we have a great team at the Institute, and we will drive ahead. I am counting on your support as we work for members across the island of Ireland and beyond.Paul HenryPresident

Jul 28, 2020

How can you keep the momentum going on recruitment and selection during the pandemic? Shay Dalton offers tips on how to maintain your employer brand and attract the best candidates in a digital space.During these uncertain times, recruitment and selection is still a priority for organisations who are trying to maintain revenue and growth targets. Keeping recruitment going through these times will place firms in good stead. Here are some helpful tips for recruitment during the pandemic.Getting hold of candidates may be easierOne distinct positive from a hiring perspective reported on by the BBC is that recruitment firms have found that reaching candidates has been easier than usual. With many employees working from home, or not able to work at all, phone calls are more likely to get answered, and interview scheduling is much easier than usual. What is more, many companies have put their recruitment efforts on hold for the time being, meaning that there is less competition for top candidates. This makes the current time ripe picking for growing firms, and a great opportunity to attract some of the best candidates.Develop a streamlined virtual process for remote interviewingWith expert predictions suggesting that COVID-19 may continue to cause disruptions for weeks and months to come, getting an effective online recruitment process up and running is crucial. With governments reporting that social distancing restrictions may be in place for some time, it is safer, more convenient and beneficial for companies to have a streamlined process for online recruitment.Move group interviews to shorter one-to-ones with key members of the teamUsing video conferencing apps for group interviews can be somewhat challenging. People inadvertently talk over one another, which can make it difficult for interviewees to keep on top of what is going on. Instead of conducting group interviews, you might consider shorter, one-to-one calls with interviewees. It is also worthwhile testing your audio and video before the call, to avoid hiccups that could look unprofessional or detrimental to your brand.Employer branding is keySelling the employer brand to would-be new recruits is somewhat harder without the ability for the candidate to visit and properly meet the team. To get beyond this problem, make sure that all online information is up to date and accurately represents both the employer brand. Following government guidance for businesses is essential for maintenance of a good brand reputation. Firms that flout guidance are being vilified in the media and are less likely to be considered good options by employees. Make sure that press reports of your firm stay positive!Focus on communication and transparencyManaging expectations will be an important part of the process. Companies that are hiring need to communicate to candidates that they will be using remote interviews for decision making. Expectations should also be set around the fact that more and more roles are likely to commence remotely at first, and this will mean remote onboarding of the successful candidate.Shay Dalton is the Managing Director of Lincoln Recruitment.

Jul 23, 2020

Networking has been about connecting with people in a physical space. How, then, do we seek new connections in a digital landscape? Rachel Tubridy outlines five methods on how to uncomplicate remote networking.A recent PeopleSource survey of 2,600 Irish business professionals from a variety of backgrounds found that 98% of respondents would now like to work from home at least one day a week, with almost half indicating that three or more days working from home on a weekly basis is preferable. Despite the fact that three-quarters of all participants indicated they were looking forward to person-to-person interaction with colleagues on their return to the office, an even higher percentage said that they would not attend business events where social distancing was out of their control.As concerns grow about future waves of the pandemic, the long-term viability of remote working and networking is very much on business leaders’ minds right now. The advent of 5G, which promises network communication speeds up to twenty times higher than the current mobile technology, will significantly reduce the need for physical office space. Instead, workers will be virtually contactable anytime and anyplace. Real-time data analysis, instant videoconferencing and uninterrupted workflows between corporate offices and a distributed workforce will change the current business dynamic. Major corporations like Fujitsu are giving workers the option to work at home or in the office, while Twitter has stated that its employees can work from home ‘forever’. But what does this mean for networking? A new kind of networking The networking dynamic has drastically changed because of the pandemic. You really must put yourself out there – informal introductions over a coffee or lunch are, for the moment, non-existent. This paradigm shift in working practices has significant implications for traditional networking. While ‘pressing the flesh’ has long been the way of establishing connections and developing trust in the commercial world, this is now being replaced by far more impersonal ways of conducting business. Physical isolation, lack of ‘live’ or ‘in-person’ events make it more difficult to communicate, which means we all must find new ways of networking effectively. People are no longer bumping into each other on the street where previously valuable information has been exchanged and where impromptu contacts were established. Networking is now being replaced by online gatherings, which, once the meeting has started, makes it’s hard to say ‘hey this is not for me, I’m out’ without raising an eyebrow. Here are five simple tips to help uncomplicate remote networking:Join business communities, local enterprise groups, Chartered Accountants Ireland district societies on LinkedIn, and participate in online meetups and industry events.When joining a remote networking event, make sure you’re comfortable in your surroundings and that you can talk freely to the other participants. Are your children, partner or housemate in the room? Find a quiet space so you’re not interrupted and check your Wi-Fi signal is strong in that space. You don’t want to cut out unexpectedly.Like with traditional networking, show up with an elevator pitch about who you are and what you do. Remember, the goal of networking is to show what you can offer the other people in the group, so be sure to have a good understanding of that yourself. Remote networking is a bit more formal than traditional events because of the medium – be patient when you have something to say, letting the person currently speaking finish what they are saying. When you do participate, be sure it’s to say something that will add value to the conversation. Remember, you’re an expert in your field and you have a lot of knowledge to offer other professionals. Relax, and remember everyone is in the same boat. The more at ease you are, the more approachable you seem and the more likely you will make some worthwhile connections.After the meeting, connect with the other attendees on LinkedIn, adding a note with your own contact details.       Rachel Tubridy is Founder of PeopleSource. You can read more about the survey here.

Jul 23, 2020

We all know how important the work-life balance is, especially in the accountancy profession. Noel O'Callaghan believes that in order for businesses to thrive, they must put the well-being of their employees first. Working as a Chartered Accountant has been a hugely rewarding part of my life. As a Chartered Accountant, the world truly is your oyster – it provides a ‘passport’ to travel, make money, meet people and is a great platform to launch a full and busy life. My 18 years working in the world of finance has reaped all those benefits and more. However, it is also important to recognise that it is a hugely demanding career that sometimes can come at a cost. While my career has been predominantly steeped in finance, I also work as a qualified psychotherapist on a voluntary basis. I believe if our mental health is managed well, it can not only allow us to realise our potential in the workplace, but we can also live happily outside of it. With my accountant friends, I allude to the idea that the ‘premium on pay is to help offset the tax on health’. Though this is said tongue-in-cheek, I believe that accountancy can be a highly attritional career that must be managed so that you can extract as many of the benefits as possible without being hit with a whopper of the aforementioned ‘tax bill’. It is an uncomfortable truth that many jobs in accountancy are stressful. This is evidenced by the number of workdays being lost to poor mental health continuing to rise in financial services. While this is a massive burden on employers and the economy, it pales in comparison to the pain and distress that the individuals are enduring. A recent study in the UK has found that over 60% of managers have had to put the interests of their organisation above staff wellbeing either sometimes, regularly or every day. This is troubling, given that the accessibility to staff at home during their off-hours is higher than ever. It makes a good work-life balance more difficult to achieve. The relationship between mental health and business is complex. Companies and accounting practices must seek to establish wellbeing as a ‘pillar’ of their strategy going forward and invest in it accordingly. To entice the best and brightest during the next college recruitment ‘milkround’, there must be a targeted message around wellbeing. This is desperately needed to future-proof businesses, as evidence suggests that the next generation of employees are going to need it even more than before. 69% of UK job-seeking graduates reported having mental health issues at some point. Providing a foundation on which all employees can thrive must be high on CEO priority lists going forward. The good news is that I believe we are reaching a turning point. Business leaders are beginning to address this growing problem. Organisations such as CA Support are evolving from previously presenting themselves as a benevolent fund to be a more rounded, practical support for people to help navigate challenges in their lives. For businesses to succeed going forward, they need to nurture the mental well-being of their teams. The article is written by Noel O’Callaghan, FCA and qualified Psychotherapist (IACP pre-accredited).  If you would like to discuss how any of the topics mentioned above are impacting your mental health, please contact the CA support team at CASupport@charteredaccountants.ie.

Jul 23, 2020

For some, staying on top of the day-to-day workload is achievement enough as we continue to work remotely. But if you have the time, energy and inkling, there’s plenty of resources – free and paid – to help you develop your skillset in your own time. MasterClass MasterClass has caught people’s imagination in recent years with it’s stellar line-up of lecturers. You can learn about self-expression and authenticity with Ru Paul, for example, or the art of negotiation with Chris Voss. Courses are presented in video lecture format and while the cost is significant (€199 for an annual membership), there’s plenty in there to help you build your soft skills and perhaps get to grips with a new hobby (skateboarding with Tony Hawk, anyone?). CLICK HERE  The Great Courses Plus The Great Courses Plus is another on-demand video service focused on lifelong learning. The site uses award-winning lecturers to present lecture series on everything from economics and finance to professional and personal growth. However, it is a subscription service – €17.99 monthly or €159.99 annually. CLICK HERE FutureLearn FutureLearn offers a diverse selection of courses from leading universities and cultural institutions. Part-owned by The Open University, the platform offers everything from short courses to online degrees. Learners can also upgrade from their basic (free) subscription to receive a printed and digital Certificate of Achievement or Statement of Participation where eligible. CLICK HERE  Coursera Coursea offers a 3,900 courses up to masters degree level in partnership with leading universities and companies such as Stanford and Google. According to the website, 87% of people learning for professional development reported career benefits such as a promotion, raise or starting a new career. That may not be at the forefront of your mind just now, but it’s another reminder that upskilling often has tangible results.  CLICK HERE Institute Webinars When the lockdown began in March 2020, Chartered Accountants Ireland moved quickly to support its students and members. Its new webinar series has proved particularly popular, with members signing up for a range of expert-led sessions on everything from authentic leadership to voluntary liquidation procedures. Past webinars can also be streamed on demand. CLICK HERE Learn something new every day If you’re strapped for time but would still like to develop your knowledge base, Highbrow delivers five-minute lessons to your inbox each day. You can choose from more than 300 topics and get your day off to a productive start before you’ve finished your first coffee! CLICK HERE

Jul 22, 2020

In times of crisis, it is common to feel stuck – even defeated. But one simple trick can help you move forward and, if embraced fully, reach new heights writes Neil O’Brien. Resilience is described as the ability to recover quickly from setbacks or disappointments, or the ability of a substance to spring back into shape. While this is true, it can be a little misleading and doesn’t communicate the full range of resilience. I have coached individuals and teams in business and sport for almost 30 years. At some point in our work together, I ask each client about previous setbacks and disappointments, and what they did to recover. On the face of it, they all did the same thing – but some went further and used their setback to reach greater heights. This article is about them: what they did, and what we can learn from them. But first, some background… Survival resilience It is human nature to get your act together in response to a crisis. It is part of the human condition, pre-programmed from prehistoric times. Setbacks effectively trigger a survival instinct, and we have come to describe this response as ‘coping’. So, in response to the current global pandemic, we all initially went straight into coping mode, which is precisely the right thing to do. In response to our sense of loss of how things should be, we set up new daily routines and new habits that require constant tweaking and adjusting. We are also hyper-vigilant because we feel like we are in continual danger. Because of this siege mentality, it is possible to be exhausted each day without actually having achieved anything. Welcome to the coping zone and survival resilience. This is the first level of resilience, but it is important not to get stuck here. How do you move on? The answer comes from my coaching clients, mentioned above. Strategic resilience I have asked people who suffered health setbacks, business setbacks, and career disappointments what they did to recover. They all said the same thing – they went back to basics. They acknowledged that their confidence was gone, and their self-belief had evaporated, but they also wanted to move on (from coping) so they knew they had to do something. The best investment, then, is brilliant basics – they did the basics of good health, good business, and career development so well and so consistently that they started to feel better. Then, when their mood changed, they began to think better. They then got their shape and discipline back, and their confidence and self-belief flooded back too. Neglect the basics and you will have a setback to deal with; they admitted this also. Strategic resilience is a daily commitment to brilliant basics – basics that are important to you. However, there is one other form of resilience that most people underestimate. Success resilience Having established that resilience is about never neglecting the basics, there is another chapter in the story. If we leave setback and disappointment for the moment and go to the opposite end of the spectrum, to effortless success and achievement, it turns out that brilliant basics are what separate the world’s best from everyone else. The most outstanding performers in any field are the best because they have achieved mastery through a daily commitment to brilliant basics. They make it look easy. They don’t have some magic ingredient that no one else has; they just never neglect the basics. As a result, they get better and better at them, and they don’t stop at strategic resilience – they keep pushing on. A professional marathon runner told me that in almost every race, he ‘hits the wall’ at around the 16-mile mark. He has a mental and physical crisis. Part of him says: “I can’t go on, I’m gonna quit”. He has learned to pick something 10 yards ahead, and the deal is that he will run to that point and then quit. And then he does it again, and again, and again until he starts to feel better. Amid a full body and brain crisis, the ability to do that is advanced sports psychology. This is an example of something really basic, a ten-yard race, that becomes genius. The crisis eventually passes and he gets his shape back in the form of great posture, breathing, and stride length. And sometimes, he even wins the race. Your ten yards I believe that the core basics of good accounting, of great sales, of top customer service, of excellent health, of top-class golf haven’t changed much. The question is: who is doing them better than everyone else? People will want to know their secret but when they find out what it is, they might even be disappointed because it’s so simple. There may be times in life or in work when you don’t feel like you can go on. If, in that moment, you can just cover your equivalent of ten yards, you will be doing genius work and effort. There will be days when we will champion gold medals, awards, and stretch targets. There will also be times when we should champion someone who has enough grit and toughness to keep covering ten yards, even when they feel like they can’t go any further. Neil O’Brien is Founder of Time2Fly.

Jul 22, 2020
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