Spotlight

As small businesses are more likely to be victims of fraud than larger ones, this article explains how SMEs can keep themselves safe. Emerging technology and improved connectivity have helped small- and medium-sized entities (SMEs) take advantage of new business opportunities, but they have also presented fresh opportunities for fraudsters. While most financial fraudsters still use telephone and email to commit the crime, the frauds themselves are increasingly sophisticated. SMEs are faced with many fraud types, from old-fashioned cheque fraud to cyberattacks such as ransomware. Organisations of all sizes are open to attack, but SMEs are often targeted as their security systems may not be as robust as those of larger organisations. Keeping security systems and devices protected with official and reliable software and backups can assist greatly in keeping fraudsters out of your business. It is also important to be aware that your firm may be at risk of indirect fraud if a fraudster compromises a supplier’s system and sends you fraudulent emails from their accounts in an effort to defraud you. Fraud can significantly damage your business both financially (e.g. lost funds, lost revenue, and the cost of any legal action or security upgrades) and non-financial (e.g. a tarnished reputation, loss of trust and low employee morale). It is therefore critical that firms work to prevent fraud from happening in the first instance. So, what is the most common fraud affecting Irish business today? The answer is email fraud. While this might not seem very new or particularly high-tech, the sophistication comes in how the fraudster builds your trust and gets you to take an action that is not in the best interest of your company. Two particularly common types of fraud are known as CEO or executive impersonation fraud and invoice fraud. Both have caught out even the most prepared businesses. CEO or executive impersonation fraud In the case of CEO fraud, the legitimate email of a CEO or senior executive is hacked and malware is then deployed to monitor how the individual writes his or her emails – the tone, common phrases used and how they sign off. Fraudsters generally strike when they know the CEO is out of the office – when on annual leave, for example – at which point they will send an email instructing a colleague with responsibility for payments to pay a supplier while providing the necessary bank account details. If undetected, the funds will then be lodged to the fraudster’s bank account by an unassuming employee. Business owners and advisers should note that it might not be a payment request in some instances, rather a request for personal information such as a P30 or customer information. Invoice fraud Meanwhile, invoice fraud is on the rise in Ireland. Using a spoofed email address, the fraudster presents himself or herself a supplier. The email will mirror an email you regularly receive from your usual supplier, including logos and signoffs, and will inform you that the ‘supplier’ has a new bank account with instructions for all future payments to be lodged to the new bank account. When you receive the next legitimate invoice from the real supplier, your firm will process the payment to the new bank account. Generally, it is only when a reminder to pay an invoice comes in that you realise what has happened. By then, the fraudster has their money and it is too late to recall the payment. Protecting your business As the old saying goes, prevention is better than cure. Implementing controls and procedures to prevent fraud does not have to be a costly task; in fact, low-cost measures can prevent most frauds from happening. Simple procedures such as verifying new payment details verbally can prevent fraud from happening in the first instance. Firms are advised to require dual sign-off on large, if not all, payments. Not only does this minimise the risk of payments going to fraudsters’ accounts, it also reduces the risk of fraudsters being able to hack into your online banking account as two sets of log-in details are required. In terms of software security and anti-virus software, only use well-known providers and do your research. Never install security software by clicking on advertisement links on the internet. A low-cost way to create backups is to use cloud technology; this does not involve the purchase of expensive hardware and is easily accessed should an attack take place. Finally, staff training is critical. Ensure that employees are aware of potential threats, know how to use systems properly and are provided with refreshers in protocols and procedures. This will all help prevent fraudulent attacks on your company or client companies. FraudSMART, a new fraud awareness initiative developed by Banking & Payments Federation Ireland (BPFI) in conjunction with the banking sector, also aims to help businesses and consumers recognise and prevent fraud. Here are its top tips to help you keep your business safe: Be informed Ensure employees are fraud-aware and understand the controls and procedures in place to prevent fraud; Have a verification process in place before changing bank account details for existing suppliers or service providers (e.g. verbally verify bank account change requests with individual suppliers); Provide cybersecurity training for staff and include routine warnings about clicking on links in emails and ensuring that systems are password protected; and Do not assume that you can trust caller ID. Phone numbers can be forged to make it appear as though a particular company is calling but that may not be the case. Be alert Do not fall for the fraudster’s trick of sending an email from a senior person in your organisation when they are out of the office. Also, do not reply to the email as the fraudster is on the other end; Fraudsters can change an email address to make it look as though it comes from someone you email regularly. Look out for different contact numbers and/or a slight change in the email address; Fraudsters may already have basic information about you or your business. Do not assume that the caller is genuine simply because they have these details; Be wary of unexpected or irregular payment requests, or requests that require changes to bank account details – irrespective of the amount involved; and Always check your bank statements. If you notice any unusual transactions, report them to your bank immediately. Be secure Ensure that your firm’s security software is regularly updated and maintained using official and reliable software, and that your data is regularly backed up; Always exercise caution when forming new relationships with potential customers and undertake appropriate due diligence; If in any doubt, do not make a payment unless you have verbally confirmed with your CEO and supplier that the details are correct; and Do not allow yourself to be rushed. Take your time and conduct the relevant checks. Conclusion If you fall victim to a scam or have noticed unusual activity in your bank account, contact your bank immediately. The sooner the bank can investigate potential losses, hold funds in accounts and place recalls on transfers made in error, the better. Fraudsters move fast. They withdraw funds as soon as it hits their accounts, so time really is of the essence. You should also report the incident to your local Garda station. For more information on fraud prevention in business, visit www.fraudsmart.ie where you can also sign up for fraud alerts. Niamh Davenport is Fraud Awareness Manager at Banking & Payments Federation Ireland.

Gerry Gallagher explains how SMEs should approach corporate governance in their organisations. Small and medium enterprises (SMEs) face many challenges while trying to survive in a competitive business environment. The lack of scale and resources available to SMEs often results in those running the organisation having to immerse themselves in a wide variety of the everyday operational functions, often to the neglect of the more strategic issues such as corporate governance. In addition, the directors and the managers are many times one and the same. However, good corporate governance is vital to the long-term success of any organisation, regardless of whether it is a multinational or a small, family-owned firm.  The UK’s Financial Reporting Council (FRC), in its Corporate Governance Code, defines corporate governance as “the system by which companies are directed and controlled”. While the FRC’s Code is developed primarily for listed companies, many of the principles contained therein are relevant to all companies. Governance embraces many disciplines: law, accountancy, economics, political science, sociology and psychology. The main challenge for SMEs is to take those principles and tailor them for their own particular situation. This process can be simplified if we examine governance under three broad headings: accountability, strategy and performance. Accountability All organisations are held accountable, but the level of accountability is more onerous for publicly-quoted companies where their actions are subject to minute scrutiny, not just by shareholders, but by a broad group of stakeholders. However, SMEs are also subject to considerable oversight. Sometimes different sectors have specific legislation governing their area. In recent years, many charities, for example, have found themselves open to a degree of scrutiny for which they were ill-prepared.  There is also a great deal of legislation that applies to all companies, such as the 2014 Companies Act. This legislation consolidated all previous relevant acts, in addition to a number of new provisions. It is very detailed and, for the first time, it codified eight duties of company directors. For example, on taking up the role of director, a person must, under Section 223 of the Act, certify: “I acknowledge that, as a director, I have legal duties and obligations imposed by the Companies Act, other statutes and at common law”. That declaration makes clear to the director that they have an onus to be familiar with the provisions, not only of the Companies Act, but also other legislation such as health and safety, employment law and many others. GDPR is one example of legislation that has placed considerable pressure on all organisations to ensure compliance. In addition to specific legislation, there are many codes developed to ensure good governance, such as the UK Corporate Governance Code and the G20/OECD. These are principles-based codes which inform the development of more specific codes in different sectors such as the Central Bank’s Corporate Governance Code for Credit Institutions and Insurance Undertakings, or the Department of Public Enterprise and Reform’s Code of Practice for the Governance of State Bodies. These codes are based on a “comply or explain” approach which allows for flexibility in their implementation, depending on the specific circumstances.  There are also voluntary codes that impact on all sectors such as those of the independent self-regulatory body for advertising, the Advertising Standards Authority of Ireland, which promotes high standards in marketing communication and advertising. Apart from external accountability, firms must also have the appropriate internal systems in place to ensure accountability. Managers need to make decisions based on accurate data and, in particular, financial information. Here, the role of the Chartered Accountant is vital, not just by providing financial information, but by interpreting it in a manner that spells out the implications for the firm and can provide assurance to outside bodies.  Strategy Accountability is only one part of the equation. The FRC definition also refers to how companies are “directed”. Each SME exists for a specific purpose and managers need to be clear on that purpose. The purpose is not to make a profit – that is the by-product of providing goods or a service that customers are willing to buy at a price greater than the cost of production. Such a purpose must be supported by organisational values, including ethical values. There are many examples where organisations have suffered financially, not because they had broken the law, but because consumers turned away due to unethical behaviour. Good reputations take years to build up, but can be destroyed in an instant, particularly in the age of social media. Such reputations need to be protected by ethical values that are an integral part of what the company does.  A clear purpose and set of values will inform the development of the strategic goals and objectives. For small companies, it can be difficult for managers to set time aside from the day-to-day operational imperatives to focus on what the company should be doing and what is important for its long-term success. You can be busy cutting down trees, but there is not much point if you are in the wrong forest. The balanced scorecard is a useful tool to ensure that strategic goals are balanced between long-term development and short-term opportunities. The company’s strategic goals need to be translated into policies and procedures that guide everyday decisions that provide consistency throughout the organisation. In particular, each company must develop a risk management policy to cover all aspects of its operations, covering financial decisions, health and safety, information technology, GDPR, human resource management and geopolitical risks such as Brexit. Managers must be able to recognise each risk, assess its likely impact on the company, evaluate the probability of that risk, determine what the company’s policy should be and monitor how the risk is rolling out. In addition, the company also needs to develop policies on diverse issues from whistleblowing to corporate social responsibility. Performance Both accountability and strategy are required to work in tandem to ensure the effective performance of the company. Such performance is achieved through people – directors, managers, employees and other stakeholders who are committed, engaged and working together as a team. The company’s directors may also be the managers, and this poses a significant challenge as being a director requires a different skill-set from dealing with the operational issues facing the company on a daily basis. Managers and directors need training specific to their roles so combining the two can be a challenge for the individual and bring on challenges for the SME.  Having the right team on board is essential. This requires careful selection of employees to ensure a good fit with the organisation’s values. Employee training is also important – initial training as part of induction as well as ongoing development. This should cover the technical aspects of their job, but also legal requirements, safety and other areas to ensure the effective performance of the employee and the company. Employees must have a clear understanding of what is expected of them, but they must also be free to make a contribution or to voice any concerns so clear, open communication between employees and management is essential. All of this is underpinned by the organisation’s culture. Louis Gerstner, a former CEO of the computer giant IBM, described culture as what people do when no one is watching. The culture should be one of high performance but predicated on sound ethical principles that guide people in making the right decisions. Culture is the basis for everything that happens in organisations. This requires strong leadership and clarity of purpose. Conclusion In recent years, most aspects of Irish society have been impacted by poor governance, from how we regulated the banks to how charities were run. Across the board, we need to improve on how governance is conducted in all organisations, big and small, and in a manner that reflects the common good. Governance is a holistic approach to running organisations that ensures full accountability to all relevant stakeholders while achieving steady and sustained performance over the long-term. It requires strong leadership, teamwork, and a culture committed to both ethical and operational values. Governance is central to the success of every SME. Dr Gerry Gallagher is a lecturer in governance and corporate strategy at IT Tralee and author of Corporate Strategies for Irish Companies.

To succeed as a true leader, one must embody a set of core traits and behaviours which can be developed through self-awareness and a willingness to grow. It was Mahatma Gandhi who said: “A sign of a good leader is not how many followers you have, but how many leaders you create”. This is worth reflecting on as we consider what we mean by leadership, how we prepare for it, and how we embrace it when, finally, the prize is ours. Technical competence is at the core of the Chartered Accountant – our discipline is an exacting one, and the training we undertake is rigorous and demanding. Rightly so, as many of us embark on careers in which we interpret and apply standards, guidance and codes of governance; we craft disclosures and market statements; we give the true and fair view of financial performance. Those of us who take our discipline into the non-accounting workplace bring with us that technical mindset, which provides a framework for how we approach the situations and challenges we face. Busting the myths How do we navigate the path to leadership? It is rarely something we are called upon to exhibit at the start of our career. Instead, it is something that comes later. My personal experience is of a career that happened in three phases – do, manage and lead. These are very different phases requiring very different competencies and, more importantly, dispositions. The last is perhaps the most challenging for the technically competent as to ‘lead’ is a role, an attitude, a presentation, and a way of being as opposed to a way of ‘doing’. Leadership is formed in the realm of emotional and behavioural intelligence, not in the realm of technical competence. Leading is not about authority, instruction or ordering, nor always being out front. It is a role that you embody by empowering, enabling, influencing, inspiring and impacting. To do this, you need vision and purpose. You need to see something bigger than yourself that others can identify with, believe in and follow. Starting from a technical place, how do we equip ourselves for leadership (assuming that we want to lead and know why we want it)? I will come back to the ‘why we want it’ later, as this is probably the most important determinant of just how good you can be as a leader. Don’t fall for those myths that are peddled about leadership or let some idealised notion of a leader get in the way of developing your inner leader. There is no ‘one size fits all’ – there are as many leadership styles as there are leaders and the circumstances in which you lead play a big part in informing the style you develop and adopt. You don’t have to have all the answers; you just know how to get other people to find them. You do not always have to lead from the front – not every challenge is the Somme – and it’s not all about you. In fact, very little of it is about you; it’s all about the environment you create for others. It’s not all high octane or high action; leadership requires reflection. And no-one is born to it. It’s not some ‘golden spoon’ that some are blessed with. Like a lot of things in life, it is a learnt behaviour and that learning often involves hard work with many knocks along the way. So, having busted the myths, where do vision and purpose start within a person and how do we nurture and develop those traits and behaviours that encourage others to follow us? Finding your inner leader When we are in the ‘do’ and ‘manage’ phases of our lives, we are very caught up in a ‘production’ environment which, on the surface, doesn’t require any great thinking around purpose or vision. But these are the very places where we should start to give ourselves the time and space to think beyond the immediate and ask: what is the end game, and why am I doing this? If you are interested in challenging yourself with these questions, you may well have an inner leader that is trying to get out. Very often, in the depths of doing you find the opportunity to lead – I found that in managing a structured asset finance business. In looking at how to optimise the balance sheet, I had a vision of a different way of managing risk and reward and from that, I lead a European risk syndication business. At first, I had few followers but senior people bought into the vision, trusted me to realise it and allowed me to get on with it.  Vision without purpose and values will not get you very far. I learnt quickly that it is not enough to have messianic zeal and passion – you must articulate a better place if you want people to go there for you – it must make sense, serve a higher purpose, meet a greater need and be supported by values that people can relate to. Now, I am a business person and I wasn’t taking anyone to the promised land but I could see a place where, if we changed what we did, we could do more of it and I knew that was what people wanted. When you take that step into leadership, make no mistake – you are putting yourself out there. You are separating yourself from the crowd and saying “look at me and follow me”. To succeed, I suggest there are a set of core traits and behaviours that true leaders have which can be developed through self-awareness and a willingness to grow. Authenticity and values Oprah Winfrey said: “I had no idea that being your authentic self could make me as rich as I’ve become. If I had, I’d have done it a lot earlier”. It was no doubt said firmly ‘tongue-in-cheek’ but as ever, Oprah was on to something here. Why limit our thinking to assume she just meant money? Consider the influence this woman has and the impact her actions have on thought formation and activism across the world. We feel we know who she is when she speaks. This is because she appears true to herself and has the courage to let people see that self in all its elements. Then we identify, then we empathise because the leader has taken the first steps to demonstrate authenticity and opened themselves up to possible rejection – now that’s putting yourself out there. Values are the soul-mate of authenticity. Without values, authenticity is hollow and people quickly see through it. Values take us beyond the charisma and allure of the person and into the heart of what the person is really about. When we know a person’s values, we can begin to understand their purpose. This allows us to interpret the vision that they are proposing we follow. More wise words from Mahatma Gandhi: “You must be the change you want to see in the world”. Leadership is fundamentally about consistency – who you present; what you present; the values you promote; the purpose you articulate; the example you set; what you say; what you do; how you treat others. If all of these do not connect consistently, you are not authentic. You may get things done, you may make people do things for you, but they will not be following you and you will not be leading. Reflection Making and taking time to reflect is so important. Very often, we are all just too busy ‘doing’ to carve out time to reflect. Ponder that old saying: “If you don’t know where you’re going, any road will take you there” and you will see that purpose and values, the cornerstones of leadership, are impossible to form and articulate without reflection. The phrase “ancore imparo” translates to “I am still learning”. I have a beautiful bronze plaque with this quote attributed to Leonardo da Vinci. When we are open, we are always learning – about the world, about others and about ourselves. Take all that learning and reflect upon it. Do this daily; challenge yourself to rationalise what you are doing and why you are doing it. How does it inform and support your purpose and the leadership that you show? Hear what others say about you, to you, think about you – learn from it. Have the confidence to take the hard stuff on board that will make you better and trust yourself to discard the envious and mean-spirited elements that can get in the way. Trust and respect Trusting yourself and trusting others is something that leaders seem to do effortlessly. This suggests an inner confidence, security and balance. This comes from self-knowledge, authenticity and values which support your vision and purpose. You are not playing at being something or somebody, so you can be free to enjoy leading and trust yourself to do the right thing. You can also trust others and when you do that, you prove Gandhi’s point because as a leader, you make more leaders and create a virtuous circle of empowerment and impact. The ability to trust has never been more important. We live in a mobile, integrated, technology-literate world. You cannot be everywhere, attend every meeting, always be with those you lead. So, share the leadership by creating other leaders. Disseminate your message through others and trust others to be the ambassadors of a shared vision and trust those who will realise that vision. In realising it, they make it their own. As Lao Tzu once said: “A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves”. Finally, respect. This encompasses self-respect and the respect of others, both received and given. Don’t waste your time seeking popularity, it’s a fad, it’s fickle and easily replaced by the next more appealing thing on offer. Instead, earn and give respect. Respect is based on mutual understanding, hearing the voices of others and considering them. It is not earned by being always right. In my own experience, I have earned more respect from admitting to being wrong than I ever got from being right. Do the right thing by others – they may not agree with you, they may not like you, but they will respect you. Mentoring in both directions To be mentored and to mentor is an experience that will enrich your self-knowledge and aid your development and the development of others. Leadership is something that is learnt and what better way to learn than being mentored by a person whom you respect and see as a role model. While doing this, you too can be the mentor to someone who sees in you the character and values that they aspire to. In this relationship, you can discover how in leading you will create other leaders. So, what you gain from one experience is channelled into the other and the cycle of learning turns to the advantage of all concerned. Conclusion Let us go back to the question of why you would want to lead and how that determines the leader you can be. Why you want to lead is derived from your vision and purpose. When people see that your vision and purpose extend far beyond any personal self-interest and speak to something far bigger, they begin to listen; they begin to think about following you to the place you want them to go – to that place you have articulated and you exemplify every day in how you live the purpose that you promote. Lynda Carroll is Head of Capital Allocation and Risk-Based Pricing at AIB.

Ambitious women face many hurdles, but these can be overcome in the search for a place at the top table.  The issues of gender discrimination in the workforce and the gender pay gap are subject to increasing analysis – and rightly so. Given the amount of catching up to do, the equalisation of gender at the most senior levels of business should be on the agenda of companies in all professions, including accountancy. Discrimination and pay are two critical issues that need to be addressed for a fairer working world and it is important that the accountancy profession continues to encourage women to aspire to positions of leadership within the industry. Those who climb the leadership ladder will in turn inspire others as they lead the way. I truly hope that any woman reading this article and planning for promotion has never felt discriminated against or held back in so may me way because of their gender. Accountancy is a great career choice for women and men alike, and it offers huge scope for ambitious and consistent people. The business case for equality So, why does the accountancy profession – or, indeed, any profession – need more women on board? According to a study by The Centre for Creative Leadership, having more women in the workplace simply makes an organisation a better place in which to work. Not only that, having a higher percentage of female talent in an organisation predicted more job satisfaction; more organisational dedication; more meaningful work; and less burnout. But that’s not all. The researchers also found that having more women in the workplace was positively related to employee engagement and retention. Specifically, when asked why they stay with their current employer, people from organisations with a high percentage of women were more likely to cite positive and meaningful organisational culture. This includes enjoyable work; a job that fits well with other areas of their life; and opportunities to make a difference. These new findings persist regardless of participants’ age, industry, organisation size, leadership level, ethnicity or gender. In fact, while both men and women in our survey responded with this same positive pattern of results, the findings were even stronger for men on some measures. The emotional quotient Research has shown that women are more naturally empathetic and have a slightly higher level of emotional intelligence functioning than men. When in leadership positions, emotional intelligence can set you apart and allow you to better handle yourself, others and what is happening around you. Women can read a room in less than a second and generally have an easier time stepping into others’ shoes and showing empathy. These are incredibly powerful skills. We know that there is a growing empathy deficit in workplaces and that social connectedness increases performance and drive within a workplace, but if fewer women occupy leadership roles, this deficit may widen. The women leaders I am privileged enough to work with agree that it is vital that women do not feel that they must behave as a man would. They urge women to use their femininity and unique style to lead. Empower through trust To achieve gender equality, organisations must first learn how best to empower their female employees. In so doing, they will also improve the engagement, outcome, performance and happiness of both men and women in the workplace. To have an attractive employer brand, organisations must also find ways to encourage a more flexible and trusting workplace – one that encourages ownership and responsibility for work delivery on-site as well as remotely when required. This is not a gender issue; it is more about flexibility for both men and women that accommodates the need to balance personal and family demands and provides a roadmap to share the burdens and responsibilities of family life more effectively. One way to do this is to ensure that remote working systems are in place, including protocols for managing physical files. A cultural shift may also be required, one that gives employees the flexibility to work away from their desks, and trust is at the core. The millennial question Organisations must also consider the young women rising through the ranks who typically fall into the ‘millennial’ category. Millennials are more likely to expect their workplace to be flexible and don’t always see the value in adhering to ‘traditional’ rules. They also need to feel a connection to their work and want mentors to teach and inspire them. They want a clear career plan and although professionally immature, they need to feel that they will be provided with the scope and opportunities to progress. If we truly wish to encourage women leaders of the future, we must consider this millennial group and show them how other women have succeeded in their journey to the leadership table. Without this inspiration, they may falter. Strategies for success Leadership is quite the enigma, irrespective of gender. While some leaders have natural skills in influence, for example, they may lack natural skills in business strategy. Leadership therefore requires skills development and continued learning. Managers in today’s evolving corporate landscape face regular recalibration and with this comes challenge. Building resilience is a must for any leader, and this must be done while adapting to continued globalisation, tightening budgets and stricter reporting deadlines. Every leader needs an up-to-date tool-kit to help them improve their interpersonal skills incrementally and consistently. Men and women share a number of common leadership weaknesses. With daily stresses, even highly functioning leaders react to situations as they happen but don’t necessarily know how to carve out the time required to reflect on, and analyse, situations under pressure. For those females with promotion ambitions, here are some strategies that will help you advance your cause: Seek out mentors. Ideally, they should be women in your industry and in positions to which you aspire. Study what makes them successful; Partner with and support your boss in reaching his or her goals. This is about learning the skills to ‘manage up’; and Look for every opportunity to demonstrate your leadership capability and skills at work And here are some pitfalls to avoid: Don’t allow yourself to be overtaken by the distraction of your ambition or goals for development. Remember, you have a day job so do it well. This will ensure you are not dispensable; and Don’t put off any plans for leadership development training that will improve your self-awareness and influencing ability. Invest in building these leadership capabilities. And finally, a recently-published Accenture report offers three powerful accelerators to help women close the pay gap: Career strategy: aim high, make informed choices, and manage your career pro-actively; Tech immersion: acquire stronger technology and digital skills; and Mentoring: find a suitable mentor who will inspire you to become a leader. Performance matters To master your leadership edge in the field of accountancy, you need to shine a spotlight on your leadership style. Remember, your role in your company isn’t that of a superhero – rather, it is that of a transformative finance partner. To cultivate this reputation, be seen as someone who constantly monitors their own performance and that of others. In doing so, you will take a significant step towards career equalisation for women. Jane is author of The Career Book and co-founder of The Leadership Rooms.

What are the determinants of leader success in a volatile, uncertain, complex and ambiguous world? Recent times have been commonly described as volatile, uncertain, complex and ambiguous (VUCA). The VUCA world has been propelled by three fundamental shifts. First, the convergence of a couple of great disruptors – technology and globalisation – has made the pace and scope of change far greater than it has been since the industrial revolution. The emergence of new disruptive technologies and business models is becoming more commonplace and is reshaping the nature of competition across industries. As a result, executives may need to master additional skills to redirect their organisations in the face of attacks from a wider array of competitors than ever before, who create value for customers in fundamentally new ways. Second, and on a related note, executives are faced with a constant stream of information and trends that have become more readily available. It is therefore difficult to distinguish noise from actionable intelligence. As a result, executives may need to make decisions and advocate for them with little clarity on environmental trends. Finally, a fundamental shift is under way in the psychological contract between employers and employees. Unlike the past, when individuals often remained with a given employer for most or all of their working lives, individuals are now more likely to change jobs multiple times over the course of their career and employers are less likely to offer stable employment than prior generations. As workplaces come to be characterised by frequent turnover of staff and an increase in contractual and temporary staffing arrangements, leaders face increasing challenges in hiring, motivating and retaining employees and in preventing the loss of valuable skills and knowledge. When one considers the fundamental changes ushered in by these developments, it is not surprising that there is much interest among executives, consultants and academics alike in understanding the key leadership skills that can drive organisational success in a VUCA world. Questions have also been asked about how these leadership skills compare to those that drove success in prior decades. A key determinant of leader success in a VUCA world will continue to be the ability to effectively manage talent in one’s organisation. In particular, managing talent is becoming the foremost strategic priority and requires even greater executive attention. We are conscious that there isn’t any one boiler-plate or leadership template for managing talent. Rather, our aim is to discuss a few challenges leaders may encounter in a VUCA world and share examples of some practices that can enhance the probability of leader success. The hiring process The first and foremost talent management challenge facing leaders in a VUCA world is getting the hiring process right and treating it at par with other significant resource allocation decisions – but getting this right is easier said than done. Research has found that executives often staff their organisations with individuals with homogeneous skillsets and work experiences, often mirroring those of executives themselves. In doing so, they may create a ‘tunnel vision’ of sorts in the organisation when instead, greater diversity of thought and skills is likely to be needed for organisations to navigate the current VUCA times. There is also the temptation to make recruiting choices based on the immediate operational needs of the organisation or by prospective candidates’ fit with current activities instead of acquiring talent that will support the organisation in the medium- and long-term. One example is the need for technology-savvy individuals who are able to help the organisation capitalise on the digital and analytics disruptions that are reshaping the business world. As the famous hockey player Wayne Gretzky once said: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” Nurturing talent A second, not-so-obvious challenge facing executives in a VUCA world is avoiding the extremes of either neglecting their top talent or singularly focusing on top talent while ignoring other employees. On the one hand, top talent disproportionately contributes to organisational performance despite being in the minority. Top talent is also generally highly mobile. Thus, leaders cannot afford to take these individuals for granted and must make efforts to motivate and retain them. On the other hand, the features of a VUCA world also imply that organisational performance is increasingly dependent on team effort as much as solo efforts by key employees. Important contributions to team effort are often made by employees who may not be the top-most performers, but are nevertheless good organisational citizens who provide valuable stability. Organisations should therefore be mindful of the unintended emergence of a vicious cycle whereby the nurturing of top talent comes at the cost of denying growth opportunities to others. The balancing act that leaders need to perform in order to retain and reward their top talent without alienating others often proves difficult. Good inductions, coaching, and emphasising and encouraging collaborative behaviour are a some actions leaders can take. Incentive and reward systems A third challenge facing executives in a VUCA world is preventing potential distortions triggered by the design of organisational incentive and reward systems. One such distortion can result from adopting incentive systems that are at odds with organisational objectives. This possibility was extensively discussed in the seminal article, On the Folly of Rewarding A while Hoping for B. For example, organisations commonly provide incentives for the achievement of individual targets while stating a desire for a collaborative organisational culture. Another distortion that can occur as a result of organisations’ incentive and reward systems is employees being promoted based on their performance in their current roles as opposed to their potential and suitability for future roles. Google’s ‘Project Oxygen’, for instance, revealed that individuals who were promoted to managerial roles largely on the basis of their current technical skills and performance were often not effective in these roles, as good managers also needed softer skills such as listening, coaching, developing others, and the ability to delegate. More generally, organisations’ incentives and reward systems could also generate distortions when they focus on a narrow set of behaviours and outcomes, thus inadvertently discouraging other value-creating behaviours and outcomes. For example, it is quite possible that a great salesperson may neither want to be a sales manager nor would make a good sales manager. Creating incentive and recognition systems that seek to recognise the different ways in which employees contribute to organisational success could be one way to avoid this. Conclusion A VUCA world has created immense opportunities for companies to tip the balance of competition in their favour and create the preconditions for lasting success. In doing so, leaders must approach the selection, motivation and retention of talent as a strategic priority. Karan Sonpar and Federica Pazzaglia are both Professors in the management subject area of UCD Smurfit School of Business.

How, in this age of innovation, can leaders manage risk while enabling growth? As technological innovation continues to revolutionise the business landscape, organisations and their leaders are also grappling with new-found risks and uncharted challenges. PwC’s 2018 Risk in Review Study: Managing Risks and Growth in the Age of Innovation shows how a distinct set of risk management practices can arm organisations to capture value from their innovation efforts and better manage related risks for further growth. Organisations, and their leaders in particular, must understand that risk management and innovation go hand-in-hand. Innovation brings great opportunity. A keen awareness of the necessary actions to address both known and unanticipated risks that accompany innovation can equip risk executives to succeed in this fast-changing environment. Risk executives should be engaged throughout the innovation life-cycle to effectively identify, assess and manage innovation risk. Key drivers In an era of digital business and rapid technology change, virtually no company can ignore the imperative to innovate. Failing to do so is an invitation to lose business. The study identified a number of key drivers: New technology, including big data and the cloud; Human capability skillsets to support new technology; Market growth requirements; Cybersecurity and privacy threats; Industry peers; and Increased regulation. Strategy and risk management As organisations across all sectors increasingly face pressure to innovate, risk executives need to help their organisations strike the right risk/reward balance. After all, organisations that effectively manage innovation risk are more effective innovators. With innovation now forming part of organisations’ strategic direction, it becomes clear that innovation must be managed just as effectively as the strategy itself, as errors could have lasting strategic impacts. “Strategy” refers to an organisation’s plan to achieve its mission, vision and to apply its core values. A well-designed strategy drives the efficient allocation of resources and effective decision-making. It also provides a roadmap for establishing business objectives throughout the organisation. Risk management does not create the entity’s strategy, but it does influence its development. An organisation that integrates risk management practices into setting strategy provides management with the risk information it needs to consider alternative strategies and, ultimately, to adopt a chosen strategy. Therefore, the same principles should be applied to innovation and the risks surrounding it given its inherent correlation to strategy. Enterprise risk management COSO’s Enterprise Risk Management Framework – Integrating Strategy and Performance 2017 defines enterprise risk management as “the culture, capabilities and practices, integrated with strategy-setting and performance, that organisations rely on to manage risk in creating, preserving and realising value”. It emphasises its focus on managing risk through: Recognising culture; Developing capabilities; Applying practices; Integrating with strategy-setting and performance; Managing risk to strategy and business objectives; and Linking to value. To keep pace with innovation and risks changing at breakneck speed, organisations need to harness a range of methods that will continue to grow and evolve along with these forces. Enterprise risk management is not static, nor is it an adjunct to a business. Rather, it is continually applied to the entire scope of activities as well as special projects and initiatives (such as innovation activities). It is a part of management decisions at all levels of the entity. Key attributes of effective risk management programmes When organisations respond well to the range of innovation risks, it naturally follows that their innovations are more successful. There are some key attributes of effective risk management programmes which achieve this: Confidence in the risk management programme’s ability to effectively manage risks from innovative practices such as artificial intelligence, augmented reality, big data, the internet of things and robotic process automation; The risk management programme influences decision-making and the shaping of innovation strategy. Exerting influence over decisions about innovation positions risk executives to help their organisations understand – and therefore better manage – innovation-related risk; The risk management programme engages early and often across the innovation cycle. Risk plays a more active role across the innovation cycle. Risk advises on innovative activities before the planning stage, and they’re much more likely to halt initiatives based on risk assessments and suggest risk-based alternatives; Drive risk tone and culture from the top, and broadcast appetite and tolerance messages about innovation and risk across the organisation. Tie effective management of innovation risk to strategic planning and performance management to align behaviours which can be measured and monitored; The risk appetite and tolerances are adjusted with frequency. The overall risk appetite may need to shift over time due to market direction or competitive dynamics. As the organisation periodically adjusts its risk appetite and tolerances, all lines of defence are informed of such changes so that business decisions, controls testing, risk monitoring and risk reporting work in a synchronised and risk-aligned manner; Harnessing of new risk skills, competencies and tools to support innovation. Adapt risk capabilities to influence and enable the organisation’s innovation strategies, expand continuous risk assessment, and use new technology for more real-time information. Successful firms add knowledgeable, curious, action-oriented and tech-savvy recruits to keep pace with risks from technology-driven innovation. Their current workforces also continuously up-skill in new methods, metrics, tools, and technologies to make critical, in-the-moment risk/reward decisions; and The risk management programme uses a wider variety of metrics to monitor and assess effectiveness of risk management in multiple ways and by multiple parties, including external parties. Examining effectiveness through multiple metrics helps risk executives shore up areas where they fall short or are vulnerable, so that the C-suite and the board can rapidly make decisions about strategic initiatives while the business steps in to address any risk profile misalignments against risk appetite. Obstacles To spot risk and react at the right time in the right manner, ensuring that important messages cascade across and into the crevasses of an organisation, is critical. With innovation risks occurring at break-neck speed, there are undoubtedly various obstacles to overcome before effective risk management can be embedded. Some key obstacles include: Organisational culture that inhibits change and fails to foster idea creation in a controlled and welcomed manner; Lack of knowledge of innovation-related opportunities and risks; Lack of leadership buy-in; and Weak collaboration between the risk programme and the business. Fuelling innovative growth  Organisations must view innovation and risk as a double-edged sword, clearing the way for greater opportunity and increased revenue growth, with eyes wide open about all-but-certain and unimaginable risk. To allow for more innovation and to deflect or limit risks from new initiatives as they arise, risk executives must be engaged and influential over the entire innovation life-cycle – from high-level strategising to brainstorming, quantifying, executing, continuously taking decisions and actions about risk appetite and performance tracking. To play this important role, risk management programmes must be equipped to effectively identify, assess, and manage innovation risk. Applying rigour, using multiple approaches, pushing the organisation to periodically adjust risk appetite, adding sophisticated skills and tools, and comprehensively monitoring how successfully the programme is tackling innovation-related risk helps risk executives meet their organisation’s strategic objectives. As digital technology accelerates the pace of change, effectively managing innovation-related risk becomes crucial. When organisations effectively manage innovation-related risk, the likelihood that they will be successful innovators rises. That simple premise alone is a call to action for risk management programmes. Failure to do so all but guarantees under-performance. Jason McGee is a Senior Manager in Risk and Assurance at PwC.