As relations with the West continue to cool, China is facing economic challenges reminiscent of the Irish economy in 2008, writes Cormac Lucey Tensions are growing between the China and the US as the latter leads the West in a sharp reversal of a policy of openness and commercial integration, which continued despite concerns about military espionage and intellectual property theft.  Now, the US is reducing its interactions with China, and a wave of reshoring/friendshoring is underway in the West. Under current President Xi Jinping, China has been picking territorial fights with its neighbours and Xi has reportedly asked his military to complete preparations by 2027 to seize Taiwan by force.  Meanwhile, senior Chinese political and business leaders are disappearing suddenly with alarming frequency and non-Han ethnic minority groups, such as the Uyghurs and Tibetans, have been subject to terrible oppression.  The Chinese economy is not faring much better. When I look at China’s economic position, I think we may now be witnessing ‘peak China’.  First, the country’s enormous property/debt bubbles are beginning to deflate. Coming into 2024, China is in a similar position to Ireland circa 2008. Its economic underpinnings are dangerously fragile, the first tremors of deflation are being felt and the authorities are insisting that everything is okay.  Over the past 15 years, China’s total debt levels (public plus private) have doubled relative to economic output (GDP).  According to Numbeo, a website that analyses the cost of living across different countries, rent yields in Beijing range from 1.45 percent (city centre) to 1.69 percent (suburbs). These yields are way below the lowest levels witnessed in Ireland at the peak of our property bubble.  They are lower than Chinese interest rates, meaning that buy-to-let landlords using debt to fund their purchases will face interest charges that exceed their rental income (negative carry).  Thanks to its now defunct ‘one child per family’ policy, which ran from 1979 to 2015, China faces a demographic implosion over the coming decades. The UN forecasts that its population will decline from 1.4 billion this year to 1.3 billion by 2050 – and below 800 million by 2100.  Today, China faces the same demographic and debt-deflation challenges that confronted Japan three decades ago.  For all the messiness and dysfunction of the West, democracy does force a society’s problems onto the political agenda rather than allow them to be suppressed, and it facilitates innovation over stagnation.    Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland

In the transformative era of 1920s Ireland, the Institute’s benevolent fund emerged as a pillar of aid. Now celebrating 95 years, CA Support remains a vital resource for Chartered Accountants facing hardship The 1920s was a time of immense significance, upheaval and formation in Ireland’s history. With the country’s independence in its infancy, this was a time when many important structures, proclamations, institutions, organisations and charities were born, including Chartered Accountants Ireland’s benevolent fund.  Founded in 1928, a time when there was no state welfare or support, benevolent funds were originally set up to assist those who worked within industries or professions who needed financial help for themselves and their families. In former decades, grants were primarily offered to widows to help them care for children and afford daily necessities. And while society has evolved and shifted, after 95 years, CA Support has proven to be as relevant today as it was then by continuing to be a trustworthy and reliable support system for thousands of Chartered Accountants and their families. It could be you It is a common misconception that financial professionals are always in good financial health due to their professional background. Like anyone in society, accountants come from all walks of life and can struggle financially for many reasons. Those who bravely contact CA Support are dealing with extreme hardships and burdens. Some common issues people present to CA Support with are:  redundancy; critical illness; bereavement of a loved one; marriage breakdown; domestic violence impacts; childcare and back-to-school costs;  household bills; and cost-of-living pressures. CA Support provides financial relief to about 100 beneficiaries every year. These are real people who are your professional peers, colleagues, friends and family who have found themselves in situations that have cost them their livelihood, financial security and family safety through no fault of their own.  Unfortunately, we can’t foresee what lies ahead in life, and for CA Support’s beneficiaries, it was almost inconceivable that they would ever need such support. Strengthening CA Support’s future Like most registered charities, CA Support relies on the generosity and goodwill of the Chartered Accountancy community. Without the kindness of members and organisations on the island of Ireland, CA Support would simply not be celebrating this milestone.  With your continued backing, CA Support hopes to support all those in our community for another hundred years.  If you are able to do so, you can donate to CA Support:  Online via the Chartered Accountants Ireland website or iDonate page at: idonate.ie/cause/casupport; By credit/debit card over the phone on 01 5233949/ 01 6377342 or 086 0243294; or By posting a cheque made out to CA Support at Chartered Accountants Ireland, 47–49 Pearse Street, Dublin 2.

Julia Rowan answers your management, leadership and team development questions I joined a new practice recently and now manage a team of six people. Everybody on the team is polite to me and each other. The work gets done, but there is little collaboration. Almost all communication is by email. Nobody speaks at team meetings. I have tried to find out what is wrong – but nobody will tell me. I find this exhausting. I work from the perspective that ‘everything is feedback’. And feedback is coming your way, loud and clear. The behaviour you are experiencing suggests that trust has broken down somewhere – most likely between team members.  Start to record what it is that you find exhausting about this situation. Do things take longer than they should? Are reasonable quality standards only being met with your input? You need to be able to be specific.  You also need to take a dual approach. First, let the team know that you need something different from them. Be very careful about your language – make observations (“I notice I’m being included in emails”) rather than judgements (“this isn’t good enough”).  Second, you need to start ‘calling out’ the tasks you find yourself doing that are not part of your job and handing each one back to the person who owns it. Conflicts like this can take a long time to get sorted, so it is especially important to be polite, patient and persistent.  I moved from a large consultancy firm to a smaller practice for lifestyle reasons some years ago. It’s been a good move, but I miss the variety, intensity and impact of the work I used to do. The work I do here is much more humdrum than in my previous roles and I feel like the other partners haven’t accepted me. They have worked together for a long time and are of one mind. My ideas are rejected.  I remember coaching a guy years ago who felt like an outsider on the team he managed and with his peers on the senior leadership team. He told me he was “very good at pretending to listen”.  And therein lay his problem: there are some things we can’t fake. Relationships are built on sincerity. So, I wonder what it is like for this practice to have invited you in … a person who finds the work “humdrum”. Do they sense your judgement?  I think the first thing you need to do is work out a way to engage with this practice sincerely. Write down the most honest observations you can make about your experience working there – to yourself, your peers and your team.  Write about how you feel about the practice, your ambitions and what you have lost by joining. Then (and only if you are sincerely interested), find a way to engage with your peers about what they have built and how they built it. What were their hopes, challenges and successes? What are they proud of?   It might also be helpful to look at your language. When stressed, we go to that very definite language (e.g. “they are all on the same page”). And the danger is that we start believing our thoughts.  Might it be more truthful to say, “they are often on the same page” or “many of them are on the same page”?  While that may sound trivial, it can change our perspective.  Once you’ve done this work, you should organise one-to-ones with your peers over lunch or coffee and try to connect with them genuinely. When people feel accepted, they find it easier to accept others. Julia Rowan is Principal Consultant at Performance Matters Ltd, a leadership and  team development consultancy. To send a question to Julia, email julia@performancematters.ie

As we prepare to usher in the New Year, three Chartered Accountants tell us about the biggest changes and challenges they have faced in their professional lives over the past 12 months Michelle Hawkins  Head of Business Advisory FPM 2023 has certainly been an interesting year!  As Head of Business Advisory at FPM, I support both public sector and private clients as they navigate these difficult times. A key challenge in 2023 has undoubtedly been the unprecedented rise in interest rates, resulting in difficulties accessing and servicing finance.  Clients increasingly require support in this area. To address this, our organisation established a dedicated Funding Solutions Division designed to help clients renegotiate their banking and loan commitments. The talent shortage and skills gap that our clients have experienced in the past year has been among the biggest in history.  It’s hard to believe that, in the current economic climate, lack of available talent is the number one challenge keeping businesses from growing and innovating. In response, we launched a Virtual Finance Function to support businesses that need to strengthen or fully outsource their finance department.  Another challenge this year has been the need to help businesses prepare for the impact of the Windsor Framework, which came into force in October. We are fortunate to have customs experts within the AAB Group with which we recently merged, whose knowledge and skills have greatly supported clients adapting to the new regime. John Morgan  CFO Dale Farm Coop I will most certainly view 2023 as a pivotal year in my career.  After spending 20 enjoyable years in a plc environment with BT, I took a leap into the unknown, joining Dale Farm Coop as Chief Financial Officer – switching not just to a different business model but also a very different sector.  Cash management has been crucial in both roles. During my time working with a plc, good cash management was about ensuring that we delivered our quarterly cash commitments to the city.  At Dale Farm, it’s about ensuring that our debt levels are controlled while paying a milk price that’s as competitive as possible. On reflection, the main challenge so far in this role has been managing the balance between profit and milk price. As a coop, our primary objective is to pay our members the most competitive milk price we can.  To achieve this objective, we need to generate a certain profit level to fund working capex/capex requirements and ensure we pay a competitive milk price over the long term. Managing this balance is critical to the role of CFO at Dale Farm.  Communicating directly with our board, leadership team and members to explain why we need to make a certain level of profit has been a key focus for me in 2023.  My second biggest priority since joining Dale Farm has been the management of interest costs and working capital levels.  Due to our investment strategy, debt levels have increased and, as interest rates have doubled over the last 12 months, this has required greater attention on working capital management. Educating the business on the parameters and importance of working capital has been a priority for me.  I would advise anyone considering a move between industries and business models to embrace the opportunity. I’ve found the change invigorating and I’m pleasantly surprised at how the core skillset of a Chartered Accountant can be applied so well in such different environments. Brian McNamara  Managing Director SwiftFile Customs When the post-Brexit trading environment kicked in almost three years ago, much of the initial focus was on keeping goods moving whereas ensuring compliance was not necessarily given the same level of attention by importers unfamiliar with customs obligations.  After a relatively relaxed initial approach from the Revenue Commissioners, 2023 has seen a significant increase in the number of companies selected for customs audits. With this, we have certainly seen a heightened awareness of the importance of managing customs risk. With Revenue audits now becoming the norm for importers and the potential fines and penalties that go with them, this is a trend I expect to see continue. October 2023 also saw the introduction of the Carbon Border Adjustment Mechanism (CBAM), the EU carbon tax on imports.  While not a core customs issue, the CBAM reporting requirements for importers of iron, steel and cement (initially) are particularly onerous.  Staffing continues to be a challenge in our industry. The economy has slowed in 2023, and there have been some high-profile job losses in the technology industry. As with other sectors, however, there are industry-specific reasons for staffing challenges in customs clearance.  Thirty years of single market membership has meant a shortage of customs professionals. Now that the UK has left the EU, it will take time to build the knowledge base on customs in Ireland. In the meantime, we address this issue by providing comprehensive in-house training.  Thankfully, everything stops moving over the Christmas period. This will allow us all to take a well-earned break and come back ready to meet challenges as they present themselves in 2024.

The launch of a consultation on a new national financial literacy strategy for Ireland is welcome and accountants will be key as gatekeepers of financial knowledge, writes John Nolan Making financial decisions and navigating the world of finance is an unavoidable part of life, from setting up your first savings account to planning for your retirement and everything in between.  However, increasing numbers of people in society struggle with such tasks and these difficulties are further exacerbated by the ongoing digitisation of financial services.  ‘Financial literacy’ is the ability to engage with the financial system and to effectively manage your finances. While the concept is hardly new, it has received notable academic and political attention in the years since the onset of the global financial crisis in 2008.  That period was an inflection point that highlighted the financial struggles of many households and small businesses and the implications for the broader economy and society. o Since then, the financial experiences of many during the recent COVID-19 pandemic and the current period of high inflation and interest rates have heightened the focus on this issue at a government policy level. Low levels of financial literacy Research by the Organisation for Economic Co-operation and Development (OECD) has shown that financial literacy levels are worryingly low across the world. In the EU, a 2023 survey found that just 18 percent of respondents have high levels of financial literacy, with Ireland only marginally better at 19 percent.  These findings are a big concern for public policymakers because financial literacy improves our financial resilience and ability to deal with financial shocks, it increases our financial wellbeing and it contributes to the stability of the financial sector overall.  European Commissioner Mairead McGuinness is leading a policy initiative focused on financial literacy and encouraging European Union (EU) member states to develop national strategies aimed at ensuring a coordinated approach to financial education.  This comes on the back of over a decade of work by the OECD International Network on Financial Education (OECD/INFE) in establishing best practice guides for the development of national strategies and the measurement of financial literacy within populations.  A national financial literacy strategy In Ireland, Minister Michael McGrath recently announced plans by the Department of Finance to develop a national financial literacy strategy.  This is a welcome move and one that a variety of stakeholders have been calling for, including the Central Bank of Ireland, Social Justice Ireland and the Competition and Consumer Protection Commission (CCPC).  The new strategy will help to ensure Ireland is compliant with the G20/OECD High-Level Principles on Financial Consumer Protection and the OECD Recommendation on Financial Literacy.  We have been behind the curve in this area, with the Retail Banking Review published in 2022 by the Department of Finance noting that Ireland is one of just four EU member states that does not have a national strategy for financial literacy.  While some important studies and reports have been undertaken in an Irish context – by the National Adult Literacy Agency (NALA) and by the CCPC, for example – there is no coordinated national approach to financial literacy.  There remains a need for an overall framework for financial education initiatives, funding for research to develop baseline measures for financial literacy across the population and to support evidenced-based interventions, and a clear set of objectives to guide stakeholders. The decision to engage with stakeholders to develop a national strategy is perhaps the easiest step to take. The devil will be very much in the detail as we progress to the substance of what such a strategy might entail and where the focus and investment should go.  Three issues illustrate this complexity – and this is by no means an exhaustive list: Where to start? First, one critical decision is which groups in society should be targeted initially to ensure the most effective use of resources and that true value is derived from financial education initiatives.  The G20/INFE High-Level Principles suggest that focusing on specific (or vulnerable) groups for financial literacy interventions makes sense for many countries.  Research by both the OECD and EU has shown that there are some cohorts within populations that tend to have consistently lower financial literacy levels.  The recent launch by Commissioner McGuinness of a joint EU/OECD-INFE financial competence framework for children and young people highlights one relevant group that might be a natural starting point for any national strategy.  A focus on young people’s financial literacy – and embedding this in education systems to facilitate a culture of financial conversation early in life – seems logical.  Research has identified numerous other groups with consistently lower levels of financial literacy, including the elderly, low-income households, migrants and those with low digital literacy, for whom financial literacy interventions would be particularly beneficial.  One additional group is of particular relevance to accountants and it is under-researched in the context of financial literacy – entrepreneurs and small business owners.  The transition from the personal to the entrepreneurial in the context of financial literacy is significant.  The additional scale, responsibilities and complexity of the financial landscape for small businesses can overwhelm their owners.  The absence of financial literacy in the indigenous business sector has the potential to be just as damaging to the economy as a lack of personal finance skills among the general population. Financial literacy as a social practice Financial literacy is a social, rather than just a technical, practice. It is a social and human-centred practice in the sense that it is heavily influenced by peers, family and social institutions.  It is a much more complex issue than a mere ‘skill gap’ to be solved through financial education interventions.  Taboos surrounding personal finances, and discussion on the topic, can have a significant impact on how people view its importance and the need to upskill in the first place.  An appreciation of the complexity of financial literacy and how it fits within the social and cultural fabric of communities will be a serious consideration for any new national strategy. Clear concepts and terminology Discussing financial literacy and developing a strategy is further complicated by how its key concepts and terms have changed over the past two decades.  For example, the UK’s national strategies have evolved from a Financial Capability Strategy for the UK in 2015, which was replaced by the UK Strategy for Financial Wellbeing in 2020.  While traditionally associated solely with knowledge, ‘financial literacy’ has evolved to encapsulate skills, behaviours and attitudes, which is closely aligned to the concept of ‘financial capability’. The terms are now often used interchangeably.  The table below presents some of the key terms currently used in this area, and how they have been defined.  The overarching goal of achieving ‘financial wellbeing’ is itself difficult to define and will mean different things to different people.  Thus, in the context of any new national strategy, it will be important to clearly articulate the objectives and what is meant by the terminology that is used. Finance is a sector whose jargon can overwhelm people, so it will be essential that any new strategy avoids this. Public interest The evolving policy focus on financial literacy should be of interest to accountants. A commitment to the public interest is one of the hallmarks of the profession.  Given the emerging evidence of the impact that poor financial literacy has on wealth inequality, financial exclusion and other adverse financial outcomes, addressing this issue is clearly in the public interest.  Accountants occupy a crucial position in society as gatekeepers of financial knowledge. We have a responsibility to utilise this position for good, both at an individual level in our interactions with clients, colleagues and the community and at a collective level in terms of support for the new national financial literacy strategy.  This is not just a policy for individuals and households; it is also for entrepreneurs and micro, small and medium-sized enterprises. Accountants, as trusted business advisors with financial expertise, have a key role to play in shaping and applying this policy. Financial literacy is about our relationship with money, which is, whether people like it or not, a core part of society. Promoting a culture of positive engagement with the financial sector and discussing finance from an early age is vital for a functioning economy and society.  Individuals and businesses rely heavily on financial services every day; at a minimum they should be confident and capable of accessing and engaging with what they need.  While financial literacy is likely something most accountants take for granted, for many in society it is a significant challenge. This is something we will be hearing a lot more about from a policy perspective in the coming months and years. Dr John Nolan, ACA, is a lecturer in corporate finance and financial reporting at the University of Galway

A successful flotation is a major milestone for any ambitious company but the path to IPO-readiness is paved with challenges and careful preparation is crucial, write Ciara O’Callaghan Crehan and Eimear McDermott The public markets are a bellwether for economic confidence at any point in time and we have witnessed a challenging period for equity performance and new issuances recently.  While the public markets offer just one source of potential funding for a business, an Initial Public Offering (IPO) is seen by many as a particularly significant milestone for promising businesses and IPO activity as an indicator of wider economic health.  There are numerous reasons why companies may want to list on a stock exchange. These include access to a new pool of capital to help take them to the next level, enhanced profile and prestige, a clearly defined business valuation and a route to exit for founders and shareholders. Raising capital through the public markets takes time and lots of preparation, however, particularly in a period of prolonged economic uncertainty.  Current IPO market conditions The current IPO drought has persisted for more than 18 months, but this doesn’t mean pre-IPO companies should be inactive. Rather, we would suggest taking advantage of the current lull to prepare now for a public offering further down the line. Already, we are starting to see the first green shoots of recovery. The third quarter of 2023 produced 36 IPOs that raised a combined total of about $8 billion. This was the same amount of proceeds raised for the full year in 2022 and was led by the largest tech offering in years, ARM, which raised approximately $4.9 billion. In particular, we are seeing a growing number of large corporates opting to consolidate their market listings on – or undertake a general move to – US markets. While this is not good news for stock exchanges in Ireland or Europe, it demonstrates the continued dominance of the US capital markets for access to funding.  The next wave of IPOs will be led by those companies that do the hard work of preparation today, readying themselves for amplified scrutiny and accountability and working to make the necessary corrections big and small. Choosing the right stock exchange Many factors play into the decision on where to list a company, including: Access to capital, which is critical – in many cases companies will decide to list on multiple exchanges to broaden their investor base; Market visibility and the reputation of the exchange, which may be known for a particular focus area; Liquidity and trading volumes; Regulatory requirements, which differ significantly across markets – the US capital markets are the most onerous from a compliance perspective but are more attractive to many stakeholders, from suppliers to employees and particularly to investors; and Expansion into new markets and peer group comparison. What it takes for a successful IPO  Any successful IPO needs a compelling equity story. In the current environment, IPO candidates need to be able to demonstrate a resilient trading performance and compelling strategy for future growth to tempt investors.  It is also important that the valuation expectation is reasonable. With a particular focus on the US market, some of the key steps in a successful IPO journey include: Ensuring you have a first-class management team and advisors; Getting your IT systems and control environment in order; Improving your financial reporting and getting audit-ready; Addressing change through a people-centric transformation programme; and Addressing environmental, social and governance-related performance and strategy upfront. It’s a team game The path to becoming a public company depends on a coordinated team effort by management and external advisors. In our experience, which spans both sides, we believe there are several critical ingredients to success: An experienced management team, ideally with some IPO experience that can build a strong equity story during the roadshow; External advisors with IPO credentials, contacts and industry experience; and A structured transformation of the people, processes (with a particular focus on technology) and culture of the company. IT capacity and controls Companies should not overlook or underestimate the ‘heavy lift’ needed for readying their IT systems ahead of a planned IPO. Some of the IT systems and tools commonly used by private companies in many cases cannot scale to meet the technology requirements of a public company.  Many companies face fundamental challenges in understanding their existing IT landscape and the interdependencies that exist between the different elements therein.  This is particularly important because you cannot expect to achieve a robust internal control framework for financial reporting without a strong partnership between the IT and finance teams.  It takes a coordinated approach – with informed, experienced leadership – to break down silos and ensure that everyone is speaking the same language. Getting the governance right at the outset is a prerequisite for successfully establishing and embedding your control framework. Companies that have not historically invested in technology and tools for financial reporting and business operations might struggle with the limitations of their existing technology if this is not addressed as a priority at the outset.  Assessing IT across people, processes and systems is critical. Taking a risk-based approach – and strategically sequencing your transformation initiatives – is equally important.  Early in the preparation phase is the time to get the fundamentals right, and to ensure that each step of your transformation is aligned to your IPO target state.  Companies should be incorporating audit and control requirements into their procurement decisions when looking at investment, alongside business, information security and other assessment criteria.  Financial reporting and audit The level of auditor scrutiny on public companies is high and ever-increasing. Therefore, getting your company’s historical accounting and controls in order is essential pre-IPO.  As already mentioned, it is critical to have the right technology in place here alongside the right people – and to give them sufficient lead time to do the work needed. In preparing for the rigours of an IPO, an auditor may have to re-audit parts of prior years’ accounts and update procedures to meet the higher standards expected of a public company. They will likely have to update controls and processes and document all key controls.  It is an arduous process and one that cannot be rushed. Early engagement with the audit team is important.  In our experience, bringing your auditor into the fold at agreed milestones can be hugely valuable in ensuring continuous alignment and avoiding any unexpected curveballs as you navigate the IPO journey. Tailored people-centric approach An IPO journey will have its challenges. It requires major transformation involving upgrading technology, improving financial reporting processes and implementing governance, risk and compliance capability. All are critical.  So too is a people strategy that sets out the vision for a collaborative and supportive post-IPO culture incorporating diversity, equity and inclusion as well as helping to guide how the business plans to achieve its environmental, social and governance (ESG) goals.  And finally, ESG As ESG continues to gain momentum, it is becoming a fundamental consideration for companies making strategic decisions in areas including funding.  Integrating ESG reporting into the equity story has become key for investors and, consequently, it is an increasingly important aspect of the IPO readiness plan for issuers.  This is especially true in Europe where regulatory requirements for listed companies will become mandatory as the European Union’s Corporate Sustainability Reporting Directive (CSRD) comes into effect. An ESG strategy is now a must-have for any company considering an IPO.  Becoming a public company and raising funding on the capital markets has always required lots of work and preparation.  Alongside a company’s equity story, financials and governance, there is now a broader focus on technology, culture and people strategy as well as ESG commitments and performance. The current market lull could provide just the ‘pause’ some companies need to prepare thoroughly for a successful flotation and future growth.  Ciara O’Callaghan Crehan and Eimear McDermott are co-founders and directors of Odyssey Consultants, a boutique risk and management consultancy for helping companies at all stage of their journey reach new horizons