With the forthcoming introduction of the Senior Executive Accountability Regime, Michelle McNamara explains what banking and insurance firms need to do to prepare and why accountability is key to that preparation. The past decade has seen a seismic shift in global focus towards greater accountability for decision-making in the financial sector, undoubtedly influenced by the fallout of the financial crisis. In 2018, the US Federal Reserve’s response was to launch a set of guidelines for how large financial institutions could manage risk and, in particular, individual accountability. Closer to home, the UK has sought to strengthen its market integrity within the banking and insurance sectors – giving firms and regulators greater powers to hold individuals to account through its Senior Managers and Certification Regime (SMCR). However, most jurisdictions within Europe have not yet moved toward regimes specifically designed to assign individual accountability. The Central Bank of Ireland’s (CBI) Senior Executive Accountability Regime (SEAR) may well change that. Together with other measures, SEAR is part of the CBI’s wider framework to boost transparency in the financial sector and will require firms to clearly set out where responsibility and decision-making lie. The regime is expected to apply to the Pre-Approval Control functions (PCFs) under the current fitness and probity regime. It will have implications for board members, executive committee members and senior leaders with critical decision-making roles. Put simply, SEAR will enable every senior member of an organisation to be clear about what is expected of them and the consequences of deviating from standards. Sitting alongside SEAR, enforceable Conduct Standards will set out the behaviour expected of regulated financial services firms and individuals working within them. These standards will oblige individuals to conduct themselves with honesty and integrity, act with due skill, care and diligence in the interest of consumers, and co-operate with regulatory authorities. All these elements are aligned with the SMCR’s Individual Conduct Rules. A further element is the enhanced administrative sanctions regime, which will allow the CBI to hold individuals to account directly for their misconduct rather than having to link the misconduct to a regulatory breach by their firm. Regulated financial services firms in Ireland can look to the UK for guidance. The SMCR has been in force for UK banks, building societies, credit unions and PRA-designated investment firms since March 2016. It was extended to cover all Financial Conduct Authority (FCA) solo-regulated financial services firms from 9 December 2019. The SMCR’s overarching aim is to reduce harm to consumers and to strengthen market integrity. Despite being in the early stages of establishing SEAR, Irish firms must prepare for what lies ahead. Given the importance of Ireland’s financial system in a post-COVID, post-Brexit environment, and the subsequent potential risks posed to our broader economy and society, individual accountability needs to be top of mind now more than ever. The lessons from the pandemic and the experience in the UK pose a unique opportunity for Irish firms to start preparing for SEAR and reap the benefits. While implementing SMCR at Pershing, we quickly identified that a significant change project would be required. Firms should start their SEAR planning early to allow plenty of time to account for unexpected setbacks, re-evaluate existing processes and ensure that the right people are around the table. This includes senior management, human resources, compliance and legal teams. Communication and training will be integral to build awareness and trust from employees subject to the regime. Firms may also need to involve information technology teams, as there could be a need for system changes. Dedicated resources will be required, with a strong internal communications stream to educate employees, as SEAR will directly impact areas such as governance, policies, procedures, recruitment practices and training. Although the timeframe for implementation is yet to be announced, firms should create statements of responsibilities and responsibility maps at an early stage to help them allocate the prescribed responsibilities with supplementary training. This step will be helpful in the overall implementation process. Statements of responsibilities and responsibility maps should set out senior executive functions’ roles and areas of responsibility and document key management and governance arrangements. Clear processes for replacing senior executives should also be established. Based on the experiences of firms in other jurisdictions that have been through the process of embedding individual accountability, the overarching responsibility is to fully understand how the firm’s culture aligns with what SEAR is trying to achieve: greater accountability for individual decision-making and a positive cultural change to drive higher quality outcomes. Michelle McNamara is Vice President of Compliance at BNY Mellon | Pershing.

According to new analysis from EY, GDP is not necessarily a good measure of how well a society is doing – and specifically, how well a country fares after the pandemic. Yannick Cabrol and Simon MacAllister suggest other considerations. Economists and public decision-makers have been relying too long on GDP to measure the health of our society. GDP assesses the overall size of the cake and excludes social indicators, which can lead to mistaken conclusions. After all, if a doctor checks someone’s temperature with the wrong tool, they may not make the proper diagnosis or propose the right treatment. Below are areas that must be considered when thinking about the impact of the pandemic on Ireland. The vulnerable At the onset of the pandemic, particularly during the initial lockdown, there was a great emphasis on the sentiment that “we are all in this together”. However, over the last 12 months, this has ceased to be the case. Instead, the pandemic had a greater impact on those already vulnerable, while others benefitted. Social inequalities The impact of the pandemic is very different to that of the financial crisis of a decade ago. But one area of similarity is that the burden of impact has fallen more acutely on the most economically disadvantaged in society. The health outcomes mimic the economic ones, with people in disadvantaged areas more likely to contract COVID-19 or suffer job loss or severe disruption. The disease itself has disproportionally affected the poorest people in our societies. In Ireland, those considered very disadvantaged are almost 50% more likely than the average citizen to contract the virus, while the most affluent are 30% less likely to contract the virus. Geographical inequalities Residents of Irish cities are 32% more likely to contract COVID-19. This can be explained by higher population densities, increased levels of social interaction, and the prevalence of younger, more mobile communities. This presents significant difficulties for decision-makers. Public health regulations need to be clear and simple to follow, but a centralised approach can sometimes be perceived as unfair and excessive for areas with lower incidence rates. The future will be shaped by diversity – of working patterns, of place, and of individuals. Technology will open new possibilities for towns and rural economies, and cities will become more time fluid with a greater emphasis on entertainment and socialising and less on routine and homogeneity. Sectoral inequalities Economic commentary and policy formation tends to focus on the exporting industries that are key to driving growth. But the pandemic has shone a light on the industries that form the backbone of the labour market: our public services and retail, leisure and entertainment industries. While public services have been among the least disrupted sectors, the accommodation, retail and entertainment sectors have endured a very difficult year. Lower paid jobs have been the most disrupted by COVID-19. The pandemic impacted nearly 90% of jobs in the hospitality sector at some point in 2020. Workers in that sector already had the lowest weekly earnings pre-COVID, at around €376 per week. Financial inequalities Unlike during the last major global recession, the main drivers of wealth – namely, stock prices and housing – have held up very well. The stock market performance reflects the acceleration of digital business models and the success of businesses in sectors such as information and communications technology and healthcare. As a result, COVID-19 has exacerbated the mismatch between the labour market and the stock market. In 2020, stocks increased by 15%, while the number of people employed decreased by 18% (excluding those temporarily supported by the Government). The result is increased financial inequalities. The pandemic is benefitting the few who have financial assets while disadvantaging the many who are struggling to keep or find a job. Those who have been able to work from home also managed to save more money than ever in 2020. The Central Bank of Ireland reports that Irish households saved over €14 billion in the year to December 2020, with total Irish household deposits reaching a record €124.5 billion at the end of the year. This contrast in wealth and labour market outcomes is just another example of disruption causing division and creating a disconnect between winners and losers. International inequalities Interestingly, more equal societies appear to be doing better in their fight against COVID-19. This may be linked to a greater willingness to invest in public health infrastructure as well as a commitment to delivering better living conditions for disadvantaged people. A fairer society is a goal sought by almost every economy in the world. However, the rewards for achieving such a goal have often been the subject of heated debate. Does a greater redistribution of wealth curtail an economy’s ability to grow or enhance it? Perhaps the impact of the pandemic will provide another reason, if one was needed, to strive for a fairer society. Yannick Cabrol is EY-DKM Economic Advisory Services Assistant Director in EY. Simon MacAllister is Strategy and Transactions Partner and Head of Valuation, Modelling and Economics in EY.

Getting your business off the ground may have taken everything you had, but taking it to the next level brings a whole new set of challenges. Hugh Campbell and Shane Kerins recommend taking five specific steps to help you expand. The reality is that scaling up your business will require a different skillset to the one you employed to get it off the ground. You now need to manage both growth and risk. In practice, that means planning ahead so that the business has sufficient resources to service the needs of its customers and staff. It also means ensuring that those resources are managed in the best way possible. Managing expansion Scaling a business is synonymous with growing your team. Finding the best staff to help propel your growth is one of the most important steps. But equally important is considering how best to motivate your staff to be their most productive and introduce measures to avoid losing them to competitors. What motivates one person may not be aligned with somebody else’s expectations. This can be relevant if you begin expanding internationally and hire talent overseas. Tax-efficient bespoke incentivisation schemes take time and effort to design. However, it should help ensure that your employees are enfranchised and motivated to achieve your growth targets. Diversify the business You must not become dependent on a single large customer for much of your business’s revenues. As your business grows, keep a very close eye on the proportion of revenues you get from each of your customers. Don’t be tempted to neglect efforts to diversify the customer base when you’re doing particularly well on one account. It may even be worth appointing an account manager to handle such a customer, freeing up your time to develop new business. Test the risk in your business’s growth As your customer base grows, you need to be certain that your operating model is appropriate for your business. Do you have the resources necessary to cope with the projected growth? Do you have the financial foundations needed to support the anticipated growth? Crucially, cash flow management is critical to bridge the period between investment in product development and ultimately generating revenue from product sales. By routinely stress-testing your business, you can confront these challenges before they become pressing. You need to assess the impact of business growth on the resources available, including people, space and finance. It is crucial that your cash flow forecasts accurately project your likely future fundraising requirements. Manage cultural change Entrepreneurs often find it difficult to let go, but recognising your limitations is an important part of achieving business growth. For one thing, there are only so many issues you can attend to personally each day. In addition, growing a business requires new skills that entrepreneurs often have to learn. It may be more efficient to find others who specialise in these areas to re-balance the workload. It’s equally important to learn to delegate to the right people at the right time and help your staff grow along with the organisation. Use management information wisely The data your business generates on a day-to-day basis can help inform many of the decisions outlined above. However, unless you understand the data and how to interrogate it, and act quickly on the insights that timely information can provide, you will be operating on intuition. Often, entrepreneurs talk about following their gut instincts, but the truth is that data will help you make much better long-term strategic decisions. Hugh Campbell is a Director in PwC Entrepreneurial and Private Business Practice. Shane Kerins is a Senior Manager in PwC Entrepreneurial and Private Business Practice.

As we emerge from the pandemic, our focus once again turns to saving our planet. One way to encourage sustainability in organisations is through wellbeing challenges. Anna O’Flanagan explains how. How is your team doing right now? The teams I have spoken with recently seem to be worried about everything, from their own health to the overall wellbeing of our planet. This is all very normal for the times we are in. Many teams have set up fitness or health and wellbeing challenges, and these have proved highly successful in bonding the team while also promoting physical and mental health. What if there was a way to develop this team wellness theme further while also benefiting the environment? A team sustainability challenge that combines these complementary goals could fortify your team and give them a sense of empowerment because they are taking control of their mind, body and environment. Goal of sustainability Sustainability aims to promote an environment where nature and humans can exist in harmony, as set out in the UN Sustainable Development Goals. This focuses not only on the environment but also on poverty, health, education and housing (and more). Therefore, leaders should take the opportunity to bring the team together (online or in offices as they begin to open) to brainstorm ways to incorporate sustainable practices (personal and environmental) into their everyday lives as part of a challenge. Here are some task ideas: Plan and encourage employees to attend sustainability events and courses; Cycle to work or to run your errands. It addresses a possible fitness goal while keeping one less car on the road; Make a bird feeder for an outdoor space; Learn how to compost; Plan your meals to reduce food waste; Use a reusable coffee cup; Plant a tree in your garden; or Volunteer in your community. Once you agree on your priorities as a team, you can then assign points to each activity, give it some timelines, and off you go. Incentives and prizes are always good motivators, so ensure that they are valued by your employees while also maintaining the organisation’s sustainability goals. This type of challenge will not only give the team a sense of working towards a common purpose, it can also release them from the feeling of powerlessness in the face of climate change and COVID-19 and create sustainable practices in their personal and professional lives. And, it will transport them from their (ever-decreasing) spaces to feel part of something bigger, more communal, and that affects change. Anna O’Flanagan is the Founder of Red Squirrel.

As companies continue to grapple with customs requirements in the aftermath of Brexit, Brian McNamara outlines the steps CFOs can take to ensure their company remains customs compliant. The last six months have seen a fundamental shift in the trading environment for Irish businesses dealing with the UK. On a macro level, we have thankfully avoided any significant disruption to supply chains. But at a company-specific level, many CFOs are struggling with hastily put together customs solutions and supply chain workarounds. Much of the focus since 1 January has been on keeping goods moving and minimising duty. While this is understandable, the re-introduction of customs on trade between Ireland and Great Britain has significantly increased the level of compliance risk for many businesses. CFOs need to get comfortable with the requirement for accurate company customs data and complete documentation. The challenge of staying customs compliant Crucially, the responsibility for customs compliance falls solely on the trader. While you may outsource the filing of customs declarations to a third party, your company is 100% liable for the accuracy of the declarations. Inaccurate declarations can result in interest and penalties. Several factors have emerged over the past six months, which have made it more challenging for businesses to stay compliant: A lack of knowledge on customs matters in the business, increasing the likelihood of errors; Multiple agents filing declarations on behalf of a company, making it harder to get a clear view of the numbers; Under-capacity and a lack of experience within freight companies filing customs declarations, increasing the risk of inaccurate declarations; and Insufficient information in customs reports from the Revenue Commissioners, making it very difficult to account for Postponed Import VAT accurately. It should be remembered that getting a Green Routing on a customs declaration does not necessarily mean it is correct. Data errors and under-declarations can be repeated without being picked up in a customs audit for months or even years. With back duties, fines and penalties, customs errors could present a severe problem for a business. Measures you can take to minimise the compliance risk in your business Raise awareness across the business of the importance of being customs compliant: ensure that colleagues outside the finance department are fully aware of the potential cost of compliance issues. Given the implications of non-compliance, customs declarations should be treated with the same level of respect as other tax returns. Take ownership of your customs declarations: have complete visibility of the customs declarations being filed in your company’s name; request details of company declarations from whoever is filing them and carry out regular spot checks for accuracy. Do not claim preferential rates unless you have the proper documents to prove you are entitled to them: the EU/UK Trade Agreement allows for duty-free access on certain goods moving between the parties. However, it should be remembered that preferential import duty rates are not an automatic entitlement and can only be claimed on UK origin products. If in doubt, don’t claim. Claims for preferential duty rates can always be made retrospectively. Ensure that you properly account for import VAT: postponed Accounting for Import VAT can provide a significant cash-flow benefit for importers, but the Revenue Commissioners can exclude a company from availing of it if they are not accounting for it correctly. All import VAT postponed in a period must be accounted for in a company’s VAT return for that period. Don’t delay: if you have concerns about your customs exposure, don’t wait to address them. The longer errors or under-declarations of duties persist, the bigger the potential problem. While the past six months have been a steep learning curve for many businesses, it isn’t too late to get on top of trading in a customs environment. Aligning all departments with an improved customs compliance approach will also significantly improve the chances of your business remaining customs compliant. Brian McNamara FCA is Managing Director of SwiftFile, a full-service customs clearance business.

In a hybrid world, it can be challenging to spot conflicts early. If leaders take certain steps, however, they can resolve existing conflicts efficiently while empowering colleagues to resolve disagreements in the future. Louisa Meehan explains. Have you noticed an increased unease with working virtually all the time? Even in the best of times – when we can sit in the same room, greet each other normally, and hear what is being said while observing the body language used – we are still imperfect communicators. Miscommunication is one of the primary root causes of conflict in the workplace. It occurs for various reasons, including different cultures, language, not listening, distractions, etc. If we can have communication issues even in the ‘best’ setting, it is no wonder that conflict can arise in a hybrid world, where we rely on technology to assist in our communications. When I work with clients through mediation, we always discuss perception. If you and I have an interaction, my perception is my reality. However, you could have a different perception of the same interaction, and that is your reality. So, there is no one reality; how we perceive the past makes it so. And different perceptions can lead to conflict. The question, therefore, is: how can we resolve conflict? The answer starts long before the conflict exists, with leaders fostering a culture where trust and open communication are encouraged. The ideal way for any conflict to be resolved is for the two individuals who disagree to feel capable of discussing it directly with each other. This may sound simplistic, but consider the last time you resolved a disagreement with someone you care about; how did you do it? You likely discussed it with them at some point and came to an agreement about how to move forward. There are, of course, some situations we avoid and sweep under the carpet. That’s okay if it’s a conscious decision and something you are happy to let go. The difficulty occurs when you don’t address the issue and you don’t let go. Then, it can fester and grow into a much more significant conflict. As a leader, it takes skill to know when to step in and help resolve a situation. Sometimes a team member will tell you that they are having a disagreement. This often happens at a point of escalation; they no longer feel that they can address it themselves. However, there were likely early signs of the conflict in the form of behaviour change. In a hybrid world, it can be more challenging to spot conflicts early. You can mitigate this by having regular check-ins with all team members to see how they are doing and whether you can help. I recommend doing this at least once a week. Through this habit, you should be able to identify problems early. The steps towards conflict resolution, in person and in a hybrid world, are as follows: Encourage direct conversation between the parties. Support a resolution as their line manager, if possible. Engage an external independent person, such as a qualified meditator, to support resolution. Potentially engage with formal internal procedures if resolution cannot be found. However, this formal option has many challenges and should be a last resort. Louisa Meehan is an HR expert and workplace mediator, and founder of Woodview HRM.