Having read the 1,246-page Trade and Cooperation Agreement, which was agreed to “in principle” by the EU and UK on Christmas Eve, Cróna Clohisey shares her thoughts on the critical elements causing concern and highlights areas that warrant further work. In recent weeks, there has been as much discussion about what the Trade and Cooperation Agreement (TCA) reached between the EU and UK on Christmas Eve doesn’t cover as what it does. The deal, spanning some 1,246 pages, threw up some surprises and certainly left a lot for discussion between the two sides in the months ahead. The main areas covered in the document include trade in goods and certain services, energy, aviation and road transport, fisheries, social security coordination, law enforcement, digital trade and intellectual property. Certain big-ticket items, including decisions relating to equivalence for financial services, the adequacy of the UK’s data protection regime, or an assessment of the UK’s sanitary and phytosanitary regime were excluded, however. These three areas, in particular, are unilateral decisions of the EU and were never subject to negotiation. The TCA does not govern trade in goods between Northern Ireland and the EU where the Protocol on Ireland and Northern Ireland will apply, bringing a whole other set of rules – not least in customs and VAT. Implementing, applying, and interpreting the TCA falls to the newly created Partnership Council. This political body will be co-chaired by a European Commission member and a UK government minister, and decisions will be made by mutual consent. Several specialised committees, including a trade partnership committee, will assist the Partnership Council. Therefore, it seems that negotiations between the EU and the UK on their future relationship are set to continue long into the future.  In this article, I will look at the TCA elements that are causing concern or require further work. Trade in goods and customs The real test for cross-border trade between the UK and EU is really just beginning, given that traffic at ports and borders is generally quieter in the weeks after Christmas. Still, problems with paperwork (which could never be removed by a free-trade agreement), health checks and systems were reported by many companies in the first few weeks of the year. We have heard reports of large retailers reporting shortages on their shelves with retailers in Northern Ireland significantly affected given the customs declarations required for goods brought into Northern Ireland from Great Britain – a requirement that seems to have taken some by surprise.   The TCA’s chapter on rules of origin is particularly cumbersome and has already hampered, and is expected to continue to hamper, existing supply chains. The ‘zero tariffs, zero quotas’ headline celebrating free trade is not all it seems, particularly when only eligible goods qualify for this approach. Rules of origin determine a product’s economic nationality and where products ‘originate’ is the fundamental basis for determining if tariffs apply. The TCA says that for products to benefit from zero tariffs and zero quotas, goods must be wholly obtained from, or manufactured, in the EU or UK or be substantially transformed or processed in the EU or UK in line with the specific origin rules that apply to the product being exported. Minor handling, unpacking and repacking won’t qualify as sufficiently processed. There could be issues for goods not wholly grown, farmed, fished or mined in either the UK or EU.  The amount of non-originating materials (i.e. materials not originating in either the EU or UK) that a product can have in order to still benefit from the TCA differs depending on the product. The annexes to the TCA set out the product-specific rules, and you will need to identify the commodity code as a starting point. Some products allow a maximum level of non-originating content (e.g. 50% of the ex-works selling price), but again this varies from product to product. If, for example, products are processed in the UK, the TCA states that EU origin materials and processing can be counted when considering whether UK exports to the EU meet rules of origin requirements. There is a qualifying production level, for example, called ‘cumulation’. Another nuance is that some rules of origin require that non-originating inputs used in the production of a good must have a different tariff heading, while some rules require a specific operation to take place in the UK for the goods to be classed as being of UK origin. For certain chemicals, for example, a chemical reaction must occur in the UK. It’s also important to remember that when goods are exported from a customs territory, origin status is lost (preferential origin status can only apply once). Take leather shoes originating in Spain as an example. When the shoes move from Spain to Great Britain and are then shipped to Ireland, they lose their EU preferential origin status when they leave Great Britain. Because they haven’t been processed or altered in Great Britain, they don’t have UK origin. Therefore, unless the goods move under a special and complicated customs procedure, duties arise on the goods entering Ireland. The now infamous case of Marks & Spencer’s Percy Pig confectionery is an example of this issue. These issues add to supply chain headaches and give rise to hidden costs. The rules are undoubtedly complex and don’t suit the UK’s significant role as a distribution hub. Business travel Free movement of people between the EU and UK ended on 1 January 2021. Of course, Irish and UK citizens are still free to live, travel and work in either country under the rules of the Common Travel Area (CTA). Beyond this category of people, immigration requirements – including securing permission to work and restrictions on the activities that can be performed as business travellers – are now a key consideration for UK nationals moving throughout the rest of the EU, including UK citizens residing in Ireland. Similar policies are in place for EU nationals seeking to travel to, and work in, the UK. The CTA allows short-term business visitors to enter either jurisdiction visa-free for 90 days in any given six-month period, but there are restrictions on the activities that can be performed. Activities such as meetings, conferences, trade exhibitions, and consultations are allowed. However, anything that involves selling goods or services directly to the public requires a work visa. The specific business situations where a visa is required are set out in the annexes to the TCA. The environment In a first for the EU, the fight against climate change has been included as an “essential element” in a bilateral agreement with a third country. This effectively means that if the EU or the UK were to withdraw from the Paris Agreement or take measures defeating its purpose, the other side would have the right to suspend or even terminate all or part of the TCA. The TCA paves the way for a joint framework for cooperation on renewable energy and other sustainable practices, as well as the creation of a new model for energy trading. However, it allows both sides to set their own climate and environmental policies in areas such as carbon emissions/carbon pricing, air quality, and biodiversity conservation. Divergence from respective environmental and climate laws will be monitored, but this area is not subject to the TCA’s main dispute resolution mechanism. It will instead be governed by a ‘Panel of Experts’ procedure. Time will tell how effective this will be. Data transfers Many businesses rely on the ability to transfer personal data about their customers or employees to offer goods and services across borders. A company based in Belfast, for example, might outsource its payroll processing to a company based in Galway. In this case, any restriction on this data’s ability to flow freely would act as a trade barrier. The EU and UK haven’t concluded a deal yet to allow data to continue to flow freely across borders, but the EU has committed to a decision on the adequacy of the UK’s system (UK GDPR) by 30 June 2021. Until then, the UK will be treated as if it is still part of the EU on data protection grounds, and data can continue to flow freely between jurisdictions. If the EU doesn’t reach an adequacy agreement (although reports suggest that a deal is close), provisions such as standard contractual clauses may be needed in future transfers of data between the UK and EU. Financial services Currently, the UK has identical rules to the EU in terms of the regulation of financial services. Supplementary documentation published with the TCA states that the UK Treasury and European Commission aim to sign a cooperation agreement covering financial services regulation by March 2021. The EU has already deemed the UK equivalent for a time-limited basis in clearing and transaction settlement, while the UK has provided the EU with specific findings that would enable EU member states to conduct such business in the UK. Many other areas of the TCA will be digested and interpreted in the weeks and months ahead. Trade deals are predominantly about trade. Only time will tell if they go far enough in other areas such as environment, security and intelligence, or healthcare, for example. Let’s hope that in the long run, a deal is better than no-deal. POINT OF VIEW:  Barry Cullen, Silver Hill Duck Silver Hill Duck is a perfect example of a cross-border business and the various challenges posed by the new trading relationship between the EU and the UK. Silver Hill Duck is a duck manufacturing company based in Emyvale, Co. Monaghan, with operations in Northern Ireland and the Republic of Ireland. The company controls all aspects of the breeding, farming, production and packaging of its famous Silver Hill Duck breed. Established in 1962, it has supplied the best Chinese restaurants in the UK for the past 40 years. During this time, the company has expanded its customer base to include retail and foodservice, including a range of raw and cooked products. Barry Cullen, Head of Sales at Silver Hill Duck and President of the Irish Exporters Association, shares the background to his company’s commercial decisions. “The UK was historically our largest market, and we took some steps before 1 January 2021 to avoid the expected delays that were predicted at the ports. This involved setting up a Northern Ireland company with the appropriate VAT and EORI numbers, and a customs clearance agent to handle the paperwork. Silver Hill also had to source a warehousing partner in the UK that could hold frozen stock for our UK customers. Trading with our fresh retail customers was suspended for the first few weeks in January due to the uncertainty around delays at ports and the documentation required. The first few weeks of 2021 has shown that this was a prudent decision, as it has become apparent that the UK is nowhere near ready for the new trading requirements. There are major delays at Holyhead with hauliers unable to access the Irish market due to incorrect paperwork and a COVID-19 testing regime that has exacerbated the problem. It’s a case of learning on the job as our sales team feels its way through the many documentation requirements to send a pallet of product to the UK. For example, despite having done due diligence for over three years, we were not aware of the REX system and the need to be registered to self-certify our goods. Even though there are no actual tariffs, the customs clearance costs are high at approximately €120 per order, regardless of size, if you act as exporter and importer for the UK customer. This will make much retail business commercially unviable and will have a significant knock-on effect on small- and medium-sized enterprises in the coming months. There will undoubtedly be a settling-in period for the new trading requirements, but the cost for traders, hauliers and suppliers is as yet uncertain.”   Cróna Clohisey is Public Policy Lead at Chartered Accountants Ireland.

Do ultra-low interest rates justify ultra-high stock market values? Cormac Lucey shares his thoughts as US tech stocks continue their astonishing rise. Are we experiencing a stock market bubble? The question arises because of the startling rebound in global stock market indices since last March and, in particular, because of the astonishing rise in value experienced by US tech companies. Since their March lows, the Nasdaq has nearly doubled, the NYSE FANG+ Index has risen by 150%, and Tesla has risen to an astounding 12.2 times its starting position. The other factor that suggests we are in the middle of an equity bubble is valuations. The best measure of underlying long-term valuation is the Cyclically Adjusted Price Earnings (CAPE) ratio. It overcomes the weakness of the traditional Price Earnings (PE) ratio, that cyclically inflated earnings can make a cyclically inflated price look reasonable, by replacing one year’s earnings with average earnings over the previous 10 years, adjusted for inflation. The US CAPE is currently 35. That level has only ever been seen before as the Nasdaq bubble peaked in 2000. After that, the US tech index fell by three quarters before eventually bottoming in early 2002. On one hand, Jeremy Grantham, founder of the GMO fund management group in Boston, reckons that US stock markets are in the final stages of a speculative bubble worthy of comparison with the dot-com bubble, the Great Crash of 1929, and the South Sea Bubble. On the other, Martin Wolf, a Financial Times columnist, doesn’t believe that we are currently experiencing a stock market bubble. He contends that equity prospects depend on the future course of corporate earnings and interest rates. He concludes that, provided the former are strong and the latter ultra-low, stock prices look reasonable. There’s the rub. Do ultra-low interest rates justify ultra-high stock market values? And how long will interest rates remain ultra-low? On the face of it, the value of equity assets should rise as interest rates fall. Interest rates are a vital component of valuation models in general, and the Capital Asset Pricing Model in particular. When interest rates fall, the discount rate used in these models decreases and the price of the equity asset should appreciate, assuming all other things remain equal. Today’s interest rate cuts by central banks may therefore be used to justify higher equity prices and CAPE ratios. But John Hussman, a fund manager and former professor of finance, argues that when people say extreme stock market valuations are “justified” by interest rates, they’re actually saying that it’s “reasonable” for investors to price the stock market for long-term returns of nearly zero because bonds are also priced for long-term returns of nearly zero. “What’s actually happening today,” he argues, “is that investors are so uncomfortable with near-zero bond market valuations that they’ve priced nearly every other asset class at levels that can be expected to produce near-zero, or negative, 10-12 year returns as well.” I agree with Hussman: US stocks are in a bubble. While equities may appear reasonably valued relative to bonds, in absolute terms their ultra-high valuations today suggest ultra-low investment returns over the coming 10-12 years for those who buy them now and hold onto them for several years. However, just because stocks are in a bubble doesn’t mean that they are about to fall. As the then-Taoiseach, Bertie Ahern, said in 2006: the boom can get boomier. What should investors do? First, expect significant growth in short-term stock market volatility. The recent one-day 25% drop in the price of Bitcoin may be a straw in the wind. Second, the final market top may coincide with central banks allowing long-term interest rates to rise in the face of rising inflation expectations, perhaps in 2022. Until then, enjoy the boom getting boomier. Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland.

With international tax reform progressing at unprecedented speed, Susan Kilty explains why Irish businesses must continue to participate actively in the discussion. With all the global uncertainty that Ireland is facing due to COVID-19 and Brexit, there is a risk that the OECD global tax reforms – the other major threat to Irish business and the economy – will be pushed further down the corporate agenda. But to do so would be very risky. Ireland must engage with this process now, at both the political and corporate level. The world of international tax is in a state of extreme flux as governments grapple with changes in the way multinationals do business. It is worth reiterating that Ireland has attracted healthy levels of foreign direct investment (FDI) over the past 30 years, and the multinational community has contributed significantly to our economic success. According to the OECD, Ireland received more foreign direct investment in the first half of this year than any other country. Along with Ireland’s near-iconic 12.5% tax rate, a crucial element in our continuing ability to attract international investment is the stability and transparency of the corporate tax regime here. Investors from abroad who establish activities in Ireland tend to be quite sensitive to changes in the taxation system. They like certainty and stability in a tax code, which is why Ireland presents such an attractive proposition. Ireland cannot afford to lose FDI as a result of turbulence in the global tax landscape at this time. As corporation tax accounts for almost 18% of Ireland’s total tax take, any change to the regime threatens to seriously undermine the attractiveness of our FDI model and negatively impact our revenue-raising ability. The crux of the matter is that we, and many other countries, apply 20th century tax systems to 21st century e-commerce business models. Businesses have an increasingly digital presence, and many no longer trade out of brick and mortar locations. This is not limited to so-called technology companies, but can be seen across industries and in businesses of all sizes. Businesses sell freely across borders without ever needing to set up operations abroad. This new digital way of trading is not always captured in our analogue tax rules, and the rules must be realigned with the reality of modern e-commerce. However, to tax a multinational business, you need a multinational set of rules. This is where the OECD comes in, but the uncertain shape that the new rules might take brings more uncertainty for businesses at a time when it is least needed. Many clients cite the changing international tax environment as one of the top threats to potential revenue growth. And although countries now face enormous bills for COVID-19, one sure thing is that BEPS, OECD and tax reform will not go away. International corporate tax reform is happening, and it will impact many businesses and our economy. Companies need to stay on top of these changes and prioritise the issues that will affect them. OECD proposals The OECD proposals offer a two-pillar solution: one pillar to re-allocate taxing rights and ensure that profits are recorded where sales take place, and a second pillar to ensure that a minimum tax rate is paid. At the time of writing, a public consultation is open for stakeholders to share their views with the OECD on the proposals that were recently summarised by way of two “blueprint” documents, one for each pillar. Pillar One seeks to give market jurisdictions increased taxing rights (and, therefore, increased taxable income and revenues). It aims to attribute a portion of the profits of certain multinational groups to the jurisdictions in which their customers are based. It does this by introducing a new formulaic allocation mechanism for profits while ensuring that limited risk distributors take a fair share of profits. Several questions remain as to how the Pillar One proposals, which constitute a significant change from the current rules, will be applied. Pillar Two, on the other hand, seeks to impose a floor for minimum tax rates across the globe. This proposal is very complicated. It is much more than a case of setting a minimum rate of tax. It is made up partially of a system that requires shareholders of companies that pay low or no tax to “tax back” the profits to ensure that they are subject to a minimum rate. At the same time, rules will apply to ensure that payments made to related parties in low-tax-paying or no-tax-paying countries are subject to a withholding tax. Finally, it can alter the application of double tax treaty relief for companies in low-tax-paying or no-tax-paying countries. Agreeing on the application and implementation of this pillar will be incredibly difficult from a global consensus point of view. Several supposed “safety nets” in Pillar Two are also likely to be of limited application. For example, assuming that the minimum tax rate is set at 12.5%, this does not mean that businesses subject to tax in Ireland will escape further tax. Similarly, assuming that the US GILTI (global intangible low-taxed income) rules are grandfathered in the OECD’s proposal, this does not mean that the US GILTI tax applies as a tax-in-kind tax for Pillar Two purposes. Pillar Two poses a significant threat to Ireland, as it reduces the competitiveness of our 12.5% rate to attract FDI and, coupled with the Pillar One profit re-allocations, could reduce our corporate tax take. The OECD estimates that once one or both of the pillars are introduced, companies will pay more tax overall at a global level, but where this tax falls is up for negotiation – and this is why early engagement by all stakeholders is critical. While the new proposals will undoubtedly have an impact, it is not certain that Ireland’s corporation tax receipts will fall off a cliff. Ireland has already gained significantly in terms of investment from the first phase of OECD tax reform, and this has helped to drive a significant increase in corporate tax revenue. But the risks must nevertheless be addressed. There is, of course, the risk that the redistribution of tax under the rules directly under Pillar One and indirectly via Pillar Two will impact our corporate tax take. But even if the rules have no impact on a company’s tax bill, they could still impose a considerable burden from an administrative perspective, and the complexity of the rules cannot be overestimated. At a time when businesses are grappling with other tax changes, led by the EU and domestic policy changes, this would be a substantial additional burden on the business community. The OECD is progressing the rules at unprecedented speed in terms of international tax reform. The momentum behind the process comes from a political desire for a fair tax system that works for modern business. However, does this rapidity risk the international political process marching ahead of the technical tax work? This is where Ireland, both government and corporate, needs to play a vital role. While the consultation period on both pillars is open, the focus for stakeholders should be on consulting with the OECD on the technical elements of its plan. Considering the OECD’s stated objective to have a political consensus by mid-2021, this could be one of the last opportunities for stakeholders to have a say in writing the rules. The interplay between the OECD and the US Treasury cannot be ignored when considering the OECD’s ability to get the proposals over the line. The US Treasury decided to step away from the consultation process with the OECD for a period in mid-2020. This, of course, raised questions around whether the OECD proposals could generate a solution that countries would be willing to implement. Added to this, the OECD has always positioned Pillar One and Pillar Two as an overall package of measures and has stressed that one pillar would not be able to move forward without the other. The “nothing is decided until everything is decided” basis of moving forward is a risky move, but the OECD recently rowed back on this stance. If the OECD fails to reach a political consensus by 2021, we could very well see the EU act ‘en bloc’ to introduce a tax on companies with “digital” activities. This could result in differing rules within, and outside of, the EU. It would also increase global trade tensions, all of which would not be good for our competitiveness. As a small open economy, Ireland will always be susceptible to any barriers to global trade. A multilateral deal brokered by the OECD therefore remains the best option – the last thing we want to see is the EU accelerating its own tax reform or, worse still, countries taking unilateral action. For the Irish Government, providing certainty where possible about the future direction of tax is critical. Where we have a lead is in how we provide that stability and guidance where we can. The upcoming Corporate Tax Roadmap from the Department of Finance will be an opportunity to give assurances in these uncertain times. Next steps for business The public consultation will be critical for businesses to have their say in shaping the rules. Ireland Inc. must continue to engage constructively with the OECD to try to shape the outcome so that we maintain a corporate tax system that is fit for purpose, is at the forefront of global standards, and works for businesses located here. Doing so would ensure that we articulate the position of small open economies like our own. Each impacted business must take the opportunity to comment on the proposals, as this may be the last chance to have a say. Indeed, what comes out of the consultation period may be the architecture of the rules for the future. We know that difficult decisions must be made at home and abroad in terms of the new tax landscape, and made with additional pressures we could not have foreseen 12 months ago. Although it may seem that much is out of our control, Irish businesses must continue to participate actively in the discussions and ensure that their concerns are heard. The game may be in the final quarter, but the ball is in our hands. Susan Kilty is a Partner at PwC Ireland and leads the firm’s tax practice. Point of view: Fergal O'Brien Since the start of the BEPS process in 2013, Irish business has recognised the importance of the work to our business model and the country’s future prosperity. At its core, BEPS has seen a further alignment of business substance and tax structures at a global level. This has resulted in an often under-appreciated surge in business investment, quality job creation and, ultimately, higher tax revenue for the Irish State. With its strong history as a successful location for foreign direct investment, and substance in world-class manufacturing and international services, Ireland was well-placed to benefit from the new global order. The boom in business investment, which last year reached over €3 billion every week, and increase in the corporate tax yield from €4 billion in 2013 to €11 billion in 2019, are evidence of the further embedding of business substance in the Irish economy. The current round of BEPS negotiations will have further significant implications for the Irish economy, and particularly for the rapidly growing digital economy. Ibec is working directly with the OECD to ensure that any further changes to corporation tax recognise the central role of business substance and locations of real value creation. Fergal O’Brien is Director of Policy and Public Affairs at Ibec.  Point of view: Norah Collender The OECD’s proposals to address the challenges of the digitalised economy will have a disproportionate negative impact on small, open exporter economies like Ireland. Earlier consultation papers issued by the OECD on taxing the digitalised economy suggested that smaller economies could benefit from international tax reform emanating from the OECD. However, the OECD now openly admits that bigger countries stand to benefit from its proposals more than smaller countries, and the carrot has turned into the stick in terms of what will happen if smaller countries do not support the OECD. Ireland is acutely aware of the dangers ahead if countries take unilateral action to achieve their vision of international tax reform. But that does not mean that countries like Ireland should be rushed into accepting international tax rules that fundamentally hamstring Irish taxing rights. Genuine consensus must be reached to ensure that international tax reform is sustainable in the long-term. Likewise, the new tax rules must be manageable from the multinational’s perspective and from the perspective of the tax authority tasked with administrating the rules. A rushed outcome to the important work of the OECD will make for tax laws that participating countries, tax authorities, and the all-important taxpayer may not be able to withstand in the long-term. Norah Collender is Professional Tax Leader at Chartered Accountants Ireland. Point of view: Seamus Coffey How Pillar One and Pillar Two of the OECD BEPS Project will ultimately impact Ireland is uncertain. One sure thing, however, is that there will be changes to tax payments. This will be a combination of a change in the location of where taxes are paid and perhaps also an increase in tax payments in some instances. But there will likely be both winners and losers. From an Irish perspective, there might have been some comfort in that the loser could have been the residual claimant – the country at the end of the chain that gets to claim taxing rights on the profits left after other countries have made their claim. As US companies are the largest source of Irish corporation tax revenue, it might have been felt that most of the losses would fall on the US. However, significant amounts of intellectual property have been on-shored here. Ireland, therefore, has become a residual claimant for the taxing rights to some of the profits of these companies. At present, Ireland is not collecting significant taxes from these profits as capital allowances are claimed. If BEPS results in a significant reallocation of these profits, we might never collect much tax on them. Seamus Coffey is a lecturer in the Department of Economics in University College Cork and former Chair of the Irish Fiscal Advisory Council.

Torunn Dahl and Glenn Gillard share the secrets to purposeful inclusion, which in these challenging times is more important than ever. Good leadership has never been easy. If it were, we would all be good leaders most of the time and organisations would not need to spend millions each year developing leadership skills. In reality, leadership is always a delicate balance of making the best decisions possible given the information to hand while taking into account the context, the strategic imperatives of the organisation, and the stakeholders involved in or impacted by the decisions being made. Operating in an environment of enormous unpredictability, wrought by a pandemic, makes this challenging task even harder. Never before has that well-worn phrase from financial services advertisements, ‘past performance does not guarantee future success’, been truer. There is no quick guide to leadership for these times. We can choose many possible routes to survive or thrive in the period ahead, as we learn to operate in an environment of ongoing uncertainty and volatility. This article will outline some steps you can take to ensure the route you choose is one of inclusive leadership, to the benefit of all your key stakeholders. A new social contract In the August issue of Accountancy Ireland, our colleagues outlined how people at the start of their accountancy careers seek a broad sense of purpose in the work they do. Similarly, in society, we have seen a significant change in people’s awareness of – and lack of tolerance for – the inequalities that exist in society. There is an opportunity to reset the path we are on as a society, to reduce systemic inequalities and become more purpose-led. Last year, 200 global CEOs, including Punit Renjen of Deloitte, signed a statement of purpose. It confirmed that a corporation’s purpose is to serve all its stakeholders – employees, clients and society. The COVID-19 pandemic and the Black Lives Matter movement have reinforced the message from the general public that business cannot be a neutral bystander. Business should, and can, be at the heart of this new social contract, and business leaders need to embrace this change. This reset to how society operates and meets the expectations of its citizens will require different types of leaders to navigate and drive the changes. In addition to the critical skills associated with good leaders such as strategic thinking, commercial acumen, decisiveness and effective communication, leaders will need to understand how to be genuinely inclusive in a broad sense. They will need to understand how a change to the social contract could impact their talent pipelines, customer relationships and supply chains. How will the decisions they make today impact their ability to retain customers, attract staff, reduce their carbon impact and sustain their business viability into the future? A model of inclusive leadership provides a framework for leaders to think about the thought process and the actions they need to consider to navigate the difficult decisions they now face. In the section below, we outline the six signature traits of an inclusive leader, as identified by Deloitte, and some suggested practical steps a leader can take to operate inclusively. The six signature traits Inclusive leadership is about treating people fairly and leveraging the thinking of diverse groups of people. While leaders must treat their people fairly, a genuinely inclusive leader in a new social contract will seek to ensure that people outside the organisation are also treated fairly. They will do this by providing opportunities for them to join the organisation or sell their goods/services to the organisation on fair terms. The examples below focus on what an inclusive leader can do inside their organisation. 1. Commitment. Highly inclusive leaders are committed to the inclusion agenda because these objectives align with their personal value systems and because they believe in the business case and moral case for inclusion. Practical steps: Put inclusion on the agenda at your meetings and hold people to account on actions agreed. Set targets, and encourage debate and discussion around what the right targets are and how to meet them. Attend diversity and inclusion events within and outside your organisation. Share new knowledge with your teams and outline the actions you will take. Reference an inclusion story or moment as part of every presentation you make. 2. Courage. Highly inclusive leaders speak up and challenge the status quo. They don’t walk past inequality; they challenge it. They are willing to admit to their own vulnerabilities and remain humble about their strengths and weaknesses. Practical steps: Speak up and challenge any inappropriate behaviour you see or hear. Others may feel equally uncomfortable and are likely watching to see whether you condone (through silence) or challenge the behaviour. Apply a diversity lens to everything you do – use a checklist if necessary as a prompt. Think about your next event or meeting. Who is talking? What images are being presented? Which metrics are being used? Do they all support an inclusive environment? 3. Cognisance. Highly inclusive leaders are aware that they, and everyone else, have biases that impact their judgement. They seek to ensure that processes are put in place to manage and overcome these blind spots and to create fairer opportunities for all. Practical steps: Seek to identify your own biases. Take the Harvard Implicit Association Test or pay attention to who you naturally gravitate towards and with whom you feel less comfortable. Pay attention to your inner voice and initial judgements and ask yourself whether biases are coming into play. We all have them! Use structured processes and criteria when making decisions that relate to people (hiring, promotions or performance, for example) to ensure objective criteria are used rather than generalised impressions. 4. Curiosity. Highly inclusive leaders keep an open mind and have a desire to learn more about others. They want to understand how they view and experience the world. They also demonstrate tolerance for ambiguity and change. Practical steps: Seek out someone on your team you don’t know well or who has a different background to yours. Put in time for coffee to connect and learn more about them. They could be the perfect person for your next project or have valuable perspectives on a problem you’re grappling with. Invite different people to present to your team or organisation to broaden everyone’s perspective. Remember to suspend judgement when listening to other perspectives; seek to listen actively and understand. Acknowledge what they are saying and respect their viewpoint. 5. Cultural intelligence. Highly inclusive leaders are confident and effective in cross-cultural interactions. They may feel uncomfortable in the situation but are willing to move out of their comfort zone and focus on learning, seeking to build their cultural intelligence. Practical steps: Start by focusing on a culture or area that interests you. Search for articles and podcasts that will broaden your understanding and seek out people who can answer your questions and build on what you have learnt. Encourage people within your teams and organisation to build out their cultural intelligence, supporting mobility opportunities where relevant. 6. Collaboration. Highly inclusive leaders empower individuals to deliver their best, in addition to working across diverse groups of people to drive better solutions built from a diversity of thought. Practical steps: Let others speak first. Ensure that you have heard from everyone in the group, actively encouraging people to contribute if they haven’t already done so. Find common ground and articulate a shared purpose and objective for the group that everyone can rally around. Create physical and/or virtual opportunities for interactions that encourage sharing and collaboration. Purposeful inclusion in a pandemic The COVID-19 pandemic presents both challenges and opportunities in building an inclusive culture and following-up on commitments our businesses have made to be more inclusive. The last few months have stretched everyone and how we act as leaders, now and in the months ahead, will influence how well our organisations, our people, and we personally come through this pandemic. It may be tempting to take a short-term view and focus solely on profits and cash flow to the detriment of suppliers, employees and the local community. But those who take a longer and more inclusive view are likely to reap the rewards, as will their communities. As organisations transition to being more purpose-led than solely profit-focused, their ability to navigate the current environment inclusively to the benefit of society more broadly will be a real test of their authentic commitment to this cause. Using the traits above, we will now explore some of these challenges and opportunities. Commitment: In the short-term, it is easy to step away from the commitments we have made. Many organisations have implemented, or are looking at, measures such as reducing headcount, suspending bonuses and promotions, and deferring hiring decisions. It is important to consider these decisions in the context of inclusion and look at how these measures are implemented and affect the future shape of the organisation. During the last recession, we saw a significant reversal of some of our key diversity measures, as women stepped away from the workforce to work in the home and as many employers reverted to traditional talent pools for staff. Cognisance: Biases can quickly step back into our thinking when faced with tough decisions or working under pressure. In the working from home environment, anecdotal research already indicates biases towards female participation. As women are traditionally viewed as the primary home-maker the risk of ‘killing with kindness’ escalates as individuals make assumptions as to whether someone can handle the workload or should be given specific work because of their family situation. While having progressive policies to support people during the pandemic has been important, this must be monitored so that it does not feed through to future decisions around performance, promotion and recognition. We must recognise, and seek to work through, these potential biases. Collaboration: During this pandemic, many organisations have reported increased engagement from staff and a greater sense of belonging. However, as the lockdown measures persist and remote working is more prolonged, maintaining a sense of ‘team’ and keeping people connected becomes a more significant challenge. Through organisation-wide collaboration, new models and methods for engagement, networking and social interaction can be developed. Indeed, there is a real opportunity to break away from our default methods of corporate social interaction in Ireland, which focus heavily on the dinner and pub scene and favour those willing (and able) to socialise after hours. Capturing new ways of interacting and building them into a new, more inclusive culture is an opportunity to redefine the workplace for many that traditionally felt excluded. Courage: Undoubtedly, the forced working from home arrangement arising from the pandemic presents a real opportunity to rethink how we look at biases around presenteeism, flexible working, and the office culture, and to re-imagine fundamentals like the daily commute and international travel. While these benefits seem obvious at this point, it will require courage to stay the course and implement the necessary changes so that these benefits can be retained as we move out of the pandemic. For example, if we are to move to more hybrid models with a greater level of remote working mixed with in-office teams, maintaining the inclusiveness of a meeting for those in-office and those at home will need to be supported by real leadership. The fear that we fall back into the old ways, where if you are not in the room you are not really participating, is already being expressed by many as they assess whether they could continue to work remotely into the future. Redefined leadership The relationship between community, employees and businesses has changed, and as leaders, we will be held accountable by our people. Truly inclusive leaders will thrive in this environment and make an impact not just within their own business, but across the community. The pandemic has challenged the way we look at the world and our role within it. We now need to seize the opportunities presented, and avoid the pitfalls, to create more inclusive organisations.  Torunn Dahl is Head of Talent, Learning and Inclusion at Deloitte. Glenn Gillard is a Partner at Deloitte and member of Council at Chartered Accountants Ireland.

Rachel Hussey explains how well-defined and inclusive work allocation practices can boost your colleagues’ career potential. One of the most common and unconscious ways in which old hierarchies are preserved in professional services firms is through the allocation of work, often at the early stage of careers. A well-defined work allocation process ensures a balanced portfolio of experience for future progression. But suppose a person is consistently allocated more challenging projects involving novel issues or premium clients. In that case, their career path is likely to take quite a different course to that of a person assigned more routine tasks, which can result in tremendous and unintended damage to the career paths of individuals. Research conducted by McKinsey in the UK in 2012 across professional services firms found that a man was three times more likely to be made a partner in an accountancy firm than a woman and ten times more likely in a law firm. McKinsey made several recommendations to address the imbalance, one of which was that women have equal access to the right career development opportunities through a systematic work allocation process based on objective criteria, such as competencies or experience. Work allocation goes to the very heart of the operation of a professional services firm. Changes to work allocation practices are hard to implement, but can have a considerable impact on the progression of female talent. McKinsey conducted follow-up research in 2015 and found that work allocation was an ongoing challenge. 70% of women in both law and accounting firms said that their firm’s work allocation process was unfair, and 86% of law firms had no formal work allocation process in place. In the absence of a systematic process, work allocation is a subtle concept that can be difficult to do in a way that promotes diversity and creates a level playing field for men and women. In deciding to whom work should be allocated, partners can make assumptions about women’s desire or capacity to do certain kinds of work or transactions. The result can be to ‘kill women with kindness’ by allocating the more challenging work to men on the team so as not to put too much pressure on a woman. A woman can ultimately end up with less experience, weaker client relationships, and lower revenue – all of which are career-limiting in a professional services firm. This phenomenon is also referred to as unconscious benevolence. Research conducted by the 30% Club in Ireland across 14 of the top Irish professional services firms in December 2019 contained some fascinating findings. For example, 21% of equity partners in accountancy firms are women, and that figure is 40% at the non-equity partner level. The research found that only four of the 14 firms that participated in the research had a formal work allocation process in place. On foot of that research, the 30% Club recommends that where firms have not adopted work allocation policies, they should pilot the introduction of such policies. They should also review work allocation practices to ensure that equal opportunities to gain expertise and experience are available to all. Finally, it urges firms to ensure that family-related absence does not impact work allocation and recognise leaders who successfully manage work allocation on their teams. Across professional services firms internationally, work allocation processes are becoming more formal and technology-enabled. Many resource management consultancies provide services and systems to firms to assist in this critical aspect of a firm’s work. Formal processes can have a significant impact on the development of female talent in firms and should, therefore, be considered as part of a firm’s diversity strategy.     Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

A lot of work today simply can’t be done well without high-touch collaboration – a challenge when many people are working from home. New tools are helping, though, write Ryan Kaiser, David Schatsky and Robin Jones. The pandemic, with an impact lasting far longer than initially expected, is forcing organisations to rethink how their teams can collaborate from a distance. Some widely used digital tools make certain forms of collaboration – such as sharing and editing documents – easy. But other, critically important types of collaboration remain challenging when colleagues are not sharing physical space, or even time zones. Organisations can experiment with a newer breed of tools, some still experimental, that aim to support remote, high-touch collaboration. In view but out of sync “Did he hear what I just said?” “Was that a smirk?” “She’s looking down – is she texting?” It’s safe to assume that these questions cross the minds of many workers during days of endless video calls. The concentration required to process these virtual interactions can be taxing, leaving workers exhausted. But with so many professionals working from home due to the pandemic, it’s imperative that organisations find effective ways for remote workers to collaborate. New technologies are answering this call: from immersive environments to virtualised offices that facilitate casual interactions, organisations may soon have many more options for helping their teams collaborate effectively at a distance. Collaboration is key, but challenged by remote work Most organisations accept that effective collaboration is essential for high performance. Apple leaders considered collaboration to be so important that they designed its headquarters building to promote creativity and collaboration. Even workers’ perceptions that they are working collectively, according to a 2014 study, can enhance their performance. Thus, collaboration activities are pervasive in the modern office. Indeed, some researchers believe “collaboration is taking over the workplace”, with time spent by managers and employees in collaborative activities increasing by 50% or more in recent years. It’s no surprise that collaboration is among the soft skills that employers seek most. But with the pandemic forcing millions of people to work from home, collaboration has become more challenging. Remote working obscures body language and distorts verbal cues that can be crucial to understanding intent. Formal, scheduled video calls – or more frequent instant messages or texts – are no substitute for quick, spontaneous exchanges of information. Professionals working in sales, customer service, management, design, and other roles in which impromptu and collaborative interactions are integral to the job may be particularly challenged. Some workers feel isolated. Managers are struggling to onboard, integrate, and teach office norms to new staffers, and building and sustaining an organisation’s culture has rarely been more difficult. Even when the crisis is behind us, the need for better remote collaboration will persist. High-touch collaboration still works best in person Of course, many, even most collaborative activities don’t require face-to-face interaction. A wide range of digital communication and project management tools support sharing files, editing documents, and communicating project status. But other valuable collaborative activities – scrum meetings for coordinating software development, brainstorming sessions to generate product ideas, hallway conversations to quickly exchange useful information – have tended to rely on face-to-face interactions. We call such activities high-touch collaboration. High-touch collaboration activities are typically synchronous, spontaneous, or sensory. Synchronous means two or more people are present in the moment when the activity is conducted, allowing for a free-flowing exchange of information. Spontaneous means unscheduled, low-overhead interactions that may occur outside the confines of a formally scheduled meeting. Some of the best ideas, and even businesses, started as impromptu thoughts or interactions between colleagues. Sensory refers to the non-verbal communication or body language we unconsciously decipher when interacting with others. Arm positions, posture, and tone of voice can influence how or when others choose to engage with or respond to us. Leaders can use this simple three-S model to identify the high-touch collaboration activities in their organisation that remote working arrangements may impair. Below are some common examples. They are important in our work and the work of many of our clients – and they can be difficult to perform when collaborators are just faces on a screen. Structured, interactive sessions. Some types of workshops or labs, employing techniques such as design thinking, aim to solve complex problems or help a group achieve consensus on a designated topic. In addition to typically needing a skilled facilitator, participants often need to read the room to assess group understanding, alignment, and engagement. Example: a lab may be used to forge consensus about the vision of a new firm-wide initiative. Ideation and co-creation. Many workers need to brainstorm and exchange information spontaneously, typically in a shared space with a visual aid such as whiteboards or sticky notes. Example: co-creation may be useful for brainstorming new product features to include in future releases. Spontaneous information exchanges. Employees may need to exchange information directly outside a formally scheduled meeting – perhaps as quickly and casually as poking one’s head in an office to ask a brief question. Example: spontaneously exchanging information with colleagues can be helpful when finalising an important client presentation. Informal connections. Conversations that typically take place in the elevator, office kitchen, or other common areas can foster a sense of connection and community; walking the halls can help cultivate relationships with clients and co-workers. Informal connections tend to rely on interpreting sensory and contextual information. Example: managers may informally check in with teams during a stressful time period to gauge well-being and engagement. To bolster collaboration among remote workers, we need tools that provide better support for these kinds of activities. Collaboration tools are proliferating A new crop of digital collaboration tools has emerged in response to the needs of companies with remote workforces. Vendors launched or enhanced at least 100 digital remote collaboration products in the first eight months of 2020, compared to the 24 product introductions we tallied in the fourth quarter of 2019. Established collaboration vendors are rapidly rolling out new features in response to user requests, and some have released free versions of products in an effort to gain market share. Some of this activity involves familiar categories of collaboration tools such as video-conferencing. Other types of tools – such as digital whiteboards, virtual offices, and immersive environments – may be less familiar, but they can provide crucial support to synchronous, spontaneous, and sensory collaboration activities. We scanned the offerings of hundreds of vendors and spoke with more than a dozen of them to learn more about their capabilities. Video-conferencing. When the COVID-19 pandemic forced millions of workers to work from home, many companies responded by substantially increasing their use of video-conferencing Google, Microsoft, and Zoom have all reported a surge in usage of their platforms. Allowing colleagues, clients, and partners to see each other over video can mitigate the feeling of isolation that some remote workers feel and can build and maintain the rapport crucial for collaborative efforts. Recent innovations in this category include the use of artificial intelligence to frame a caller’s face, background obfuscation to prevent distractions, and the use of avatars. But video-conferencing has its drawbacks. Not all work interactions occur in the confines of a formal meeting. Any given video-conference likely includes at least one participant battling audio and video quality issues, including lags that can jumble non-verbal cues and distracting background noise – especially for people sharing space with partners and children. Workers also report feeling exhausted at the end of a day filled with numerous video calls due to the mental focus required to concentrate on a grid of colleagues. Ideation and whiteboarding. Because it supports problem-solving, design, and strategic planning, ideation can be a critically important collaboration activity. A classic setting features a blank whiteboard, markers, and a team with ideas to share. Vendors such as Microsoft, Miro, and Mural offer digital tools that aim to provide the benefits of in-person ideation in a remote environment. Such tools typically feature an interactive workspace designed for visually oriented ideation and problem-solving. They are best suited for co-creation and ideation activities but can also be used to facilitate labs and similar sessions. A variety of features help spur thinking. For example, users may have access to templates or frameworks tailored to a variety of meeting types such as a scrum call or a design thinking session, time-keeping features to keep a group focused, virtual sticky notes to jot down ideas, and polling to streamline the decision-making process. These tools share little contextual information about users, however, making it hard for facilitators to read a room and determine how to best engage participants. Legibility can sometimes be difficult, and employees may need to consider a touchscreen, stylus, or other peripheral to maximise their capabilities. Virtual offices. Other types of tools attempt to replicate office spaces on your computer screen. Virtual offices are intended to run continuously in the background, showing in real-time what your colleagues are doing through the medium of digital aerial views of office floor plans, avatars, or even 3D worlds. And they aim to emulate the natural, rapid types of interactions that frequently take place in a physical workplace like tapping someone’s shoulder to ask a question. These platforms display context about colleagues – are they meeting with a client right now, or are they listening to music? – and they provide multiple pathways by which co-workers can informally connect. Sample virtual office vendors include Pragli, Sococo, Virbela, and Wurkr. Virtual offices typically allow significant customisation (avatars, floor layout, branding, etc.) and integrate with a growing list of social and collaboration applications one might use throughout the workday, such as Microsoft Teams, Slack, and Spotify. These vendors also enable informal interactions through emotive digital gestures such as high-fives or dance movements, allow users to tap each other to instantly join a virtual meeting room, and offer the ability to lock spaces for more private conversations. Many also allow screen-sharing and the uploading of files. Some virtual offices currently lack the ability to integrate with common office software such as Google or Microsoft and may lack common ideation mediums such as whiteboards. Some tools use much of a laptop’s processing power when rendering a 3D office, potentially affecting other applications. Immersive environments. This is an emerging category of tools that aim to enable workers to connect, share experiences, and participate in simulated real-life scenarios using augmented or virtual reality (AR/VR) technologies. Some studies have shown that VR is a promising medium for remote collaborative work. Users experience a 3D shared environment where they can see representations of themselves and colleagues and conduct meetings. Immersive environments are best suited for interactive sessions and co-creation/ideation. The virtual environments provided by tools such as Arthur, HoloMeeting, and Spatial can range from basic rooms to non-cubical architecturally complex spaces that expand creative possibilities. Some vendors make it possible for users to take a selfie and upload and wrap the image around an avatar for a personalised, life-like presence. Combined with spatial audio and visible mouth or hand movements, these technologies can give one the impression of being in the same space as a colleague. Interacting with the environment and accessing menus using one’s hands or controllers is highly intuitive. Typical features include 2D or 3D whiteboarding options, 3D process flows, and the ability to access content from the web, including images and 3D models. While some platforms are accessible by smartphones and laptops, the full experience is typically only available with the use of an AR/VR headset – a factor that may limit adoption in the near term. Early-stage tools may suffer from distracting latency – or lags in refreshing the display – or lack integration with other applications, which limits the type of work one can do, such as co-edit a PowerPoint slide, and most have smaller capacities (usually under 20 participants) when compared to virtual offices. What to watch The descriptions above are a snapshot of a rapidly moving market. Progress in the underlying technology of AR/VR, and increasingly affordable hardware, will likely boost the appeal of immersive environments over the next couple of years, for instance. Other developments in the domain of remote collaboration are worth watching. New features. With so many workers affected by the pandemic, collaboration vendors are quickly responding to user needs and rolling out new features. For instance, Microsoft recently deployed ‘Together mode’, using AI to place meeting participants side-by-side as if they were sitting in a virtual auditorium. Other advances include attention tracking, which alerts a host if an attendee goes more than a few seconds without having an application open; intelligent capture, which can make a person’s video image transparent so users can see content being written or drawn on a whiteboard as it happens; and real-time translation. Organisations should take note of this rapid pace and consider product road maps when evaluating tools. New mediums and uses. Remote collaboration tools are evolving, and organisations are likely to experiment with them in various ways. Some executives have used popular video games such as Animal Crossing, Grand Theft Auto, and Minecraft to conduct meetings, for instance. While some may not be inclined to use video games for collaboration or are unfamiliar with the format, others feel they help people think differently and bond with colleagues. The education sector may be another testing ground as teachers, students, and parents around the globe are now being forced to learn how to use virtual collaboration tools. Other formats are likely to emerge. New insights. Collaborating via software enables novel analytical applications not possible with conventional in-person conversations. For example, Gong uses speech recognition and natural language understanding technology to transcribe, annotate, and analyse data from sales calls to coach salespeople toward better performance. YVA.ai uses artificial intelligence to predict burnout and enhance employee engagement. Talent leaders may want to consider how data within these tools can help inform their talent strategies or improve employee performance. New shortcomings. Improved tools may eventually solve the video-conference fatigue problem, but it’s possible that emerging remote collaboration technologies may give rise to other unpleasant technology-induced side effects such as the dizziness or nausea that can accompany immersive environments. When choosing a collaboration tool, organisations should take these into account and design mitigation strategies such as time limits where applicable. New risks. As workers migrated to home networks and personal devices after the onset of the pandemic, firms faced an increase in hacking attempts, and many are enhancing their cybersecurity posture accordingly. The amount and type of information generated by remote collaboration tools could be especially sensitive, and companies should strive to ensure that such data is secure while meeting workers’ reasonable expectations of privacy. Preparing for a (somewhat more) remote future Many workers will not return to the office or may work from a company office only part of the time. According to a June 2020 Fortune/Deloitte CEO survey, CEOs expect 36% of their employees on average to still be working remotely by January 2022, three times as many as before the pandemic. One forecast suggests that through 2024, around 30% of all employees currently working remotely will permanently work at home. Many organisations are likely to need effective remote collaboration tools and approaches. Managers, particularly those in industries where remote working is already familiar, such as technology, financial services, and business and professional services, should begin exploring the use of remote high-touch collaboration tools, especially for collaborative activities that are synchronous, spontaneous, or sensory. As workers’ exposure to, and comfort with, these tools varies, organisations should consider implementing effective training and adoption strategies as well as policies guiding effective use. It may be helpful to think of remote collaboration as more than just a way of coping with the pandemic. To be sure, the pandemic triggered a surge of interest in remote collaboration and a burst of activity in the market for remote collaboration tools. But even after the crisis subsides, the need to support high-touch collaboration for remote workers will likely remain. This trend may carry the seeds of new opportunities. It may bring greater flexibility to talent models, offer workers new opportunities to balance professional and personal needs, help reduce the carbon footprint of work, and enable entirely new business models and industries. The development of remote collaboration could eventually change how we work in surprising and beneficial ways. Ryan Kaiser is a senior manager in Deloitte’s US Innovation group, where his efforts focus on digital transformation, strategy, and product/solution incubation. David Schatsky, Managing Director of Deloitte US, analyses emerging technology and business trends for Deloitte’s leaders and clients. Robin Jones is a Principal in Deloitte’s Workforce Transformation division, with 22 years of organisation and workforce transformation consulting experience.