Liz Riley talks to Penelope Kenny about the struggle to get a good ethical culture in organisations; discusses the riskiness of bonds with Bria Murphy; and explores the complexities of integration management with Dr Nicholas Ingle. Download the podcast now.

Ethna Kennon highlights the latest VAT cases and discusses recent VAT developments. Revenue VAT updates Receivers and Mortgagees in Possession (MIP): in eBrief 102/15, published on 16th October 2015, Revenue updated its Operational Manual to include guidance on the VAT consequences of receiverships and the appointment of MIPs in scenarios where VAT Transfer of Business relief does not apply. Revenue guidance on the application of VAT Transfer of Business relief is already contained in Revenue’s “Transfer of Business”  VAT Information Leaflet of July 2014. In particular, the new guidance addresses VAT obligations arising for receivers and MIPs with respect to “forced sales” of assets and supplies of services (including lettings) by a receiver/MIP in the course of carrying on the business of the borrower over whose assets the receiver/MIP has been appointed.   Finance Bill 2015 VAT proposals: Finance Bill 2015 (“the Bill”) was published on 22 October 2015 and contains a number of  VAT proposals, some of which we have highlighted below. Unless otherwise indicated, the effective date of the below proposed changes is the date of passing of the Finance Bill (which is expected to occur in mid-December 2015). Amendments may be made to the proposals prior to enactment, however. 1. VAT exemption for educational activities: currently the exemption applies to children’s or young people’s education, school or university education, and vocational training and retraining irrespective of the body or organisation providing the service.  The Bill proposes amending the scope of the Irish VAT exemption applicable to educational activities so that the exemption will apply where the activity is carried out by specified “recognised bodies”. The Bill also contains provision for the Revenue Commissioners to treat education and vocational training services provided by “recognised bodies” as subject to VAT in circumstances where treating the services as VAT exempt would result in a distortion of competition. The proposed provisions specifically apply VAT exemption to private tuition by teachers covering school or university education. The aim of these changes is to bring the parameters of the exemption legislation more in line with EU law. It is worth noting that Irish Revenue have indicated that the proposals will not result in a departure from the current treatment applied by Revenue in practice.   2. Extension of VAT reverse charge mechanism in the energy sector: the Bill proposes that with effect from 1 January 2016, the recipient of wholesale supplies of gas and electricity, and of gas or electricity certificates in Ireland will be required to account for  VAT on the supply on a “reverse charge basis”, rather than the supplier.    3. Revenue powers: the Bill proposes extending Revenue’s powers in relation to obtaining information on taxpayers. The proposed provisions empower Revenue to apply to the High Court to seek information from third parties and financial institutions about an unnamed taxpayer or group or class of unnamed taxpayers and to apply for an order compelling third parties and financial institutions to provide such information without putting the taxpayers on notice of the application. In a VAT specific context, the Bill also proposes authorising Revenue to cancel (and publish the cancellation of) a VAT registration number in certain circumstances if it appears necessary for the protection of VAT to the Exchequer. EU VAT updates VAT recovery: in Sveda (C-126/14) the Court of Justice of the European Union (CJEU) considered whether Sveda, a Lithuanian business, was entitled to deduct VAT incurred on costs associated with its construction of a recreational path that would be used by the public free of charge for the first five years post-construction. 90% of the construction costs were funded by a Lithuanian public body. The path was constructed by Sveda with a view to attracting visitors to whom Sveda intended to make VATable supplies of food, drink and souvenirs. The CJEU held that although the path would be used by the public free of charge, it was possible, in principle, for a sufficient link to exist between the VAT incurred on the construction costs and Sveda’s intended economic activities as a whole in order to support VAT recovery. The CJEU left the final decision to the national referring court. It should be noted that Irish VAT law contains specific rules where goods are given away free of charge. However, this case should be of interest to taxpayers that incur expenditure on goods, which are intended for use by the public free of charge but are acquired or produced for the purposes of the taxpayer’s planned VATable economic activities.    Buying and selling virtual currency such as bitcoin: in Hedqvist (C-264/14), the CJEU considered whether the exchange of traditional currency for virtual currency or vice versa, was a supply for consideration and if so, whether the supply fell within the scope of the EU VAT exemption for ‘transactions, including negotiation, concerning currency, bank notes and coins used as legal tender’ as set out in Article 135(1)(e) of the EU VAT Directive. The CJEU held that for VAT purposes, the exchange by an operator of virtual currency such as Bitcoin for traditional currency constitutes a supply for consideration (the consideration being the margin between the purchase and sale prices). Furthermore, the CJEU acknow-ledged that transactions involving virtual currency are financial transactions and that the VAT exemption in Article 135(1)(e) should not be interpreted as involving only traditional (i.e. non-virtual) currencies. Global VAT developments The Organisation for Economic Co-operation and Development (OECD) published its Base Erosion and Profit Shifting (BEPS) Action Plan on 5th October 2015. Amongst measures focused on corporate tax and transfer pricing, this includes recommendations in relation to the application of  VAT and in particular, proposals to counter VAT anti-avoidance in the digital economy. Ethna Kennon, ACA, Chartered Tax Advisor (CTA) is VAT Director at KPMG.

Bernard Barron and Justin Moran outline the factors involved in establishing and maintaining a successful relationship between public sector audit committees and internal audit. Against a backdrop of ongoing change, audit committees play an increasingly important role within the governance framework of public service organisations in Ireland. The change agenda within the public sector has resulted in continuing pressure on organisations to achieve more with less in an increasingly complex risk environment. Changes in technology, regulation and legislation – not to mention the deployment of shared services – have also contributed to higher levels of reputational risk, which requires a more diverse skillset at both board and audit committee levels. Audit committees need to be more effective in how they operate, particularly in their relationship with internal audit. The practices and principles outlined in this article are vital to establishing and maintaining a successful audit committee relationship with internal audit, and take into account the ongoing development of guidelines and codes that prescribe requirements in relation to the operation of audit committees in public sector-based organisations in Ireland. Indeed, many of the practices and principles outlined are applicable to other sectors including the private and not-for-profit sectors. Corporate governance guidelines for commercial and non-commercial State bodies in Ireland are set out in the Code of Practice for the Governance of State Bodies, which was last updated in May 2009. At the time of writing, a draft revision to this Code of Practice had been circulated for review. Many interested parties await the final publication by the Department of Public Expenditure and Reform (DPER). The requirements in respect of audit committees in central government departments and offices are presently based on the 2002 Mullarkey Report and the Audit Committee Guidance paper published by DPER in 2014. The Department has also published a Draft Corporate Governance Standard for Central Government Departments for public consultation. The draft standard aims to promote best practice in corporate governance across the central government sector while also providing greater clarity on the role of the audit committee. Success factor #1 It is critical for the audit committee and internal audit to hold an open dialogue around enterprise-wide risks, share their perspectives, and seek to reach a common viewpoint on the role of internal audit around the most critical risks. There are a broad range of risks facing organisations today in the areas of financial reporting and control, risk management, business continuity planning, data security, corporate governance, fraud, performance management, whistleblowing policy and conflict of interest declarations among others. Alignment around the most critical risks is essential to prioritise and enable effective allocation of internal audit resources. While diverging viewpoints may arise, there is a need for continuing communication between all parties on how well the audit committee perceives risks to be managed. Success factor #2 While internal audit’s role in providing independent assurance on risk, control and governance should be clearly stated in the internal audit charter, the importance of the strategic internal audit plan should not be understated. A detailed strategic internal audit plan enables the internal audit function to align its objectives to the organisation. The internal audit strategy should have a minimum three-year time horizon and provide a roadmap based on the organisation’s overall strategy, risk priorities, key stakeholder expectations (including parent department expectations), regulatory requirements and the role of the other risk and assurance activities specific to the organisation. Examples of other risk or assurance-type activities may include external audit, legal, security, environmental health and safety and compliance. Consideration of wider aspects allows for the assessment of duplication of efforts or potential gaps between these activities and functions. In addition to providing a clear basis for audit committees to approve internal audit activities and priorities, the plan can serve to:   Set and agree clear timelines and deliverables; Facilitate discussion on risk coverage on an ongoing basis to allow for changing priorities; Provide a framework for evaluating and identifying potential skills gaps in the internal audit team based on the types of internal audit reviews to be performed. Such evaluation at an early stage also allows time for the sourcing of skillsets outside the organisation, if required; and Assess whether the internal audit activity will add value in addition to providing the necessary assurance to the audit committee over the lifetime of the plan. Success factor #3 The Code of Practice for the Governance of State Bodies requires the audit committee to assess the effectiveness of the internal audit function. This assessment should consider whether processes, methodologies and tools are up-to-date; internal audit has the functional, organisational and sector insights it needs; and staffing models are flexible enough to anticipate change and address emerging risks/issues. In order to make this assessment, audit committee should explore the following questions:   Are the existing skill sets within the team appropriate? Is the internal audit team adequately resourced for its role? Has the internal audit activity performed its work in accordance with its charter? Does the existing internal audit model (in-house, outsourced or co-sourced) provide sufficient flexibility to gain access to the skillsets to provide the necessary assurance over a broad range of risks? Do members of the team participate in professional development training? Have the team members acquired professional designations that demonstrate their competency? Does the internal audit department have the tools it needs, including advanced data analytics? Are the internal audits conducted in conformance with the International Standards for the Professional Practice of Internal Auditing and the Institute of Internal Auditors’ (IIA) code of ethics? Does the internal audit activity have a quality assurance and improvement programme in place to provide feedback and drive continuous improvement? Audit committees should also consider whether internal audit activity has been subject to independent external quality assessment within the past five years. External assessments should be conducted in accordance with the IIA’s International Standards for the Professional Practice of Internal Auditing and be performed by an outside independent assessor or assessment team. The objective of the external assessment is to evaluate an internal audit activity’s conformance with the IIA’s definition of internal auditing, code of ethics and standards. External assessments should also focus on identifying opportunities to enhance internal audit processes, offering suggestions to improve the effectiveness of the internal audit activity and promoting ideas to enhance the activity’s positioning within the organisation. Conclusion Communication between the audit committee and the internal audit function is key. An effective audit committee can strengthen the position of the internal auditor(s) by acting as an independent forum for internal auditors to raise matters impacting upon management. The head of internal audit should be invited to audit committee meetings to present and discuss audit planning, findings and observations. The lines of communication and reporting should be clearly defined and encourage internal auditors to speak freely, regularly and on a confidential basis with the audit committee. It is the overall combination of factors which should guide audit committees in managing the relationship with internal audit. The use of the principles and practices outlined should build meaningful trust between the audit committee and internal audit for the ultimate benefit of the organisation. Bernard Barron FCA is a Partner in Mazars, specialising in governance, audit and internal control. Justin Moran FCA is a Director in Mazars, specialising in governance, internal audit and risk management.

Bria Murphy considers the potential impact of future interest rate hikes on bond holdings and how investors might protect their pensions from the fallout. When it comes to plan-ning for retirement, investors generally opt for what they perceive to be a low-risk strategy. In terms of portfolio construction, this typically translates into a sizeable allocation to bonds as bonds are considered low-risk and therefore, ideal for pension funds. However, interest rate hikes could dent the value of bond holdings – and consequently, pension funds – for  unsuspecting investors. Bonds have consistently proved popular with pension fund investors. In fact, some of the largest bond-holders in the world include pension funds. As an asset class, they are perceived by many to be risk-free and for that reason, it is not uncommon to see pensions with concentrated bond allocations. The perception that bonds are risk-free has become particularly apparent in recent years with the proliferation of ‘lifestyle pension funds’. The majority of pension schemes offer managed lifestyle funds as their default option to new and existing members. These funds do not take current market conditions into consideration when setting their asset allocation, however. They instead use a formulaic approach to investing by automatically transitioning assets from higher risk equities to lower risk bonds as the investor nears retirement. In some cases, up to 70-80 per cent of your pension could be invested in bonds as you approach retirement. If bond yields rise, as expected, many investors could see the value of their pension pot fall just as they are about to retire. Low-risk or no-risk? From an investment perspective, bonds will always play an important role in a well-constructed pension portfolio as they can offer protection in times of crisis. But bonds are not entirely risk-free. If you buy an AAA-rated sovereign bond from a reputable government, the risk that it will not pay a coupon and return your capital is very low. It could therefore be considered a low-risk investment but like a stock, the value of a bond can rise and fall over its lifetime. Bond prices have an inverse relationship with interest rates. When interest rates rise, bond prices fall and bond yields rise. For example, if you buy a bond today paying a high coupon or yield and interest rates fall tomorrow, the price of that bond will rise as investors are willing to pay more for the higher level of income. The reverse is also true. If you buy a bond today with a low coupon and interest rates rise tomorrow, that bond will no longer be as attractive to investors and its price will fall. The Bond Iceberg graphic on the right depicts this relationship. It illustrates the likely fall in value for bonds of different durations where yields increase by one per cent. For example, a one per cent per annum increase in yields on a 30-year German bond would result in a fall in bond value of 22 per cent. Long-term bull market It is easy to see why bonds have become popular with pension funds in recent years. Bonds have enjoyed one of the longest bull markets in living memory. Never in economic history have interest rates been so low for so long. During the recent financial crisis, central banks across the globe slashed interest rates close to zero and implemented the unorthodox policy of quantitative easing (QE), which essentially created new money. With that new money, central banks primarily bought bonds to urgently inject liquidity into the system. Together, the US Federal Reserve (the Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Bank of Japan are estimated to have created a staggering $10 trillion of new money since the start of the crisis. This flood of money has pushed bond yields down to today’s low levels. Where’s the risk? The ECB remains committed to its programme of QE but both the Fed and the BoE look set to raise rates in the not-too-distant future. Although the timing and magnitude of interest rate hikes is uncertain, both banks have been relentless in communicating future rate increases. The primary catalyst for the hike is an improving economic outlook in both countries. So how is the bond market likely to react to the prospect of higher rates? We need only look back as far as 1994 to get an insight into the likely response. Like today, bond yields were pushed lower by the recession of the early 1990s and inflation was falling. When the outlook turned positive in early 1994, the Fed began to raise interest rates aggressively. Between the first rate rise in February and the end of the year, it raised rates from three per cent to 5.5 per cent. Panic ensued in the bond market. Investors dumped bonds and trillions of dollars was wiped off the global bond market in what has become known as The Great Bond Massacre. In an attempt to avoid a repeat of 1994, it is clear that any rate increase will be well-flagged by central banks. The hope is that pension fund managers will adjust their bond portfolios in an orderly way. While this is likely to stem any sudden large losses in bonds, over the longer term it could have a detrimental impact on the performance of many pensions. Limit the impact The size of the interest rate impact is unclear but to prepare for a more challenging time ahead, there are three important steps investors can take to limit damage to their pension from rising interest rates.   Ensure your pension or portfolio is not overly exposed to bonds: in a rising interest rate environment, too high an allocation to bonds in your pension can lead to sizeable losses. If your pension has an over-concentration of bonds, you could consider reallocating some of the funds to other investments that are impacted less by rising interest rates. Stay in shorter duration bonds: in times of rising interest rates, longer duration bonds are more sensitive to interest rate moves. The shorter the maturity, the less impacted the bond should be from rising rates, as illustrated in the graphic below. Diversify: diversification is regarded as the cornerstone of successful investing. A multi-asset approach can help lower the volatility of returns over time and help offset some of the weakness in a rising interest rate environment. Bria Murphy ACA is an Equity Analyst at Davy Private Clients.

Evaluating risk and its potential effect on future gains is an essential part of any investment strategy, write Eugene Kiernan and John Flavin. Too many investors pay mere lip service to the concepts of risk and return. They focus too much on the returns they want and not enough on the risks they are taking. Investment managers who achieve the highest returns routinely win awards but there are no glitzy ceremonies to recognise excellence by investment professionals – be they accountants, fund managers or advisors – in managing risks. That may well be down to human nature as when markets are rising, investors tend to think positive. They want their fund manager to achieve higher returns than anyone else. Those who deliver the highest returns are often viewed as the best in the business. Only the best-informed investors tend to quantify the risks being taken to get these returns, however. It is typically only when markets fall that investors’ focus shifts to risk. It is only then that they worry less about gains and more about minimising their losses. Unfortunately, many investors realise the importance of risk when it is too late and markets have already moved against them, eroding or even destroying the gains achieved when markets were rising. That is why, when it comes to deciding on how to invest, quantifying risk is every bit as important as quantifying return. The risk/return relationship Every investment professional is familiar with the mantra that they must take on higher risks to achieve higher returns. This is a theory that deserves closer scrutiny. It is true that investors who take higher risks should demand higher returns, but it is equally true that higher risks do not necessarily result in higher returns. Rather than focusing solely on returns, investors and their advisors would benefit from a greater focus on risk-adjusted returns – that is, the extent to which their gains are dependent on higher-risk investments. Measuring return alone does not paint the full picture. For example, if an investor is deciding between Fund A and Fund B, she or he may see little difference between them if Fund A has delivered 11 per cent over the past three years while Fund B has delivered 10 per cent. The picture changes dramatically, however, if the investor is then told that Fund A (perhaps containing a high proportion of tech start-ups, exploration stocks and investments in emerging markets) is a lot riskier than Fund B (containing a highly-diversified portfolio with investments across asset classes and geographies). In this example, an investor in Fund A is taking significantly more risk than an investor in Fund B, and is much more vulnerable to a downturn in a particular sector or in emerging markets. While the return is higher, is the difference big enough to justify the additional risk? An informed decision can only be made if the risk is quantified and the expected return adjusted accordingly. Measuring volatility Volatility is a key feature of risk-adjusted return analysis. In essence, volatility measures the likelihood that the return generated by an investment will fall outside a limited range. Lower volatility suggests that the return generated will be steadier and more predictable, allowing investors to meet their goals over the long-term without being hit by significant and often inevitable market downturns along the way. It was Warren Buffett who once said that the first rule in making money is making sure not to lose it. In other words, the key to long-term success is protecting against downside risk and avoiding the big drops. Irish investors, more than most, learned the lesson during the financial crash that years of gains can be wiped out in a very short time. On the flip side, it can take a very long time to repair the damage a significant downturn can do to a portfolio with significant risk exposure. There is strong evidence that riskier portfolios underperform compared to portfolios that take steps to mitigate risk. In other words, the gains riskier portfolios make in good times are outweighed by the losses suffered when markets fall. For example, a study of global equity funds by global asset management firm Blackrock that covered the performance of mutual funds between 1986 and 2014 showed that the “safest” 20 per cent of portfolios achieved significantly higher annualised returns than the “riskiest” 20 per cent. The study also showed that, when it came to comparing the risk-adjusted performance of portfolios, annualised returns actually decreased as volatility increased). The superior performance of low-volatility equities stems from their ability to protect in times of market stress. For instance, low volatility stocks performed significantly better than broad market indices in the market meltdown of 2008. They had less ground to make up than those that had fallen further, which meant that holders of riskier stocks suffered more and suffered for longer. While there is a wide array of risk measures available, most investors will focus on volatility of returns as a shorthand tool to assess risk. Indeed, most fund providers highlight this measure in their literature, as do many performance league tables. The Sharpe ratio, which looks at returns delivered, adjusted for the degree of risk being taken, is a useful way of establishing the relative efficiency of an investment strategy or fund. A high Sharpe ratio means the risk-adjusted returns are higher. Conclusion Riskier stocks do not necessarily mean better long-term returns. In fact, the opposite is true. More volatile portfolios tend to get hit excessively on the downside and fail to match gains made by less volatile portfolios on the upside. Some riskier stocks have risen in value as the market is basing a significant part of its valuation on future performance and expectations are high. When these high expectations aren’t met, the fall from grace can be severe. That is not to say that investors should shy away from riskier stocks and riskier portfolios – far from it. They are perfectly legitimate investments, but it is crucial that the level of exposure taken by an individual investor fits with her or his requirements and risk appetite. The bottom line is that serial compounding over a number of years is the basis for sustainable returns. Evaluating risk and the effect this risk may have on future gains is an essential part of any investment strategy. Ultimately, risk is not to be avoided but it must be managed well. Eugene Kiernan is Head of Investment Strategy at Appian Asset Management. John Flavin FCA is Senior Relationship Manager at Appian Asset Management.

Leaders and managers can spark transformational change through the simple but oft-overlooked practice of strategic real-time thinking, write Sian Lumsden and Ian Mitchell. "I’ve never really thought about being overly targeted when deciding where the bulk of my management energy ought to be invested. But when I begin to really reflect more deeply on what I’m doing with my time and energy, I can see that I need to bring a lot more focus to bear on four hugely important direct report relationships. But how should I go about restructuring my organisation to allow me to do this? That’s the big question I want to think about today.” She’s a newly-appointed director working in a large public sector organisation facing some really big financial and structural challenges. She’s very aware that she has a real opportunity to add significant value if she can bring her best game to the role. She also knows that the future trajectory of her career path pretty much rides on making a go of this gig. It’s focusing her mind sharply and she’s asked Ian to spend a day off-site with her, joining her in exploring some of what she believes to be the key issues and challenges she is facing. We call it doing some ‘real-time thinking’. Quality of thinking  Sian: “We love it when practice partners and key executives set aside the time to think deeply about the big uncomfortable issues lurking around their work. It’s so easy to get seduced into sticking with the humdrum – particularly the urgent humdrum. Looking for solutions to big issues can feel like it carries too much risk. “Nancy Kline, founder of Time to Think Inc., says: ‘Everything we do depends for its quality on the thinking we do first’. Of course we would all agree with her and at first glance, it can appear to be an incredibly simplistic observation. But it’s not, is it? It’s the word ‘quality’ that gives it its potency. “What we find on a regular basis across a wide range of businesses, practices and other organisations is that key leaders, senior managers – well, everyone really – can be so busy with the doing of work that there is little time left to devote to the quality thinking that makes that work truly effective.” Ian’s been asking the client about ‘shift’, wondering what the single most relevant transformational change in her organisation might look like if it were to take place. Her answer is more than a little revealing. “I’d like to see the dysfunctional organisation I inherited become the organisation I would be proud to lead.” Unpacking that one opened up an exciting day’s thinking. Sian: “Nancy Kline goes on to say that “the quality of attention that we give to each other determines the quality of their thinking”. Now that’s a challenging thought if I ever came across one and it’s one that Ian and I are trying to develop in our work, both with our clients and also with each other and our team as we grow our practice together.” Going bravely into the ZOUD We live in a fast-paced world, plugged into pretty much endless information at the touch of a screen. It takes a bit more effort to get in touch with our own thinking. Whether we’re working on our own, collaboratively or as part of a team or partnership, however, it’s important that the environment we create around us is one in which thinking is able to thrive. In working with our clients, we’ve learned a lot about creating that environment. The Zone of Uncomfortable Debate (ZOUD) is a term we came across in the work of John Blakey and Ian Day; it’s a place we like to encourage our clients to explore. It’s the place where contentious issues can be addressed, debilitating problems can be resolved and difficult decisions can be made. It can also be, as the name implies, a place where pressure builds and thus a place of tension and potential conflict. But it’s where important new thinking occurs as the heart of any issue is exposed and individuals or teams begin to engage with their truth in a very open way. It’s the place that sits right at the heart of our own real-time thinking conversations together as partners and, as such, it has proven to be a very fertile ground for us to explore as we’ve built our business. The cost of staying comfortable Ian: “One of the first things encountered when we venture into that uncomfortable zone is an understanding that leveraging what we do well will take us a lot further than trying too hard to tackle what we feel we do badly. It’s uncomfortable for some to face up to the fact that there are just some things that we’re not wonderful at, but if we can move on from that place the results can be quite transformative.” Sian: “To be fair, it took a while for the penny to really drop with us on this one – perhaps because it initially sounds so counterintuitive. Or maybe because, at first, it could feel as by coming at things from this perspective we might be ducking out of pursuing an important development opportunity. But taking this approach forces us to rely on others around us to work in the spaces where perhaps we don’t create the most value for our organisation and frees us up to add real value by being the best that we can be in the areas where we have real gifting.” Ian: “In our own work and with many of our clients, we’re also discovering that what is comfortable discussion for one person in a team or organisation might feel like deeply uncomfortable debate for another. As a result, part of a leader’s agenda might be to seek to understand the areas which, while being very comfortable for the majority, might create uncomfortable debate for some of her or his key people and to build some thinking around how to productively manage this space.” Sian: “Again, this brings us back to the thinking around social styles that we introduced in our first article and opens up the very important question of how prepared we are to really seek solutions. ‘What, in this context,’ we need to ask, ‘might be the cost for us of going into this uncomfortable debate to deal with this issue?’ And if we commit to going there, we may need to be ready to act on some challenging conclusions.” Ian: “Of course, the ultimate problem with not taking our thinking and our strategic conversations into this uncomfortable zone is that we can find ourselves in the position of making decisions that lack integrity. Decisions that we don’t really buy into ourselves. “Sian and I talk about the Four As – avoidance, attack, autocracy and plain old half-hearted acquiescence. These can constitute the endgame for leaders, organisations and teams who make decisions but shy away from taking themselves into the ZOUD. All of these ‘As’ are ultimately debilitating in any organisation, eroding effectiveness from within and leading to loss of morale.” Back at the thinking day… She’s reached the three defining questions that she needs to think about. The answers will almost certainly decide whether she will ever manage to develop her dysfunctional inherited organisation into the one that she would be proud to lead. And she’s taking them very seriously. “Am I confident that I have the backing of my board and other stakeholders to start this journey?” Her answer is an emphatic ‘yes’. “Do I have the passion to do it, and keep at it when the journey becomes difficult?” This time it’s a ‘yes, absolutely’. “What might stop me going forward in this direction?” She concludes with an equally emphatic ‘I don’t think anything will’. Sian: “Ian received an email from the client a couple of days later. She stated that being given the opportunity and space to think strategically had brought not only fresh perspective, but also a new level of positivity when it came to addressing some of the previously daunting issues that were causing her to feel stuck when she thought about her role and responsibilities. “Thinking does that. ‘Thinking and listening,’ says Nancy Kline ‘are not linear; they are creation.’ And brave thinking creates transformational change.”   Ian Mitchell and Sian Lumsden are Partners in Eighty20 Focus, an executive development firm that delivers real-time coaching in Ireland and the UK.