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Cracking the glass ceiling

With gender pay gap reporting on the horizon, it’s time for organisations to really examine whether they’re doing the best they can for female employees. Dawn Leane outlines 10 things every business can do to help women in the workplace. According to recent research, the advancement of women in the workplace has, at best, stalled. So, what can organisations do to get back on track? 1. Start with the culture Many organisations over-engineer initiatives to improve gender balance. This often manifests as policies and procedures, which research shows can be counter-productive and have a negative impact. Organisations should focus less on control and more on creating environments that are genuinely egalitarian. This is achieved by modelling appropriate behaviours and embedding good practice. 2. Ask questions Don’t assume you know why women are not advancing in your organisation. Issues can be specific to the culture of individual workplaces or teams. Without insight, you could spend a lot of time and money developing solutions to the wrong problems. Independent interviews with current and former employees can help build an objective picture of the challenges unique to your business. 3. Support fathers All fathers are entitled to paternity and parental leave. However, only a third took paternity leave last year. Research suggests that men and women believe fathers don’t take their full entitlement because parental leave is still viewed as the domain of women. Yet, fathers are no less interested and engaged in their children’s lives. Encouraging fathers to take leave might not do much for your individual organisation, but this is a wider issue for business and society and will contribute to higher staff retention and satisfaction. 4. Don’t outsource management responsibility A survey by the 30% Club found that employees spend increasingly less time with their manager discussing their personal development as they progress through the organisation. Opportunities for career-relevant advice and feedback are outsourced to mentors or coaches. Women at this stage of their career receive less advice from their manager than men by a ratio of four to one. While mentors and coaches have a role, it is the relationship with their manager that is pivotal to women’s development. 5. Provide access to gender-specific training This can be a divisive topic, but research shows that women benefit enormously from gender-specific training. The chance to discuss common experiences, like gender bias or personal leadership challenges, is key. However, it is important to ensure that management doesn’t wipe their hands after offering this kind of training. Other types of development opportunities should also be offered to women. 6. Create dress rehearsals Developing leadership abilities takes practice and requires learning from mistakes. With low levels of women in senior roles, those who do succeed have increased visibility. Organisations can create space for women to enhance their leadership skills without being subject to undue scrutiny. Opportunities such as leading projects or deputising for their managers, when coupled with appropriate feedback, can help to provide such a ‘safe’ space. 7. Reduce the opportunity for unconscious bias In organisations, even the smallest amount of bias can have significant consequences. Unconscious bias is prevalent in both women and men. The Implicit Bias Test developed at Harvard University offers incredible personal insight. Training for unconscious bias has proven to be largely ineffective. Until our conditioning changes, the solution is to limit the opportunity for such bias to occur. For example, blind, systematic processes for reviewing job applications will help to end such bias. 8. Monitor where women are in your talent pipeline The McKinsey Women in the Workplace reports advise that, for women, inequality starts at the very first promotion; entry-level women are 18 percent less likely to be promoted than their male peers. This has a dramatic effect on the pipeline as a whole. Organisations should be attuned to this, as it is easier to correct imbalance at earlier stages in the pipeline. 9. Accept that careers are marathons, not sprints Organisations often place too much emphasis on rapid advancement, leading people to burn out and leave, particularly when they have competing demands outside work. Reframing career development as a long-term goal allows both women and men to increase and to slow their pace as appropriate to their circumstances without being written off. 10. Focus on output not presenteeism If accountability and results are what matter, show this through flexible working arrangements. Hybrid working has been both a blessing and a curse to women in the workplace. Flexibility is necessary to ensure women continue to be productive and successful members of the team. Dawn Leane is the Founder of Leane Empower.

May 13, 2022
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Wartime tax concessions

With the continuation of the Russian–Ukrainian war, Revenue has introduced a tax concession for Ukrainian citizens working from Ireland. Jane Quirke explains what the concession involves and how to comply. On 14 April 2022, Revenue announced a concession in relation to the Irish tax treatment of Ukrainian citizens who continue to be employed by their Ukrainian employer while performing their duties remotely from Ireland. There are several points people need to keep in mind while helping those in this position with their tax. Liability of income to Irish tax and concessional treatment Regardless of the tax residence position of the employee or the employer, income from non-Irish employment attributable to the performance in Ireland of the duties of that employment is chargeable in Ireland to income tax and the Universal Social Charge (USC). It is within the scope of the PAYE system of deduction of income tax at source. However, by way of concession, Revenue will: treat the Irish-based employees of Ukrainian employers as not being liable to Irish income tax & USC on Ukrainian employment income attributable to the performance of duties in Ireland; and ·not require the Ukrainian employer to operate within the PAYE system on such employment income. The concession applies solely to employment income paid to the Irish-based employees by their Ukrainian employer. This concessionary treatment will apply for the tax year 2022 where the employee: would have performed their employment duties in Ukraine but is currently unable to because of the war; and is still subject to Ukrainian income tax on their employment income. Corporation tax Similarly, due to the ongoing war in Ukraine, an employee, director, service provider or agent may have come to Ireland and may, as a result, have an unavoidably extended presence in the state. Revenue will disregard such presence in Ireland for corporation tax purposes where the employee, director, service provider or agent would have continued to be present in Ukraine if it wasn’t for the war. This concessionary treatment will apply for the tax year 2022. Record keeping Any individual or relevant entity that avails of the concessional treatments set out here should make sure to keep any documents or other evidence – such as a record with the individual’s date of arrival in the State – showing that the individual came to Ireland due to the war in Ukraine and is performing their work or duties here. Jane Quirke is Director of Tax and Legal at Grant Thornton.

May 13, 2022
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The greatest risk to organisations? Doing nothing

Businesses facing rapid change, emerging threats and unforeseen disruption must prioritise proactive risk management and build the right culture to support it, writes Andy Banks. Risk is unavoidable and, as the pace of change continues to quicken, managing risk is becoming a bigger challenge for all organisations. Disruption—be it geopolitical, environmental, social, or technological—is impacting societies at every-greater speed, making the risk landscape facing businesses more volatile and uncertain than ever before. It is not enough to stand still. In an increasingly unpredictable world, companies need to rethink their fundamental risk management principles to help protect and grow their business no matter what might lie ahead. So, where to start? Through our own research, we have found that four key characteristics can help to future-proof businesses facing greater risks. 1. Be forward-looking Recent events have underscored the need for organisations to be more proactive in scanning the horizon for risks, from industry regulations to systemic global disruption. A range of new threats are now emerging, and many have no precedent. As a result, we can't always use past events to tell us what comes next. Instead, organisations should consider what they learned in the past about handling major disruption and use this assessment to prepare a flexible response to future threats. 2. Be transparent and build a culture of trust The pandemic has further demonstrated that you can earn or lose trust depending on how you respond to the threats and challenges you face. Organisations should consider how they can embed a culture that supports transparency, particularly when it comes to identifying and addressing risk. This will be crucial as we all respond to major macro-challenges that require trust and transparency to forge a culture of accountability and drive positive behaviours. 3. Be resilient Many of the risks facing organisations are unavoidable. This is not just true of the COVID-19 pandemic—it is also true of other systemic issues, from supply chain disruption to cyber crises. The focus, therefore, needs to be on ensuring that your organisation can weather the storm, adapt, and emerge stronger. 4. Be inclusive The scale and interconnectedness of the risks facing organisations and society at large demands a collaborative response. This comes in many forms, from being open to new ideas, and seeking perspectives from different people, to co-operation between industries and sectors. We can't overcome systemic challenges without asking for help and working together on shared solutions. Risk journey questions Kick-start your organisation’s risk management journey by considering these 10 key questions: Is your risk management framework forward-looking and comprehensive? Does it align with your organisation's purpose and values? Is your business strategy translated into a risk strategy and risk appetite framework, as the foundation for all risk management processes? How does the risk function contribute to decision-making? How do you develop tangible data insights to model and quantify risk so that threats can be prioritised and measured using imaginative thinking? How is the organisation accountable to employees and other stakeholders? How does your organisation promote trust and transparency when it comes to equity and diversity? Is your risk appetite framework understood, implemented and used to steer the day-to-day business? How does risk management support agile and responsive decision-making? How diverse are the teams within your organisation? How does your organisation listen to different voices that can challenge entrenched habits and viewpoints? Andy Banks is Partner of Risk Assurance Services at PwC.

May 13, 2022
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Helping your employees navigate the cost-of-living crisis

With inflation on the rise, everyone is going to feel the pinch. But what can organisations do to cut costs and retain staff? Moira Grassick suggests alternatives to the traditional pay rise. The population of Ireland is experiencing an arduous cost-of-living crisis as inflation rises to its highest level in 22 years. Millions up and down the country are struggling to heat their homes, fill their cars, and put food on the table as prices surge, and many workers are finding their income stretched to an unprecedented degree. It is likely that many business owners will be hearing the same question: "Can I have a pay rise?" As a result, organisations are also finding it difficult to weather the inflationary storm, with many simply unable to offer additional payment to keep up with inflation. So, when faced with the pay rise request, and the risk of losing valued workers, what can companies do to help employee pay packets stretch that little bit further – even when pay rises are out of the question? Business owners are having to think outside the box when it comes to supporting staff through these challenging times. However, there are many ways to help employees reduce their outgoings. Employee assistance programmes Help your staff look after their mental health with the provision of an employee assistance programme (EAP) – particularly as financial issues can take their toll. An EAP provides your staff and their families with access to 24/7 counselling and support on all of life's issues, all totally free to them. Implement hybrid working The pandemic thrust flexible and hybrid working into the spotlight, so consider implementing this where possible. Not only could it help your employees balance their home and work life more effectively, but it will also cut commuting costs. And businesses could benefit from too, with less energy expended in the workplace. Remember though that working from home isn't for everyone – and there is the added issue of higher utility costs – so it's always best to give your staff the choice. Taxsaver schemes To further reduce commuting costs, consider giving staff the opportunity to avail of Taxsaver travel tickets which they can use to save tax and up to 52 percent when paying for a bus, train, or Luas pass. Other ways to reduce travel costs include offering a cycle-to-work scheme, which can help cover the expense of a bike with added tax benefits. SMany companies are also opting to provide electric car schemes to the same effect. Bonus vouchers A bonus in the form of a voucher, which can be used to purchase goods or services, can be given tax-free to employees once a year up to the value of €500. This can help people to shoulder the expense of daily lunches or household food shop. Discount services Lastly, using discount services means that staff can enjoy discounts on days out, food and drink, tech, food shopping, and everything in between, making their pay stretch further. Consider a pay rise Of course, if it's feasible, a pay rise in line with the rate of inflation will go a long way in supporting your employees and the organisation in the long-term. But with bills going up for everyone –  and that goes for businesses too – it's not always possible. And that's where these alternative ideas come in. Moira Grassick is Chief Operations Officer at Peninsula Ireland.

May 05, 2022
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How to navigate the uncharted territory of the metaverse

The advent of the metaverse will transform every aspect of our lives, and businesses and governments need to prepare for it now, writes John Ward Consider the possibility of hosting a meeting with colleagues physically located in different parts of the world but virtually present in the form of 3D avatars. What about being able to try on clothes in a virtual shop without leaving your armchair, or even designing and test-marketing a new car without the need to build a prototype? These are all examples of the massive potential held out by the metaverse, the shared three-dimensional virtual world where people interact with objects, the environment and each other through digital representations of themselves. Up until now, online platforms have enabled us to simulate many offline activities, but they cannot substitute physical presence. The metaverse aims to bridge this gap by creating a tactile, sensorially immersive experience that delivers the feeling of being present without requiring your physical presence. This will demand a radical shift in companies’ approach to customer engagement, branding, product development, innovation and, ultimately, their entire business model. We are already seeing retailers sell clothing and shoes for avatars, manufacturers creating digital twins to optimise factory performance, and organisations using the technology to conduct interviews and onboard recruits. Governments are beginning to realise the potential for deeper interactions with citizens in areas such as education and culture. Some countries are combining artificial intelligence (AI) with digital replicas of physical environments to predict the spread of wildfires. These examples provide a glimpse into the astonishing possibilities offered by the metaverse. But there are also potential pitfalls. The challenge for businesses, governments, and society is to successfully navigate the transformed environment created by this immensely powerful new technology. As we begin the journey into this new world, five key questions emerge: How will the metaverse transform business? Irish businesses need to ask themselves what investments they should make to prepare for the metaverse. Like digital transformation, the metaverse has the potential to become a breeding ground for a new set of competitors, markets, customer preferences and business models. Businesses need to start factoring this into their medium- and long-term strategies. Are regulators ready for the metaverse? The metaverse is likely to magnify challenges already faced by regulators in areas such as personal data collection and privacy. The virtual and augmented reality devices used to access the metaverse will allow organisations to track and collect highly personal data such as blood pressure and other health indicators. This will require extensive revision of current data regulations and legislation. What will good regulation look like in this new landscape, and how can regulators ensure their efforts do not lag behind the technology? How will the metaverse impact human-centred experiences? Successful experiences in the metaverse will be contingent on the ability to understand and adapt to changing customer behaviours and expectations. Furthermore, as customers journey through the metaverse, trust will become even more important. In this context, organisations will need to examine how this will change the way brands design and implement the customer journey, what it will take to deliver trusted experiences, and how customer engagement and loyalty will be redefined. How will the metaverse affect sustainability efforts? Making the metaverse a reality will require a vast new technology infrastructure, and it will necessitate the adoption of resilient, net zero solutions. The shift to a virtual world could, on the one hand, reduce physical resource consumption and greenhouse gas emissions, but the electrical power required by the expanded infrastructure could offset many of these gains. At the same time, the metaverse could transform our ability to model the physical world, offering a more profound understanding of our environmental impacts and enabling better decisions on mitigation. How will the metaverse develop in different countries and regions? Although globally recognised standards will emerge over time to enable interoperability, governments worldwide will likely intervene in the implementation and operation of the metaverse in the same way as they have done with the internet. Organisations must ask how this will impact the evolution of the metaverse and their global operations utilising it. At the same time, the global decentralisation movement – which seeks to free the internet and the metaverse from government and corporate regulations – is gaining traction. What implications might this have on the future of business models and corporate structures? We are standing on the threshold of a transformative technological epoch, and this will demand a new approach to every sphere of human and business activity. Businesses, governments, and civic society will need to understand the full implications of the technology and prepare accordingly. John Ward is Partner of Head of Digital & Emerging Technology at EY.

May 05, 2022
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Using ESG transformation to respond to stakeholder needs

Environmental, social and governance metrics are crucial when formulating your business strategy and looking to the future. But what can organisations do to meaningfully embed ESG into their business? Fiona Gaskin explains. International events and movements such as COP26, the COVID-19 pandemic and Black Lives Matter (BLM) have concentrated the minds of investors and executives on the importance of integrating environmental, social and governance (ESG) into overall business strategy and non-financial reporting. PwC's latest CEO Survey revealed that ESG metrics are still not being integrated into long-term corporate strategies, however. Released in March, the report found that fundamental ESG targets, such as net zero, have only been set by a minority of Irish companies. So, why does ESG matter? At its simplest, ESG gets to the very heart of why you are in business, ‘who’ you are as a company, and what your impact on the world is. It’s also about how you align your business model with the needs of society, what you report, and how you engage with your people and stakeholders. Deferring integrating ESG into your overall business strategy gives rise to risk. It might mean, for example, that you will hardwire old value creation models that don't meet the concerns of your stakeholders and long-term needs of your business.  It also becomes increasingly likely that you will fail to manage real and material risks while also finding yourself out of step with your stakeholders. Integrating sustainability into your overall business strategy is essential, as ESG will propel the next wave of corporate transformation.  Strategic reinvention Companies are redefining their business and sustainability strategies before determining how to respond most appropriately to the evolving non-financial reporting environment.  Management teams are taking a fresh look at difficult strategic trade-offs in response to both new opportunities and external pressures. This includes concerns about heavy carbon emissions — very much on the radar of energy companies and cement manufacturers, for example — and a range of social concerns including health, race, gender, inclusion, and inequality.  So, what can you do if your organisation's current strategic priorities result in outcomes increasingly viewed as unsustainable (or even unacceptable)? In this case, you will need to introduce a strategy to address such concerns, exploit different opportunities, and redefine, not only what the business does, but also how it does it. Reimagined reporting The most immediate call-to-action is often a combination of heightened regulatory requirements, greater risk awareness, and demand for data that can support the management and disclosure of ESG data.  Everything from carbon emissions to racial and gender balance and the sustainability of sourcing strategies is under the microscope. Investors, governments, regulators, rating agencies, and informed customers assess whether businesses have identified, and are appropriately managing, ESG risks. As companies re-evaluate what they report publicly, formal non-financial disclosures are starting to augment or replace non-binding frameworks. Business transformation A business that begins to report against broader non-financial metrics will quickly find that objectives need to be defined in order to manage these metrics, and drive the change needed to achieve these objectives.  Similarly, a business that has had to redefine its strategic priorities to ensure its sustainability and relevance will need to transform to deliver on the new strategic objectives.  Either way, businesses will have to actively manage ESG outcomes by internalising ESG into strategy and transforming it to implement the related change and report progress and results.  Senior leaders have a critical role to play in driving this agenda for transformation, which is not separate from ongoing digital transformations but will inform and build on them, redefining both their context and purpose. Every company is uniquely situated, as is the scope of change needed. Whether the motivation is an ambitious emissions target that inspires strategic reinvention, deals to exit or restructure unsustainable businesses, ambitious diversity, equity, and inclusion (DEI) priorities or supply chain overhaul, the resulting ESG agenda will eventually encompass reporting, strategic and business transformation initiatives.  It all adds up to a new equation for business – behaviours based on purpose and trust that create value by forging solutions to society's challenges. Here are four steps you can take to help your company begin its ESG transformation journey. Decide on strategy and metrics The first step is strategic. Set an overarching approach to ESG. It should be supported by a clear tone from the top, with the CEO and leadership team committed to encouraging buy-in across the entire organisation cohesively and inclusively. Process and governance Standardised policies, procedures, controls, and governance are crucial to efficiently integrating ESG into your business. Automated workflow and data transformation tools can help ensure that your data is appropriate and your metrics are clearly defined. Through this kind of structured approach to reporting processes and governance, your ESG story will be grounded in objective and reliable data. Prioritise integrated reporting Treat ESG reporting like the integrated effort that it is. Create an architecture that includes data sourcing, aggregation, calculation, validation, reporting and analytics. Leverage existing financial reporting architectures to the greatest degree possible, and map each ESG reporting element to the architecture. Tell an authentic story When telling your company's ESG story, present more than a snapshot of where you are now. Instead, talk about where you want to go next and how you plan to get there. That sense of evolution will help you act now, with reporting and data you can stand behind into the future. The final word The impetus for businesses to address ESG issues and opportunities is likely to continue to grow, spurred by investors, shareholders, governments, policymakers, employees, suppliers, customers and citizens. Now is the time to start planning for a new future. Fiona Gaskin is ESG Leader for Assurance and Reporting at PwC Ireland.

May 05, 2022
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The future of audit: every cloud has a silver lining

What does the future hold for the audit profession and what can firms do to attract and retain the best young auditors? Mike Hartwell, Aisling Kirby and Orla Duffy examine lessons learned from the pandemic and look at what lies ahead. As we emerge from the pandemic, we have to ask: will the work of the auditor ever return to the way it was before? The answer to this question isn’t simple. To get to the bottom of what might lie ahead for the profession, we must consider a wide range of elements, from audit quality to the calibre of experience and on-the-job training available to our Chartered Accountants from the start of their career. Then there is the changing nature of the way we work, the emergence of new technologies and the impact of rising interest in sustainable finance on business practices. Collaboration is at the core of the audit How we collaborate has changed immeasurably, not just within our audit teams, but with clients and other stakeholders who have an interest in financial reporting. The experience of working effectively in a hybrid world has allowed component and group auditors to collaborate more easily across jurisdictions, off-shore delivery centres, and with a wider cohort of specialists. Our young audit professionals have led the way in driving this adaption, and finding the silver lining for the profession as we emerge from the pandemic. With hybrid working now the norm, the days of auditors convening in client boardrooms for days on end are behind us. We have the technology to be connected to the businesses we work with from virtual audit room settings in combination with those all-important in-person interactions. Virtual audit room technology has enabled young auditors to gain exposure to senior clients and audit management from the very first day of their training contracts, allowing for more impactful virtual collaboration. By combining virtual and in-person engagement, opportunities arise for a richer professional experience in which young audit professionals can accelerate their development. Tech-first generation drives adoption The success of statutory audits in the collaborative post-pandemic world is being made possible by technology. By embracing emerging technologies, auditors can develop more valuable insights about business processes and control environments in the remote or hybrid working world. Businesses reliant on our audits are no longer looking for assurance alone. They want insight that goes beyond the audit opinion. Technology — in particular, analytics — has enabled auditors to enhance the efficiency and quality of our engagements, deliver valuable observations and communicate better with management and those charged with governance. Sustainability is two-fold The changes that have come out of the pandemic have allowed audit professionals and audited entities to step back and consider practices that have the potential to reduce our carbon footprint without compromising audit quality. There is now an acceptance that you do not need to fly across the world for every planning meeting, endure long daily commutes, and print each and every draft financial statement on single-sided paper. Due to be published by the end of the year, new International Financial Reporting Standards on the disclosure of sustainability-related financial information will help to ensure that our profession remains to the fore in carrying out our responsibilities in a sustainable manner. The future of work Overall, how we work has become more agile, flexible, and collaborative, while also ensuring that ever-evolving regulatory and legal requirements are fulfilled. The rapid pace of change has given the profession fresh scope to help build a more sustainable model for business and finance — one in which the role of the auditor is valued by stakeholders and viewed by young professionals as an attractive career. In-person interaction will always be critical to the work of the auditor. Combined with emerging hybrid working practices, however, the profession is now entering into a new era of greater collaboration and innovation. Mike Hartwell is an audit partner and Head of Audit and Assurance in Deloitte Ireland. Aisling Kirby and Orla Duffy are audit seniors in the Deloitte Consumer Business and Technology & Financial Services departments, respectively, and members of Deloitte’s Young Audit Professionals Forum.

Apr 22, 2022
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The risk function of the future

The role of the risk function is changing, and risk professionals need to make sure they are equipped with the right set of future-proofed skills. Andy Banks explains. Organisations are reappraising the skill sets of risk professionals as they reposition the risk function to adapt to new organisational structures and tech-driven strategies. This represents a fundamental shift away from the traditional approach to risk management, which often focused on established risks, to a more predictive and integrated approach. In this environment, we are seeing a growing emphasis on new skill sets for risk professionals —digital affinity, innovation, agility, and communication, for example, alongside a greater focus on strategy, client needs and holistic thinking. At the same time, analytics and data science teams are beginning to emerge within risk functions. This means that risk professionals now also need data analysis skills and a greater focus on predictive digital models. Growth of specialist teams The greatest threats facing the risk function today are coming from non-financial sources, feeding demand for more specialists with niche knowledge. Despite this, specialist teams currently account for just six percent of the risk function on average. Although climate change was seen as the top threat facing banks in a recent PwC survey, climate change specialists account for, on average, just 0.51 percent of risk teams. While operational resilience is high on the agenda for regulators, meanwhile, most risk teams have just one operational resilience specialist for every 100 risk professionals. Acquiring new skillsets Successful transformation requires the right leaders, behaviours, data, tools, and incentives. Here are five steps organisations can take to acquire the skills needed for the risk management function of the future. 1. Strengthen the risk function with a diverse range of skills In a fast-moving, uncertain environment with a changing risk profile, the risk function must have a range of multi-skilled and senior risk professionals. There is a strong emphasis on individual skills such as holistic thinking, storytelling, and digital affinity. 2. Close the digital skills gap As well as developing their soft skills, risk professionals need to improve their digital skills continually as a data-driven and visualisation approach is essential for managing and reporting risk today. This will enable risk professionals to focus their time and attention on analysing, interpreting and visualising data and ultimately provide value. Combining data analytics with human knowledge will provide in-depth insights into trends and changes in risk and generate higher levels of precision and greater risk coverage. 3. Reshape the risk function to meet the greatest threats With the rising focus on non-financial risks such as cybersecurity, climate change and operational resilience, specialist skills are essential. Building teams with diverse skills will encourage diverse thinking and lead to better decision-making. Specialist risk professionals can be ‘found and made’ through recruitment, upskilling, and on-the-job training. 4. Create a culture of continuous learning Staff will need to be supported through this period of change ahead as ways of working evolve and become more tech-enabled. Ongoing training and development will be crucial to driving the transformation agenda and upskilling the risk function, not least in data analytics. Employees who see their organisation investing in their long-term development will be more likely to trust leaders and feel engaged and valued. 5. Monitor risk function skills continually It is vital to continuously monitor your risk function's skillset and headcount to ensure that the team is equipped with the skills, seniority and expertise to manage new and emerging risks. Importantly, as the digital agenda grows, risk function leaders should utilise data analytics to predict skills gaps and upskill. Andy Banks is Partner in Risk Advisory Services at PwC.

Apr 22, 2022
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The flip side of disruptive change for companies

The way we manage people has undergone seismic change in the last two years giving rise to a valuable opportunity to redefine leadership for better business results, writes Paul O’Donnell. As we move into the post-pandemic era and employees navigate new hybrid work environments, it’s time for companies to review their leadership and management structures. The ‘old rules’ of management, characterised by the pyramid structure of top-down hierarchy, are no longer fit-for-purpose. In their place, we’re seeing the emergence of a very different approach characterised by both flexibility and responsiveness. The flat organisation The pandemic has created and enabled opportunities for companies to reset, rethink and reinvent how they operate. It is no longer a case of leaders rising to the top. Instead, we need a different kind of leadership — one that extends right across organisations, with fewer management ‘layers’ and greater reliance on cross-functional teams. This new collaborative culture is how leadership tends to look in what we call a ‘flat’ organisation. A flat organisation is one in which there are few or no levels of management separating the leadership from staff-level employees. In flat organisations, employees are supervised less while also being actively encouraged to get involved in decision-making. The idea is to create a more level playing field, allowing the organisation to solve business challenges by leveraging the expertise, talents and passions of the wider workforce. Benefits vs negatives There are several positives and some negatives to a flat organisational structure. On the plus side, a flat organisation can: elevate the employees’ level and sense of responsibility within the organisation; remove excess layers of management and improve the coordination and speed of communication between employees; eliminate middle management salaries, cutting costs; and nurture innovation by allowing specialists to pursue passion projects that serve the organisation. On the flipside, however, a flat structure can also: lead to confusion and potential power struggles if people are not sure who in the leadership team, is responsible for what; produce a lot of generalists, but few or no specialists — the specific role of individual employees may not be apparent; limit the long-term growth of an organisation — management may decide against pursuing new opportunities if they believe doing so might unsettle the existing structure; and struggle to adapt to change unless the company is divided into smaller, more manageable units. Creating passion Research shows that companies must have very clearly defined missions, goals, and growth plans to be successful with a flat structure in the long term. When these elements are figured out, some experts say employees can find a new passion for work. They may feel more motivated to pursue leadership roles and projects that benefit both their own career and the wider company, giving rise to a more positive work culture. Whether or not you are a fan of the flat organisation, however, one thing is for certain: returning wholesale to the hierarchical organisational structure of yesteryear is not a good idea. As transformation and disruptions become the new normal, it is time to start reimagining management. Paul O’Donnell is the CEO of HRM Search Partners.

Apr 22, 2022
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Time for CFOs to rethink their operating models

New technologies can help finance leaders to future-proof their business and think more strategically, writes Danny Buckley. One of the prerequisites of working in a disruptive market is the need to design a more flexible operating model for finance. For many, the need to transform these operating models is no longer an option – it is an imperative. CFOs are reassessing gaps in their operating models to help set better targets and improve their reporting and forecasting capability. Riding the crest of the innovation wave Since the onset of the pandemic two years ago, the rise in automation has given finance teams more scope to concentrate on higher value-added activities. One area of particular interest has been financial forecasting powered by artificial intelligence. Here, AI has the potential to help finance teams generate predictive insights and reduce margins of error — and, at some point in the near future, instant forecasting in real-time may well become the norm. To build a better view of the future in the meantime, organisations will need to embed a culture of innovation — one in which technology and data can be used together for strategic advantage. The finance team will also need to change, opening itself up to new ideas and greater collaboration with others, both within and outside the organisation. On the journey from ‘running’ finance as a function to ‘driving’ finance as a value-added service, CFOs and senior finance leaders will need to focus on: partnering with external parties to provide finance processes or activities requiring specialised technology or knowledge; embracing data ecosystems which could prove crucial as organisations look to share business information across internal boundaries; hiring people with the right skills, giving them a career path, and attracting in-demand talent; and keeping abreast of the constantly changing legislative and regulatory environment. Transformation in operating models may create opportunities for finance-as-a-service. To future-proof operating as seamlessly as possible, CFOs will need to be able to build cross-functional teams. A clear understanding of targeted business interventions will help finance leaders to use data proactively to provide operational insights so that they can drive value at scale. To do this, they with need a solid strategy combining both data and technology. Technology can create a platform for the digital transformation of the finance function and a collaborative architecture connecting a range of ecosystems. Ultimately, it can bring employees, providers, and customers together as a cohesive unit. Danny Buckley is Partner of Financial Services CFO Advisory at EY.

Apr 08, 2022
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How accounting teams can become profit generators

The key to generating profit from within the accounting department is to give your team the time to offer value-added services and strengthen key relationships. Laurent Charpentier explains how. Today’s business climate demands we do more with less and this means that even our most vital cost-management teams are now expected to do more to boost the bottom line. Here are some strategies that can help your accounting team to generate revenue as well as cut costs. Task automation Applying automation to streamline tasks can save you money — take the many vendors who like to offer early payment discounts as one example. By automating invoice and payment processes, your team can capture “early-bird” discounts consistently. This in turn can reduce the cost of company expenses because it means you pay less on invoices and avoid fees on overlooked payments. Automating time-consuming manual tasks also means your accounting staff have more time to focus on strategic tasks. They can concentrate on the payment deadlines for accounts receivables, and on collecting other receivables, such as deposits, structured payment arrangements and delinquent fees. Going paperless Operating an eco-friendly business is the way of the future, but many organisations continue to rely heavily on paper, despite the availability of inexpensive cloud storage — and accounting departments tend to be heavy power users when it comes to paper consumption. Shifting to a mainly paperless model can cut costs on several fronts. It lessens the equipment and ink costs associated with printing and copying. It also reduces the shipping, delivery, storage, and other procurement costs associated with document handling. For receivables, generating invoices digitally and emailing them to clients enhances visibility and accountability, further ensuring more on-time payments. For payables, adopting secure e-check, credit card or even virtual credit card payment policies, cuts down on the number of cheques processed, shortening your payment windows and strengthening vendor relationships. Finally, creating and storing digital records can speed up access to those documents, as well as help to reduce fraud and comply with tax audits. Data silos Data silos are information, files, software or data points accessible by one department but isolated from the rest of the organisation. As organisations grow, these silos can make internal data sharing more complex, resulting in a severe lack of transparency, efficiency, and trust. This is especially detrimental in accounting as it can limit meaningful analysis, create workflow blocks and delay the availability of vital financial data, hindering the organisation’s decision-making process. You can start to dismantle these silos by integrating departments and platforms using enterprise resource planning (ERP) software. This can help to collect and centralise data across multiple departments. Once you eliminate accounting data silos, you can then help to support analysis across the organisation aimed at uncovering insights that can help to improve profitability. Teams will have greater scope to work together and make better decisions. They can identify valuable new opportunities and develop better habits for management spend and keeping costs down. Profit generation Having already saved time and money by automating processes, you can now direct your accounting team’s focus to strengthen relationships with vendors. Paying vendors on time helps to maintain relationships, making it easier to negotiate discounts – and discounts mean wider margins and higher profits. Beyond timely payments and discounts, positive vendor relationships can also help to ensure fewer delays in your materials supply chain – the kind that might delay customer deliveries. Keeping that revenue flowing is key to profitability. With more time, your team can also offer other value-add services to customers. Offering creative financing terms can earn you transaction fees while also making payments easier for them, for example. These and other accounting-related services can boost profitability as well as reduce processing times, fraud, and transaction costs. Laurent Charpentier is the Chief Operations Officer and Chief Innovation Officer at Yooz Inc.

Apr 08, 2022
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Should this meeting be an email?

Meetings are a part of most people’s working days, but are they really the most productive way of working? Geraldine Dolan suggests stepping away from the traditional “talking shop” and considering alternatives. Situational Leadership Theory, a leadership model developed by Dr. Paul Hersey and Kenneth Blanchard, is predicated on the belief that there is no one best style of leadership. The best style of leadership will depend on the task at hand and the makeup of the team performing the task. In a nutshell, a single leadership size does not fit all, and this has never been more apparent than right now. A meeting isn’t always the solution to every problem. Over the course of the pandemic, virtual meetings became a way of not only exchanging information with colleagues and team members, but also a means to connect with others outside our homes. Now that some of us are back in the office, we have returned to the tried-and-true meeting to solve every problem, but are we right? Be mindful of your working environment systems From a systems perspective – meaning the working environment – leaders may be dealing with a combination of working models. Some team members may be returning to the office and others hybrid-working, while others have been coming into the office for the last two years. As a leader, resourcing oneself and being mindful of this ‘flux’ in our systems of working is important, particularly when you consider the external environment of war as well as a challenging and changing economic future. These challenges can impact people’s roles, the business in which they are working, and their day-to-day activities. Others for whom there is no professional impact may instead be dealing with personal challenges affect their performance – which can, in turn, impact team and business results. It is important to make the time to connect with your team in-person. Everyone needs feedback on their job, but it’s important to consider when is best time to give that feedback – could it be given in the moment, as a response to an email or message sent? Or does it need to be in a bi-weekly, one-to-one catch-up? Are the one-on-one meetings more important for brainstorming? What model works best for your team? As a leader, you are accountable for the productivity of your team. This doesn’t mean you are responsible for all of the work, however. The structure of your environment means your responsibility is delegation and people management – what does the team need to meet the collective goal? Keeping all this in mind – the different working models, the outside stressors and the workload – you have to ask yourself: could this team meeting be an email? Could a weekly status update serve my team better than a meeting? It’s important to give your team the opportunity to take ownership of their tasks and become mentors to other team members. This encourages collaboration, learning and growth while, at the same time, helping to get things done, supporting development opportunities, and enabling the team to be more agile — and, none of this needs a team meeting headed up by management. When done right, meetings can be very beneficial for everyone. They can help to build rapport, promote collaboration and encourage creative thinking. Done wrong, however — without mindfulness or situational leadership — unnecessary meetings can do little more than cost everyone their precious time. Geraldine Dolan is an Executive/Organisation Coach and Consultant.

Apr 08, 2022
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Financial investigations: what you need to know

If you find yourself having to conduct a financial investigation, the first steps you take can have a crucial bearing on the success or otherwise of the eventual outcome, writes Sinead O’Neill. It can be tempting to react immediately when you or a client identifies, or suspects, a problem with the company finances. Careful consideration should be given to all investigative actions from the outset to ensure that the integrity of the outcome cannot be called into question. First steps Before commencing any internal investigation, take a moment to consider the following issues: Time sensitivity – Does an investigation need to commence immediately, to prevent or reduce the damage to the business, or protect the evidence? Confidentiality – The matter must be kept confidential to maintain the robustness of the investigation process, avoid any further efforts at concealment, and comply with HR policies. The investigation could be carried out either overtly or covertly. In either case, however, confidentiality is crucial. Legal privileges – While this might not be at the forefront of your mind initially, you should seek appropriate legal advice before taking actions that might compromise the investigation. Expertise – Do you or your client have the necessary skills in-house to investigate the matter properly, or do you need to refer the matter externally or to a local authority? Objectivity – Those investigating should maintain objectivity and ensure there is no conflict of interest that might compromise the integrity of the outcome. Ideally, you or your client should document the investigation plan, assigning roles, responsibilities, and tasks, to key individuals. It’s worth bearing in mind that your initial suspicion or hypothesis might not have any merit. Keep an open mind and go where the evidence takes you. This may mean revisiting and revising your plan of action and timelines for the investigation, so that sufficient time and resources can be given to gathering and analysing evidence as the process unfolds. Evidence gathering An essential element in any investigation is evidence and careful consideration should be given to where the evidence is located. Is it on electronic devices? Are the devices owned by the company, or are they personal to the employee? Is the evidence password protected? Does getting the password require interviewing witnesses? Alongside these considerations, HR policies should be consulted to ensure compliance with internal policies. It is crucial that the evidence gathered is not compromised in any way. You might need to engage experts to extract the data to protect its integrity. Resist the urge to delve straight into the source of evidence. Electronic data It is rare these days that a financial investigations will not involve some element of electronic data. A forensic image should be taken of the data, where possible, and should be used for investigative analysis to maintain the data’s integrity. Data analytics can be beneficial in any investigation as it can help to identify patterns, trends, and key relationships. Keywords can be run over copied mailboxes and mapped to individuals, for example, identifying who is discussing the matter in question and to what extent. This level of analysis would be near-impossible if reliant on manual techniques alone. Full-circle reporting It is essential to acknowledge that work should not cease upon the conclusion of the investigation. The results of the investigation should be communicated, corrective action taken, and the performance of the investigation evaluated. This full-circle reporting can be invaluable to a company because it strengthens the organisation’s defences while also discouraging future in-house wrongdoing. Investigations are not only a critical component of uncovering wrongdoing, such as fraud, but also act as a deterrent to others both within and outside of the business. As such, it is vital that they be carried out correctly. Sinead O’Neill is the Director of Forensic and Investigation Services at Grant Thornton Northern Ireland. 

Apr 01, 2022
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Company acquisitions, the labour market and lessons in due diligence

Understanding the current labour market is essential when it comes to business acquisition. Richard Crisp highlights four areas of due diligence to consider when buying a company. The post-Brexit exodus of European workers from the UK and ‘The Great Resignation’ have put enormous strain on the labour market. Some companies are struggling as their business models and cost bases come under pressure. When buying a company, understanding whether the target has priced in cost pressures appropriately is crucial to making the right decision. The first step in understanding a target’s future probability has traditionally been to analyse historical trends. The volatility of the current labour market dynamic means, however, that historical trading may not fully reflect some recent cost pressures. You should further analyse how this unique labour market dynamic impacts target businesses and how it can be accounted for in your due diligence. Here are four areas of due diligence that can help build confidence in the success of an acquisition. 1. Wage inflation Employers are being forced to offer lucrative packages to attract and retain talent in competitive markets, leading to exceptional increases in wages and salaries. Historically, an assumption of a two to three percent salary increase annually was relatively standard. Employers need to be aware that this may not be sufficient to maintain quality staff in the current environment, however. Comparing the salaries for recent hires to historical hires for the same role may indicate wage inflation while increasing churn or difficulty filling positions may indicate that current salaries are not sufficiently competitive. 2. Use of subcontractors Some businesses may be turning to subcontractors to plug gaps and overcome short-term resourcing constraints. Even when this is justified to allow flexibility around seasonal peaks and troughs, it tends to be more expensive. You should strive to establish a ‘normal’ level of subcontractor use for your target. This will form an important part of your due diligence, as will the tax risks associated with off-payroll labour. 3. Talent and growth The achievement of business plans is often heavily dependent on a company’s ability to grow the staff base and attract suitably experienced individuals. Consider adapting the pace of projected growth to allow some contingency in a challenging hiring environment. 4. Staff training and development Some companies may choose to take a long-term approach and invest in developing junior staff rather than pay a premium for experienced talent. While this will likely be cheaper in the short term, junior staff will take longer to get up to speed. This can lead to a slower ramp to optimum revenue generation and profitability. Make sure you understand the hiring strategy and that this is appropriately reflected in your forecasts. And the rest… In addition to labour market issues, your acquisition target may also be dealing with other challenges. Imminent cost increases, such as the National Living Wage and NIC rises scheduled for the UK in April 2022, could materially impact a company’s gross and EBITDA margins. Soaring energy prices and Brexit-related import and export difficulties are also impacting some sectors. Understanding these issues will be paramount to forming a complete view of your target’s future maintainable earnings. These issues have affected our recent due diligence deals and may continue to do so for some time. It is important, therefore, that your projections model is flexible and robust enough to model scenarios and sensitivities. This will help you to avoid any nasty surprises. Richard Crisp is Director of Corporate Finance Director at BDO UK

Apr 01, 2022
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What does LULUCF mean for your business?

Land use, land-use change and forestry is becoming increasingly important when it comes to climate change, but what is it, and how does it impact your organisation? Orlaith Delargy dives in. It might be strange to think of Ireland’s land and forestry as a ‘sector’, but under Ireland’s Climate Bill 2021, emissions from this sector will need to reach net zero by 2050. Land use, land-use change and forestry (LULUCF) is a vital part of Ireland’s climate challenge – and solution. What is LULUCF? LULUCF is one of the categories in the UN’s greenhouse gas accounting framework. Emissions from forests, grasslands, croplands, wetlands and land-use change are reported under this category. We often think that areas such as forests and wetlands absorb carbon, but the LULUCF sector in Ireland has been a net source of GHG emissions in all years from 1990 to 2019. In 2018, for example, the LULUCF sector emitted 4.8 megatonnes of CO2 equivalent (MtCO2e). That’s on par with total emissions from combustion in the manufacturing industry. In particular, grasslands and wetlands are considerable sources of emissions due to the drainage of organic soils and peatlands, which releases carbon and increases emissions. LULUCF in the Climate Action Plan 2021 Under the new Climate Action Plan 2021, the LULUCF sector will have to cut two to three Metric tons of carbon dioxide equivalent (MtCO2e) by 2030. The challenge could be even greater if Ireland’s forest sink continues to decline – cuts of 4.6 MtCO2e may be required.  How does the Climate Action Plan 2021 propose to meet this challenge? Rapidly increasing afforestation and rehabilitating and restoring peatlands are key pillars of the proposed actions. We will see the publication of the National Land Cover Map and the National Land Use Review, which will support decision making around Ireland’s land use. A new Forestry Strategy and Programme will be launched in 2023, along with agri-environmental schemes encouraging farmers to establish and maintain forests on their land. The Government will support the development and use of timber and harvested wood products, with knock-on effects for the construction industry. The role of agriculture A range of agricultural measures will be introduced to increase carbon sequestration, and a National Agricultural Soil Carbon Observatory will be established. Measures to increase carbon sequestration include incorporating straw and cover crops in tillage, using multi-species swards on Ireland’s grasslands, and increasing the number of hedgerows and trees on farms. The next National Biodiversity Action Plan is under development and will include a range of measures to support the delivery of the Climate Action Plan 2021. The role of oceans The role of the oceans in carbon sequestration will also be reviewed, with efforts to increase public and scientific understanding of the effects of climate change on the sea. What’s the takeaway for businesses? Businesses in all sectors depend directly or indirectly on natural capital (the land, the sea and everything in between) for essential goods and services such as clean air, clean water, food, timber, and well-being. Climate change and biodiversity loss seriously threaten these goods and services. According to the Global Reporting Initiative (GRI), less than 25 percent of large companies at risk of biodiversity loss disclose their impacts. This year, GRI and CDP are ramping up their expectations for corporate reporting on biodiversity. The Taskforce for Nature-related Financial Disclosures (a global initiative to provide organisations with a framework to address environmental risks) will publish the first draft of its recommendations. To keep pace, businesses need to begin mapping their dependencies and impacts on natural capital to ensure that everyone can continue to benefit from ecosystem goods and services into the future. Businesses should assess and disclose nature-related financial risks and incorporate these factors into their risk management and investment decision-making. Companies with land holdings of any size should consider what they can do – and who they can partner with – to improve carbon sequestration and biodiversity and support Ireland’s LULUCF targets. Orlaith Delargy is Associate Director at KPMG Sustainable Futures.

Apr 01, 2022
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The coach's corner - April 2022

Julia Rowan answers your management, leadership, and team development questions. I try to be a good leader to my team – I coach, give feedback, help them develop new skills, etc. A few things have happened at company level (e.g. policy changes, unpopular decisions, team members not getting a promotion), and I feel I am getting the blame. As a result, there’s a lot of negative talk about the company, and the spark has gone out of the team. How do I get it back? Leaders often find themselves working very hard to defend, explain, and compensate for organisational issues over which they have no control. You have done a lot of good legwork here, and now you need to trust yourself. Lean into the discomfort, acknowledge the difficulty, offer support and put the ball back in your team members’ court.  For example, if somebody talks about “crazy promotion decisions” you might say, “I’m sorry you did not get that role. How can I help you be successful next time?”  Or, if someone talks about “stupid policies”, you might say something like, “It’s tough when these things don’t make sense. Is there something I can do to help?”   The critical thing here is to catch the moment of the criticism and change your response from explanation to acknowledgement. This is easy to write but hard to do, and you will kick yourself more than once as you realise you’ve launched into an explanation. One day you’ll stop doing it – and your team will feel heard. You might consider respectfully bringing the issue up with the team: “I feel that some organisational issues are impinging on our motivation. At our next meeting, should we talk about how we get our mojo back?” Listen to each person and ask the team how they want to move on. My guess is that the team will have arrived at that point themselves. I am pretty good at my job, but my manager micro-manages me. Nothing can be complete without her checking it. She makes irrelevant changes to my work, and even internal documents are drafted and redrafted. Apart from the frustration, it takes up huge time. How can I get her to back off? There are a lot of ways to answer this: we could look at your performance, the pressure your manager is under from their boss and your manager’s personality.  We could say that trying to change other people is generally a waste of time. The only person you can change is yourself, meaning you need to decide to live with, address or leave the situation.  Suppose you want to address the situation. Try to see beyond your manager’s behaviour and look at her intention: what is she trying to achieve? What hopes and fears lie beyond her behaviour? What does her behaviour tell you about what is important? Connect her behaviour with her intention and use it. For example, when she delegates work to you, explore what is important to her (accuracy, completeness, speed, etc.). Then let her know that you have heard her concerns and priorities. My read of this situation is that she is concerned about being (seen to be) good enough. You should ask yourself how you can usefully connect with and ease those concerns.  Julia Rowan is Principal Consultant at Performance Matters, a leadership and team development consultancy. To send a question to Julia, email julia@performancematters.ie.

Mar 31, 2022
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Counting the costs

SMEs hit hard by the pandemic must now grapple with the economic fall-out of the war in Ukraine, signalling fresh uncertainty for the year ahead, so what’s the best plan of action? COVID-19 lockdowns, global supply chain disruption, inflationary pressure – and now the economic fallout from the Russian invasion of Ukraine.  The headwinds facing Ireland’s small- and medium-sized enterprises (SMEs) show no signs of easing as we enter the third quarter of 2022. Even as the year began, the imminent winding down of Government supports for COVID-hit businesses was already prompting speculation of a spike in insolvencies just around the corner. Now, Gabriel Makhlouf, Governor of the Central Bank of Ireland, has called on a “patient” approach from policymakers and creditors to help ensure that “unnecessary liquidations of viable SMEs are avoided over the coming months.” Speaking at a recent event in Dublin co-hosted by the Central Bank of Ireland, Economic and Social Research Institute, and the European Investment Bank, Makhlouf pointed to the need to “channel distressed but viable businesses towards restructuring opportunities and unviable businesses towards liquidation.” Uncertain outlook For those SMEs in the sectors hit hardest by the pandemic, the fresh economic turmoil sparked by the Ukraine invasion will be a cause for concern. “The outlook right now for SMEs generally in Ireland is very hard to determine,” said Neil McDonnell, Chief Executive of the Irish SME Association (ISME). “It will vary considerably from sector to sector, but after two bad years for hospitality and tourism due to the pandemic, the war in Ukraine is likely to mean volumes will remain low into the summer.”  Pandemic-related insolvencies have yet to spike. Research released by PwC in February found that Government support had saved at least 4,500 Irish companies from going bust during the pandemic, representing an average of 50 companies per week during the period. Insolvency rates are likely to rise in the months ahead, however, as pandemic supports are withdrawn from businesses with significant debts, and PwC estimates that there is a debt overhang of at least €10 billion among Ireland’s SMEs, made up of warehoused revenue debt, loans in forbearance, supplier debt, landlords, rates and general utilities.  “Government supports have to end at some point. We realise this, but it will be accompanied by a significant uptick in insolvencies. This is natural and to be expected, since 2020 and 2021 both had lower levels of insolvency than 2019,” said Neil McDonnell. “Aside from hard macroeconomics, however, we can’t ignore the element of sentiment in how businesses will cope. This is the third year in a row of bad news.” Confidence in the market Before taking on his current role as Managing Partner of Grant Thornton Ireland, Michael McAteer led the firm’s advisory services offering, specialising insolvency and corporate recovery. “What I’ve learned is that you really cannot underestimate the importance of confidence in the market,” said McAteer. “If we go back to 2008 – the start of the last recession – or to 2000, when the Dotcom Bubble burst, we can see that, when confidence is lacking, the pendulum can swing very quickly. “If you’d asked me a few weeks ago, before the Ukraine invasion, what lay ahead for the Irish economy this year, I would have been much more optimistic than I am now. “Yes, we were going to see some companies struggling once COVID-19 supports were withdrawn, particularly those that hadn’t kept up with changes in the marketplace that occurred during the pandemic, such as the shift to online retail – but, overall, I would have been confident. Now, it is harder to judge.” Government supports Neil McDonnell welcomed the recent introduction of the Companies (Rescue Process for Small and Micro Companies) Act 2021, which provides for a new dedicated rescue process for small companies. Introduced last December by the Department of Enterprise, Trade and Employment, the legislation provides for a new simplified restructuring process for viable small companies in difficulty. The Small Company Administrative Rescue Process (SCARP) is a more cost-effective alternative to the existing restructuring and rescue mechanisms available to SMEs, who can initiate the process themselves without the need for Court approval. “We lobbied hard for the Small Company Administrative Rescue Process legislation. The key to keeping costs down is that it avoids the necessity for parties to ‘lawyer up’ at the start of the insolvency process,” said McDonnell. “Its efficacy now will be down to the extent to which creditors engage with it and, of course, it has yet to be tested in the courts. We hope creditors will engage positively with it.” McDonnell said further government measures would be needed to help distressed SMEs in the months ahead. “We already see that SMEs are risk-averse at least as far as demand for debt is concerned. Now is the time we should be looking at the tax system to incentivise small businesses,” he said.  “Our Capital Gains Tax (CGT) rate is ridiculously high, and is losing the Exchequer potential yield. Our marginal rate cut-off must be increased to offset wage increases.  “Other supports, such as the Key Employee Engagement Programme (KEEP) and the Research and Development (R&D) Tax Credit need substantial reform to make them usable for the SME sector.” Advice for SMEs For businesses facing into a challenging trading period in the months ahead, Michael McAteer advised a proactive approach. “The advice I give everyone is to try to avoid ‘being in’ the distressed part of the business. By that, I mean: don’t wait until everything goes wrong.  “Deal with what’s in front of you – the current set of circumstances and how it is impacting your business today.  “Ask yourself: what do I need to do to protect my business in this uncertain climate, and do I have a plan A, B and C, depending on how things might play out? “Once you have your playbook, you need to communicate it – and I really can’t overstate how important the communication is.  “Talk to your bank, your suppliers, creditors, and your employees. Sometimes, we can be poor at communicating with our stakeholders. We think that if we keep the head down and keep plugging away, it will be grand.  “By taking time to communicate your plans and telling your stakeholders ‘here’s what we intend to do if A, B or C happens,’ you will bring more confidence into those relationships and that can have a really positive impact on the outlook for your business. “Your bank, your creditors and suppliers are more likely to think: ‘These people know their business. They know what they’re doing.’ If something does go wrong, they know that there is already a plan in place to deal with it.” Role of accountants Accountants and financial advisors will have an important role to play in the months ahead as distressed SMEs seek advice on the best way forward. “We are about to experience levels of inflation we have not seen since the 1980s. This will force businesses to address their cost base and prices,” said Neil McDonnell. “My advice to SMEs would be: talk to your customers, to your bank, and your accountant. Your accountant is not just there for your annual returns. They are a source of business expertise, and businesses should be willing to pay for this professional advice. No business will experience an issue their accountant will not have not come across before.” As inflation rises, SMEs are also likely to see an increase in the number of employees seeking pay increases, McDonnell added. “Anticipate those conversations, if they haven’t occurred already,” he said. “Any conversation about wages is a good time to address efficiency and productivity – is there more your business could be doing to operate more efficiently, for example, thereby mitigating inbound cost increases?”

Mar 31, 2022
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What Russia’s invasion of Ukraine means for neutrality in Europe

The war in Ukraine will profoundly impact the defensive stance of the EU’s neutral countries. Russian President Vladimir Putin’s decision to invade Ukraine is changing Europe in ways the Kremlin did not build into its calculations when it sought to conquer its western neighbour.  NATO, the EU and the United States are united in their agreement over an unprecedented, punitive package of sanctions against Russia.  Individual NATO members are sending lethal weapons to Ukraine. NATO, which has boosted its defences in Poland, the Baltic States and Romania, has ruled out a no-fly zone over Ukraine. It fears retaliation from Putin, even the threat of a nuclear strike. Meanwhile, Europe has opened its doors to refugees. No more squabbling over who to admit or how many numbers will flow into each country compared to 2015, when former German Chancellor Angela Merkel gave shelter to over one million Syrian refugees fleeing the war. Germany has thrown away its ‘rule book’. The belief that wandel durch handel (change through trade) would bring Russia closer to Europe is over.  Social Democrat Chancellor Olaf Scholz has reached a Zeitenwende — a turning point — not only regarding Russia, but domestically as well. German defence spending has risen to two percent of gross domestic product, equivalent to about €100 billion a year. The anti-American and pacifist wings in Scholz’s party are also toeing the new line — for now. As for the EU, its foreign policy chief, Josip Borrell, said the bloc would send weapons to Ukraine. What a turnaround for a soft power organisation built on a peace project. This may see the EU transition from a soft power provider to a hard power player as it now urgently reassesses its security and defence stance.  This is where the neutral countries of Ireland, Finland, Sweden, Austria and Malta face challenging debates and decisions. All have signed up to the EU’s Common Security and Defence Policy. With the exception of Denmark and Malta, they are participants in the EU’s Permanent Structured Cooperation (PESCO), aimed at increasing defence cooperation among the member states. They benefit from the decades-long US policy of guaranteeing the security umbrella for its NATO allies in Europe. Somehow, the neutral countries are having their cake and eating it too, but for how much longer? Russia’s attack on Ukraine changes everything about the future role of Europe’s security and defence policy. This was confirmed during the informal summit of EU leaders in Versailles in March. Europe has to take defence seriously.  Neutral Finland and Sweden already cooperate very closely with NATO. Russia’s invasion is leading to intense debates about whether both should now join the organisation.  As for Ireland? The war in Ukraine is linked to the security of all of Europe, forcing neutral countries to confront the reasons for their continued neutrality.  Maintaining neutrality at a time when Europe’s security architecture and the post-Cold War era is being threatened is no longer a luxury monopolised by pacifists, or those who link neutrality to sovereignty. It is about providing security to Europe’s citizens and how to do it collectively.  Taoiseach Micheál Martin has said discussions about military neutrality are for another day. Neutrality, he said, “is not in any shape or form hindering what needs to be done and what has to be done in respect of Ukraine”.  Neale Richmond, Fine Gael TD, has described the neutrality policy as “morally degenerate,” calling for a “long-overdue, serious and realistic conversation” about it.  Tánaiste Leo Varadkar has attempted to straddle both sides here. “This does require us to think about our security policy,” he has said. “I don’t see us applying to join NATO, but I do see us getting more involved in European defence.” Martin did later concede: “The order has been turned upside down by President Putin.” Neutral Ireland – and the rest of the EU – now must draw the consequences. Judy Dempsey is a Non-Resident Senior Fellow at Carnegie Europe and Editor-in-Chief of Strategic Europe.

Mar 31, 2022
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Reviewing our economy with a focus on value and equity

Tackling climate change will mean embracing economic models that prioritise the many, not just the elite few, writes Kate van der Merwe. In the pursuit of a holistic and inclusive economy that can serve current and future generations, we need to take a fresh look at our economic alternatives.  We are facing existential challenges: a climate crisis that we continue to escalate; a biodiversity crisis that is the sixth mass extinction; and significant inequities that the coronavirus pandemic has served to both highlight and exacerbate.  We must review how our economy works with a focus on real value and equity. In doing so, let’s scrutinise the underlying assumptions and realities, and consider alternative options, including the transformative innovations of social and circular economies. The current context Traditionally, economics is often framed as the study of how people make choices and allocate scarce resources over time, individually and collectively — for example, forsaking consumption now for later benefit (in finance, the choice to invest). Key concepts include ‘utility’ (the satisfaction from something) and ‘consumption.’  The relationship between both is represented by the ‘utility curve,’ which defines utility in direct and positive relation to consumption. Simplified, this means that the more we consume, the happier we are.  In finance theory, utility becomes defined in terms of monetary value. The concept of ‘consumption’ also defaults to a narrow definition of a one-time event. When supply meets demand in the market, for example, economic actors (businesses) are driven to mass-produce for one-off transactions, placing emphasis on short term profits.  When core concepts are so narrowly defined, the underlying utility or value is distorted. By focusing so narrowly on monetary value, we can become disconnected from the real value of the ‘thing’ money is buying and being valued upon. An investor following these limited definitions might, for example, invest in a high-yield mining company even if those yields are derived from destroying the health and wellbeing of their community, and feasibly worsening the investor’s overall utility, particularly in the long term.  If we assume that the fulfilment of our essential physiological needs has the highest incremental utility, then a theory assuming and supporting insatiable consumption — despite the consequences of that consumption threatening our essential physiological needs — appears contradictory.  As the COVID-19 pandemic has highlighted, inequity remains a significant challenge. In the current global economy, just one percent of the population holds 38 percent of wealth, while 50 percent holds just two percent.   During the pandemic, the world’s 10 richest men doubled their wealth. As the average worker faced job insecurity, CEO compensation rocketed. In the US, the CEO-to-worker compensation ratio reached 351:1 (in 1965 it was 21:1).  The pandemic has been a relatively mild precursor to the disruption that is building because of climate change – a threat that we have created, one that our current economic system perpetuates and that we have the power to stem. In facing this disruption, we will need economic models that prioritise the many, not just the elite few.  Alternative approaches Alternative models and ideas include circular, ecological, ‘donut,’ community, collaborative or sharing, social and solidarity economies. Loosely speaking, many focus on or draw inspiration from addressing social inequity and/or the environmental crises.  They look to democratise the economy, to better address systemic inequities, as well as incorporating realistic assessments of nature’s limits, so that we might begin to tackle our self-destructive environmental trajectory. Many of these ideas are not new. They are part of our history.  Their elegance is in their flexibility and compatibility with being layered and combined, an example being a social enterprise engaged in the circular economy. Given the breadth of this topic, this article briefly discusses two of the alternative models: social economy and circular economy. The social economy While the concept of the social economy is long-standing, its definition is evolving. Existing forms of social economy businesses include cooperatives, mutuals and social enterprises. Key features include a core organisational purpose of maximising societal and/or environmental impact, not profit, through the reinvestment of profits, and often incorporating democratic governance.  Existing forms of social economy businesses include cooperatives, mutuals and social enterprises. Within the EU, 2.8 million (10 percent) of all organisations are social economy enterprises, employing 13.6 million people.  While GDP is a problematic measure, the social economy contributes eight percent of the EU’s. One growing and exciting part of the social economy are those social start-ups that are applying innovative solutions to some of our biggest problems, like climate change, often tackling social and environmental issues simultaneously.  During the COVID-19 pandemic, the social economy gained visibility for its resilience and its value creation on a broader scorecard and structural supports are developing.  Last year, when announcing social enterprise funding, Minister for Rural and Community Development, Heather Humphreys, recognised social enterprises for “the invaluable role” they played throughout the pandemic, making “an important contribution in areas such as mental health, social inclusion and the circular economy.” In 2019, the Irish Government published the National Social Enterprise Policy for Ireland 2019–2022, which is also a core component of the State’s plans for rural and community development.  The EU is also scaling up support for the social economy, publishing the Social Economy Action Plan in 2021 for implementation this year, with plans for an EU Social Taxonomy.  A European stalwart of the social economy, based in the Basque Region of Northern Spain, is the Mondragon Cooperative Corporation.  Established in 1956, Mondragon is one of the largest corporates in Spain, with sales in over 150 countries. It comprises a collection of mutually supporting social enterprises engaged in education and innovation, finance, retail, and manufacturing/engineering (including the esteemed Orbea bicycles brand and Urssa, the world-renowned steel manufacturer).  Mondragon is particularly intriguing given its social impact aspirations — the structures and practices it has created to differentiate itself as social (such as maintaining a pay ratio limit of 6:1), while maintaining success in an ill-fitting capitalist economic structure.  Ireland also has its own booming social enterprise sector, with plenty of examples across a wide range of sectors, such as:  FoodCloud (connecting retailers with charities to donate food);  Airfield Estate (a working farm, kitchen, education, and food destination in Dublin); WeMakeGood (Ireland’s first social enterprise design brand) and; Moyee Coffee (“a radical company with radical [Fairchain] impact”). The circular economy The circular economy is also gaining ground, driven by the threat of climate change. The circular economy designs out waste by optimising scarce resources to build a restorative and regenerative economy.  It does this by deploying interdisciplinary systems thinking, i.e. considering complex systems holistically, and incorporating relationships and interdependencies between parts.  A long-term approach to resources, especially minimising the use of raw materials, fundamentally contrasts the circular economy with the linear ‘take-make-waste’ economic system.  The circular economy treats natural resources as scarce, which serves to keep climate breakdown and the threat to our survival front and centre. Maintenance and repair services grow, while production becomes more focused on non-virgin sources, thereafter prioritising regenerative materials. The emphasis is on prolonging the life and utility to be gained from products. This shifts the focus from expiry-bound consumption to ongoing use. The circular economy also diversifies the ways we transact – from individual ownership to shared ownership or rental (product-as-a-service).  The Whole of Government Circular Economy Strategy 2022–2023: Living More, Using Less, the first of its kind in Ireland and the Environmental Protection Agency’s Circular Economy Programme 2021–2027, both launched in December 2021.  These are core to the Irish Government’s drive to achieve a 51 percent reduction in greenhouse gas emissions by 2030 and to reach net-zero emissions by no later than 2050. A Circular Economy Bill is also in development.  Similarly, the EU is enabling the circular economy as part of the European Green Deal, adopting a new circular economy action plan (CEAP) in March 2020.  This action plan introduces both legislative and non-legislative measures aimed at facilitating the transition to a circular economy, including the establishment of the European Circular Economy Stakeholder Platform for sharing and scaling up the circular economy. Examples of businesses successfully applying circular principles include MUD Jeans, which offers a discount on the next purchase or lease for each pair of end-of-life jeans returned, recycling the returns into new jeans, eliminating waste, and using 92 percent less water in production.  Locally, the Rediscovery Centre in Dublin is the National Centre for the Circular Economy in Ireland. It hosts four up-cycling social enterprises in fashion, furniture, bicycles, and paint, as well as an Eco Store, and provides various educational offerings. Traditional businesses are also increasingly incorporating circular elements. Harvey Norman, for example, is offering preowned, refurbished phones. Holistic view While the traditional economy has a limited singular focus on the point-of-purchase, many of the alternative economy models, such as social and circular, take a more holistic view and can recognise and pursue multiple goals simultaneously.  Such models reflect the complexities of our environment, including the challenges of climate change, and intrinsic value, more accurately. These alternative ideas are also more dynamic. They can be combined with one another and enable better designed, more resilient outcomes.  Greater care is taken in defining what an organisation does as well as how it does it, generating more equitable outcomes by holistically considering impact, and providing greater long-term efficiency in synthesising society’s needs and the management of scarce natural resources.  In doing so, these alternatives better address critical unpriced externalities and offer ways to change our current self-destructive trajectory. Our traditional economy appears to focus on scarcity of value, durable efficiency, and resources, while the alternative economy models focus on their regeneration and restoration.  These alternative ideas offer fundamentally different approaches in how value is created, measured, and maintained, and are better suited to the holistic and inclusive economy needed by current and future generations. Kate van der Merwe, FCA, is a Sustainability Advocate and member of the Institute’s Sustainable Expert Working Group.

Mar 31, 2022
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Taking up the hybrid-helm

As we cautiously return to the office, many leaders are considering afresh the changes they made to their management style during the pandemic. Four members outline how their organisation, team, and leadership outlook has changed since March 2020. Gareth Gallagher  Managing Director at Sacyr Concessions  The biggest challenge over the last two years was having to continue operating our assets fully in as safe a way as possible for our staff and the public, and we had to allow anyone who could work from home to work from home.  The government deemed keeping the toll roads safe and operational an essential service, so many of our staff had to work on site. Because of this, we had to continuously do risk assessments to keep our team safe and comply with public health guidelines, such as shift change patterns and fitting out internal structures in vehicles.  Now, though, the staff that had been able to work remotely have started coming back to the office a few days a week. It is nice to have physical meetings with people again, but everyone must remain flexible. There could be times when more face-to-face meetings are required.  The last two years have made it clear to people what is important to them, and that is why flexibility and a hybrid model is more important for job satisfaction than they might have been previously. The hybrid model gives people more autonomy over time and has been proven to work, but the last few years have also emphasised that in-person meetings are more efficient for certain work requirements.  Above all, the pandemic emphasised that communication is critical, and it has probably made me more conscious that I need to check in with people on a more regular basis.  Larissa Feeney  CEO and founder at accountantonline.ie The pandemic coincided with a period of rapid growth in our business. We were in the middle of hiring key staff and implementing new practice management software and about to launch other initiatives when COVID-19 struck, and the future suddenly looked very uncertain.  Fortunately, we already had quite an embedded blend of hybrid and fully remote models in place since 2018, so the move to being fully remote was technically straightforward.  Although we have an office presence in Dublin, Derry and Donegal, over 80 percent of our teams now work fully remotely, and the remainder almost all work hybrid.  The move to almost fully remote working came about by necessity but is hugely positive in many ways for us. I’ve learned that working from home does not suit everyone, and it is undoubtedly the case that regular, daily contact is essential across the teams.  I was concerned that remote staff would miss out on showcasing their talents, and people would become overlooked for promotion and development. However, we are working hard to avoid that with coaching, leadership training and career planning, which has had a positive impact on the visibility of talent development. We have hired an additional 20 people in the last two years. It is still strange but becoming much more normal for me to work with so many people I have not met in person yet. This year, we have planned a series of in-person meetings throughout the country for staff to meet in peer groups, and in May, we will have one larger gathering with all staff for the first time in two years.  Since March 2020, I have supplemented my communication style by scheduling skip level one-to-one video meetings with all individuals so that I can hear staff feedback. I have found that to be a great benefit in understanding their challenges, ideas and suggestions for improvement.  Working life might be easier if we all worked under the same roof, but there are significant personal benefits and cost and time saving to working remotely. Derek Mernagh VP Corporate Controller at KeepTruckin I am a Corporate Controller leading an accounting organisation based in the San Francisco area of the US. I went from sitting in-office with my team five days a week in early 2020 to now managing my team remotely in a matter of days.  I never imagined how the work culture I had gotten used to would change so drastically. I would have thought, at the time, that doing my job remotely would not be possible.  I changed jobs last year and have never met any of my current team in person. This has been a considerable change to adapt to, as I had been so used to in-person management and felt that knowing the team in person helped build stronger working relationships and trust.  Also, the dynamic of meetings was more open and transparent, as everyone had met each other in person, and I felt people were more comfortable in sharing their opinions. Building that connection with the team is more challenging in a remote environment, but I have learned to adapt.  We meet more often because we feel we should check-in due to the work from home environment, but this brings some challenges. “Zoom fatigue” is a real thing.  I try to check-in with my team using direct messages or group channels on collaborative tools like Slack to ask how they are and how things are going. I also have monthly team meetings that we try to make more light in content, so the team can get to know each other better.   There are advantages with the current work schedule that my team and I appreciate, such as no commute time, but finding a hybrid solution for the future where some connection is possible will be a perfect balance.  Una Rooney Corporate Accounting Manager at Allstate Northern Ireland In my company, we have always had the option of remote working; however, it was not often invoked. Since the pandemic, they have now adopted a hybrid working environment which I feel has created an innovative and energised work environment across all locations in Northern Ireland and America. Would I have answered this in the same way in June 2020? I’m unsure. Through the pandemic, we had enforced a work-from-home model. This presented challenges as an organisation and management group in finance, such as onboarding, ensuring people took leave, keeping employee engagement, maintaining a high standard of deliverables, and retaining relationships virtually.  In hindsight, as an already global team with team members in Chicago, we were achieving what we thought were challenges daily. We initially took more time and effort to think outside the traditional corporate box to adapt. I did become more deliberate in my actions and aimed to be seen as much as possible so the team could practice what I was preaching. I ensured I was taking breaks, upskilling remotely and always available for a call.  We did bingo, escape rooms, virtual team lunch, and breakfast for stateside members as a team. These activities were required to ensure collaboration and inclusivity since casual coffees and lunches were no longer on the table.  I know this kind of engagement isn’t for everyone but by providing a non-busy period, we were able to look after staff mental health while helping integrate new starts and build up relationships with other team members and myself as manager.  By building up this rapport and respect virtually, I felt we saw the deliverables and standards being maintained. Team members were open to asking questions, and I kept an open-door policy to ensure communication was still prevalent. We all made a forced change. Before, I was an office worker and never thought of hybrid as an option. Now, the working world is evolving and, if used correctly, can bring a highly-motivated and highly-productive finance team globally. 

Mar 31, 2022
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Central banks need to take away the punch bowl

Overdone stimulus at the height of the pandemic, supply chain disruption and Russia’s Ukraine invasion are all fuelling spiralling inflation. Central banks need to work harder to find the economic sweet spot, writes Cormac Lucey. Two years ago, as COVID-19 was first running rampant worldwide, our economic authorities resolved to prevent the resulting shutdowns from turning into economic depression by unleashing an unparalleled level of economic stimulus.  In the UK, the budget deficit shot up to 15 percent of GDP. In Ireland, the deficit approached 10 percent of modified gross national income. This fiscal support was accompanied by strong monetary stimulus.  Whereas UK broad money grew by six percent in the two years to June 2019, it rose by 22 percent in the two years to June 2021. The equivalent figures for the Eurozone were nine and 18 percent, respectively.  While a medical nightmare was unfolding for our health services from March 2020, from an equity investor’s perspective, the 18 months that followed represented a sweet spot, as authorities stuffed economic stimulus into their economies and asset prices were the first beneficiaries.  Since April 2020, UK stock prices (as represented by the FT 100 index) have risen by over 35 percent, while Irish shares (Iseq index) have jumped by over 40 percent. What’s bad for Main Street is often good for Wall Street.  Now, as the COVID-19 threat recedes, this threatens to go into sharp reverse. What’s good for Main Street risks being bad for Wall Street.  Sharp rises in inflation across the developed world are forcing central banks into withdrawing monetary stimulus and pushing interest rate increases. What lies behind this sudden burst in inflation?  First, levels of policy stimulus were overdone in some parts of the world. Whereas the growth in two-year money supply figures referenced above was nine percent in the Eurozone and 16 percent in the UK, it was 25 percent in the US. Guess who has the biggest inflation problem?  It is also notable that there is little or no marked inflation problem in South-East Asia, where the COVID-19-induced increase in money supply was minimal.  Second, supply chain problems, especially energy, have contributed significantly to recent inflation readings. Eurozone inflation in the 12 months to January was 5.1 percent. Excluding energy, it would have been just 2.6 percent.  Sharply rising energy prices are a symptom of the West shutting down conventional carbon-based sources of supply before alternative sources are ready to take up the slack.  This shortage has been aggravated by sanctions imposed on Russia following its invasion of Ukraine. Over time, we should expect supply chain problems to be fixed and higher energy prices to be their own cure, suppressing demand and allowing for price stabilisation and reductions. The financial sweet spot of two years ago risks becoming a sour spot as central bankers rush to restore their credibility in the face of ever-higher inflation readings.  Jerome Powell, Chair of the US Federal Reserve, said recently, “The [Federal Open Market] Committee is determined to take the measures necessary to restore price stability. The American economy is very strong and well-positioned to handle tighter monetary policy.’’  Well, over fifty years ago, the then-Chair of the Federal Reserve, William McChesney Martin, said the central bank’s job was to “take away the punch bowl just when the party gets going.” His successors may not just have to take away the punch bowl, but also shove partygoers into a cold shower. There is a real danger that an already slowing US economy could be pushed into a recession by aggressive central bank tightening. Europe would be unlikely to escape the resulting economic fallout.  Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland.

Mar 31, 2022
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