Julia Rowan answers your management, leadership, and team development questions. I recruited a team member three years ago. She had great qualifications and experience and, on many levels, was a good performer. I found it hard to give her feedback – she took it very personally. I often ended up taking work back from her and completing it rather than give her feedback. She is moving on and I’m about to recruit her replacement. How can I avoid this happening again? A. People often find it hard to hear feedback: they may see correction as failure, have come from a place (home, school, previous employer) where ‘feedback’ was a dirty word – and generally only given when things went wrong. It can be useful to set expectations by asking a feedback-related question at interview. For example: “In this firm, we share a lot of feedback. Can you give me an example of some helpful feedback that you have received in the past and what the impact of that was?”   When your recruit joins, revisit the feedback issue as part of a broader induction conversation: “We loved the example you gave at interview about the feedback you received. On this team, we share a lot of feedback about what works well and what doesn’t work well so let’s sit together regularly to reflect on how you are doing.”  Make sure to follow up on this regularly and acknowledge what they are doing well. It’s easy to overlook good performance. Give the positive feedback first and then bridge to the developmental feedback. Don’t use the word ‘but’ – it negates the positive feedback. Make sure that your body language, vocal tone and the words you use support the ‘feedback is normal’ message. Rehearse the feedback you plan to give out loud with a warm, confident tone. Your recruit has a right to know how they are doing. In my boss’s eyes, everything is urgent and important. Priorities change by the day and there is always a sense of panic. I like my boss and this firm, but I don’t want to work like this. How can I improve this situation? A. It sounds like your boss is stressed, not doing her best thinking, and unlikely to realise the impact of her behaviour. You need to think this through carefully before you talk to her and work out: what is the positive intention behind her behaviour? In this case, that could include setting high standards, giving clients great service, or avoiding a backlog.  Work out what you want in place of the current behaviour (a weekly meeting to agree priorities, an agreement that you decide on priorities etc.) and request a meeting. Give your boss a heads up on what you want to talk about. When you meet her, don’t describe her behaviour; instead, connect with her intention (“I appreciate the high standards you set”), and agree with her (“I want to meet those standards”). Then ask for a recurring meeting to plan the week ahead.  Julia Rowan is Principal Consultant at Performance Matters, a leadership and team development consultancy. To send a question to Julia, email julia@performancematters.ie.

Drawing on research and global experience, Munro O’Dwyer explains why the creation of a sustainable State pension system is a knotty – but not insurmountable – challenge. The Pensions Commission was established in November 2020 to “examine sustainability and eligibility issues… and outline options for the Government to address issues including qualifying age, contribution rates, total contributions and eligibility requirements”. One of the terms of reference was to examine how private sector employment contracts specifying retirement ages below the State pension age may impact on the State’s finances and pension system. While the report is yet to be published, it is of interest to look at the retirement ages and policies of other countries to put Ireland’s approach into context. Many countries have adopted policies that seek to tap into the social and economic benefits of longer working lives. The United States abolished mandatory retirement in 1986 while, with some exceptions, New Zealand followed in 1999 and Australia in 2004. The UK followed suit in 2011, although a compulsory retirement age remains. This can apply if a job requires certain physical abilities or has an age limit set by law. The PwC Golden Age Index helps to explain the rationale for these policies. The Index is a weighted average of seven indicators, which reflect the labour market impact of workers aged over 55 in OECD countries, including employment, earnings, and training. The most recent report identifies that the OECD could achieve a $3.5 trillion boost to GDP in the long-term if countries raise the employment rates of those aged over 55 to match New Zealand levels (with New Zealand having the greatest level of employment market participation across older workers). For Ireland, the potential gain was estimated to be around 9% of GDP, or roughly €25 billion. The Index identified key drivers of employment for older workers – successful policy measures include increasing the retirement age, supporting flexible working, improving the flexibility of pensions, and further training and support for older workers to become ‘digital adopters’. So, what influences the age to which we work? Many factors influence workforce participation at older ages, from marital status to gender participation gaps and public expenditure on family benefits, among others. It is interesting to step through a few of the factors in more detail in the context of the debate in Ireland. It is reasonably intuitive that life expectancy generally has a positive impact on employment patterns for older workers as the longer people are expected to live, the more likely they are to spend more of their life working. Life expectancy also captures other factors that may influence the employment rate for older workers – the level of health, for example, which could be impacted by healthcare policies, medical advances, and technological developments. Repeated studies have shown that health influences the age at which a worker retires. Greater expenditure on pensions is expected to reduce the incentive for older workers to participate in work, as increases in State pension wealth are associated with a lower retirement age. Interestingly, studies across several countries on the effect of general employment protection laws and age discrimination laws have been mixed. Some studies argue that these laws negatively affect employment among older workers, as employers see older workers as a greater burden if they have greater protection, even though the intended effect is to help improve employment prospects for older workers. This highlights the complexity involved in setting retirement ages and supporting older workers to participate in the workforce. What burden will fall on younger generations? Much has been written about the potential for significant changes in Ireland’s demographics, with the dependency ratio (the number of persons in employment relative to those in receipt of pension benefits) projected to fall over the coming decades. This will potentially create strains around the financing of the system into the future and may create a perceived intergenerational inequity. The Pensions Commission is tasked with identifying measures to review the projected changes in demographics, earnings, and the labour market, and the associated costs of these changes. Aside from potential pension financing cost arguments, will longer working lives limit opportunities for younger workers? The argument is often made that the amount of work in an economy is fixed, so one more job for an older person means one less job for a younger person (the ‘lump of labour’ theory). Research has repeatedly shown that this theory is not observable in practice, and instead identifies that the number of jobs in an economy is elastic – labour markets are dynamic, and economies adapt to labour force changes. Simply put, an economy can and will create more employment opportunities to reflect extra participants entering the labour force. Policies enforcing mandatory retirement ages do not help create jobs for younger members of the workforce. In fact, they reduce the ability of older workers to contribute – both directly and in terms of the experience they bring. What other perspectives exist? In a recent Ibec survey, 67% of respondents believed that abolishing an employer’s right to fix a retirement age would have a negative impact on their business, although 73% of those surveyed also consider retaining staff beyond their fixed retirement age, with most of those surveyed using the option of a post-retirement fixed-term contract. Arguably, these responses are somewhat in conflict with each other, highlighting the complexity of the issues in question. A key concern of employers is that the current legislative framework presents many difficulties, particularly where an employer seeks to facilitate employee requests to work longer. Similar concerns were identified in terms of employers’ ability to conduct effective workforce planning. In contrast, the Citizens’ Assembly has called for an end to mandatory retirement ages. Allied to the introduction of pension auto-enrolment, these were seen as the most appropriate means of responding to the challenges created by the State’s ageing population. An Interdepartmental Group on Fuller Working Lives reported that retirement at the age of 65 was impractical given the potential for a gap to emerge between that age and the State pension age. To the extent that there is common ground, it is arguably around setting the retirement age at a level consistent with the State pension age. This would address the gap that would otherwise emerge for employees leaving the workforce, but who are ineligible for State pension benefits. What model should Ireland adopt? Looking at experience globally, the State pension age is simply a single aspect of a complex system. Contribution and coverage levels across the private pension system, mandatory retirement ages, the role of the State in providing social insurance benefits, employment levels more generally – the range of factors goes on and on. There is greater consensus around what “good” might look like. Where people live longer and healthier lives, the wish is that employees will want to, and will be supported to, remain in the workforce for longer, which in turn enables increases to the State pension age. Increases to the State pension age in turn allow the payment amount to keep pace with the expectations of retirees. This virtuous circle then supports greater sustainability across the social protection system. The Pension Commission report will offer several proposals for consideration. It is to be hoped that decisions made will set the course for a sustainable pension system that appropriately supports generations of retirees into the future. Munro O’Dwyer is a Partner at PwC Ireland.

With the launch of the 1,000 Chartered Accountants campaign, four members explain what they are doing personally to combat the climate crisis and share their advice to help others in the profession do the same. Kate van der Merwe Sustainability advocate I grew up with an appreciation of nature, its power and our place in it. As my awareness of the climate crisis and biodiversity loss grew, so did my frustration and sadness with the inequitable, one-dimensional systems we’ve become embedded in and their repercussions. However, the recent emphasis on holistic, inclusive, multidisciplinary thinking gives me hope. Over time, as I learn more about sustainability, I have adapted my personal and professional choices to minimise my carbon footprint and drive positive impact. I’ve been pleasantly surprised that these changes often yield unanticipated benefits. Personally, I focused on my consumption (energy use, diet, travel, consumer choices) and finances (pensions and savings). Professionally, I brought a sustainability perspective to my roles, such as flagging future regulatory considerations and chairing the Young Professionals 2017 sustainability-themed year. I went on to do a MSc in Renewable Energy and Environmental Finance and am exploring roles that will give me more direct sustainability scope and impact. There’s a growing acceptance that business-as-usual won’t continue, as it will be transformed either by devastating climate breakdown or deliberate, significant lifestyle and system changes to avoid the worst. When people are informed about issues, they can have a very strong will for action, as demonstrated by the Citizens Assembly which proposed the most stringent climate action, subsequently diluted within the Climate Action Plan. Each individual has a unique set of strengths and sphere of influence to make their positive climate impact, be it towards personal or system change. Considerations may include democratic action (e.g. voting), consumption habits and financial decision-making. Within the workplace, every decision – budget allocation/investment, targets etc. – must incorporate a sustainability perspective. How does the decision benefit society? What are the emissions/energy/biodiversity impacts across the product/service lifecycle? Is the impact equitable? These considerations are key for the future and align with the EU sustainable finance trajectory (green and socially inclusive). We need holistic and multidisciplinary approaches for comprehensive solutions. It’s time to ask questions, get creative and collaborate. We urgently need bold and brave action! Dr Judith Wylie Senior Lecturer, Ulster University Business School I love the great outdoors – living near the beach has given me an appreciation of the importance of blue water, clear sky and green space. Having local spaces where we can walk, swim, explore and find peace have become even more important to us all in recent times. My interest in sustainability has led me to researching Irish companies’ approach to corporate social responsibility. At the beginning of my studies, almost 10 years ago, I was told “you can’t study ‘hugging dolphins!’” What is pleasing, however, is how much this attitude has changed over the last decade with increased corporate action and public awareness of sustainability issues. My own research indicates that many Irish companies are listening to stakeholder concerns and are providing innovative solutions on climate change as well as committing to important sustainability goals.  It can be overwhelming when we hear news of the climate crisis and how much we have damaged our planet already; it can be easy to wonder what difference a single action can make. However, taking responsibility for small things can collectively have a big impact. I love fashion but I am conscious that the World Bank reported that the fashion industry is responsible for 10% of annual global carbon emissions, more than all international flights and maritime shipping combined. By moving away from ‘fast fashion’ and being more conscious about investing in sustainable brands, hiring clothes for special occasions and buying second-hand, I can make a difference and have fun in the process! We can all try to reduce our carbon footprints both at home and in our workplaces. Set the example for your family, friends, and co-workers. For example, eat less red meat each week, take public transport or cycle to work, or encourage the businesses you engage with to operate more sustainably. Although making changes can be difficult, use your hope for a better world to drive you and bring others along on the journey to a more sustainable society.  Tommy McLoughlin Founder & CEO at ButterflyCup My colleague, Joe Lu, invented ButterflyCup to eliminate the need for plastic lids and was looking for a business partner to help commercialise his invention. When introduced, I immediately saw its potential in the takeaway coffee and cold drinks sectors. Our cup does not require a water-proof laminated plastic coating, thereby eliminating the plastic normally required for both regular plastic-coated paper cups and for plastic lids. 600 billion cups and 600 billion lids are used globally each year between hot and cold drinks – that’s a lot of plastic. People are generally well-intentioned, but change happens relatively slowly – even when the facts are compelling. The key to rapidly altering behaviours at the pace now required because of climate change is a combination of meaningful (rather than token) regulatory incentives, disincentives and bans. Rebalancing business and customer costs is critical to changed behaviour.  For example, most people are now favourably disposed to switching to electric cars, but the cost differential remains prohibitive. This also applies to the over-use of plastic, which has a high negative environmental impact in both its production and disposal. If changes are made so that plastic costs more, it will be used less.  Improved infrastructure in areas such as vehicle electrification, waste segregation and recycling is also key to progress.  It is vital that businesses operate for the greater good rather than focusing on narrow and short-term self-interest. Unfortunately, many big corporates that are motivated by share price, CEO bonuses and so on act to protect the status quo by engaging in ‘greenwashing’ and often misleading PR while at the same time lobbying legislators in order to delay and derail environmentally positive progress – similar to how the tobacco and oil industries behaved in the past.  The voluntary actions of businesses and consumers alone is inadequate to achieve vital climate targets. Real environmental reform must be driven by legislation and regulation.  Probably the most effective contribution individuals can make is to call out bad practices and advocate for positive change, both within their work and business networks and on social media. Plus, as consumers, people need to ‘vote with their feet’ by actively supporting ethically sustainable businesses, products and practices. Prof. Pat Barker Lecturer in Business Ethics, DCU   Chartered Accountants, as professional individuals, should take a lead in focusing on what they, as individuals, are doing when it comes to fighting climate change. It’s not enough to look to big corporations and government, loudly demanding that they need to do something. Neither is it enough for us to wave generally in the direction of turning off lights at home, reducing food waste, flying less and investing in green pension funds. We need to change our lifestyles in ways that really pinch and evoke the ‘ouch’ response.   My ouch response was caused by my 11-year-old granddaughter’s suggestion that I, her mother and she adopt the One Dress for 100 Days Challenge. She hit me with this climate change challenge just as I contemplated the impending opening of the shops and the delicious prospect of buying myself some new clothes, footwear, underwear, makeup and some accessories after 14 months of lockdown. She scrambled up onto her Zoom soapbox and told me that I still have a wardrobe of perfectly wearable clothes, there’s no need to have a different outfit every day; that I wash my clothes too much and that nobody notices what I wear anyway. She delivered the killer blow – I was supporting the waste of scarce resources, encouraging child labour, and unnecessarily filling up landfill. So, I agreed to give it a shot and the three of us are now on day 20 as I write this. The feeling of doing something positive for the environment is accentuated by a sense of finding contentment in a life of less. I have recognised that 90% of the clothes we wash are not dirty enough to be put into a washing machine. I have been digging into the depths of my wardrobe to change the look of the dress and have not bought anything new. I don’t know how I will feel after 100 days, but I notice that my focus has shifted from how I look in my clothes to feeling comfortable in my own skin. Most people have not noticed that I am wearing the same dress day after day and I have embraced my own rejection of a life of unsustainable over-consumption.   I am definitely experiencing the ‘ouch’, but I do expect the lessons (if not the dress!) to persist beyond the 100 days.

Ambrose Shannon explains how CFOs can play a lead role in limiting the future impacts of climate change during what he describes as “the decade of action”. Throughout the summer of 2021, heat waves, wildfires, droughts, and hurricanes served as stark reminders that we should not take our planet for granted. The recently published report from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) has made it very clear that unless immediate and large-scale actions are taken to reduce greenhouse gas emissions, these weather patterns, and the corresponding commercial impacts, will only become more severe. In Ireland, like elsewhere, companies are looking at their own commitments to environmental, social and governance (ESG) objectives (see sidebar) encouraged by both regulatory initiatives and wider societal pressures. For example, the Climate Action and Low Carbon Development (Amendment) Bill 2021 is intended to achieve net-zero carbon by no later than 2050 throughout the entire Irish economy. This entails the introduction of five-year carbon budgets on a rolling 15-year basis. In China and South Korea, where similar measures have been deployed, companies have seen significant impacts on their business models, strategies, and performance. Furthermore, the required Local Authority Climate Action Plans are expected to set out ambitious measures to significantly increase renewable energy production, decrease transport emissions, and reduce the impact of agriculture on the environment. Irish businesses have a critical role in achieving this climate-driven transition. And CFOs can play a pivotal role in areas such as leading strategic reviews, allocating capital investment, securing funding lines, protecting credit ratings and driving sustainable business performance. According to Accenture’s 2021 report, CFO Now – Breakthrough Speed for Breakout Value: 73% of respondents claim that the CFO is best placed to ensure the resilience of the organisation in today’s operating climate; and 68% of CFOs globally are now responsible for ESG monitoring and reporting. And momentum is accelerating. In November, the United Nations Climate Change Conference of the Parties (COP26) will bring world leaders together to accelerate movement toward the goals of the 2015 Paris Agreement. We expect agreement on ambitious goals, meaning that politicians, policymakers, regulators, and investors will need to work together with businesses to deliver on ESG objectives. Failure to act on climate change represents an existential risk to society and the global economy and poses a clear financial risk to businesses themselves. The impetus for business to act is time-sensitive and will likely be driven by four key factors: Governments setting legally binding emission reductions and net-zero targets; Investors and financiers wanting to understand climate-related financial risks and long-term business model viability; Employees placing increased importance on the ESG values and actions of their employer; and Customers placing ever more importance on the sustainability of the products they consume – with many seeking “champion brands”.  For business to meet these demands, CFOs and executives need to create and operationalise a comprehensive ESG strategy. Key considerations Regulators have for some time now warned about the threat that climate change poses to the stability of the financial system. Mark Carney, formerly Governor of the Bank of England, is leading a World Economic Forum (WEF) initiative to explore the risk posed to global financial systems associated with the energy transition. According to the Bank of England, as much as $20 trillion of assets could be at risk from climate change alone. The progress of delivery against ESG transition plans varies greatly from sector to sector and geography to geography. A report by Arabesque S-Ray found that just 25% of public companies worldwide are on track to deliver on their ESG-related commitments. Our research and work in this space suggest that CFOs and the wider finance team are uniquely positioned to guide their organisations in the following ways: Assessing the ESG impact on existing business models. CFOs can play a crucial role in assessing and measuring the potential impacts of ESG on current business operations. For example, identifying and modelling risks could include scenarios on the P&L impacts of a 1.5-degree world, the impacts of a higher carbon tax on profitability, the introduction of subsidies, or pricing signals to parts of the supply chain. Highlighting risks associated with ownership of certain assets. It is rational to expect the valuations of certain assets on the balance sheet to fluctuate as we progress through the transition towards net-zero. For example, we have seen large write-downs in valuations among many of the global oil majors. On the other hand, it is equally rational to expect certain asset classes to rise in value, such as those parts of the economy that support the electrification or home insulation agendas. Either way, CFOs will want to avoid holding stranded assets and will need to make more material bets on a more frequent basis over the coming decade. Identifying where investment will be needed to transition to a sustainable economy. Ireland’s transition to a more sustainable future is expected to have a wide-reaching impact on key sectors of the economy. For example, Ibec’s report, Building a Low-Carbon Economy, suggests that Ireland’s electricity and transport systems will need to reduce emissions from 1990 levels by up to 92% by 2050 and that buildings and factories will need to reduce emissions by up to 99%. Decarbonisation needs to go hand-in-hand with technological innovation, and CFOs will play a key role in identifying where investment is needed to ensure that business outcomes are achieved in a way that is economically and environmentally sustainable. Responding to investor demands and attracting investment. In the US, one-third of the $50 trillion of assets under professional management is invested in ESG strategies, according to research by the NewClimate Institute. ESG considerations are increasingly being adopted in assessing the sustainability and risk of investment decisions. At the same time, investors and pension funds are applying pressure on companies to provide products and services aligned with the UN’s Sustainable Development Goals (SDGs). Turning ESG commitments into action. Credibility is not a new concept to finance but is vital in the ESG space. As a profession, we can help our organisations avoid even the suggestion of ‘greenwashing’. Credibility is enabled by robust transition plans with regular and transparent disclosures on progress against them. Some CFOs are investing now to create enterprise-wide data provisioning and analytics solutions for ESG. This will enable them to model multiple commercial scenarios and inform the optimal pace and sequence of the pivot. Conclusion While executing a successful ESG pivot depends upon a strategy that is unique to the qualities and context of the organisation, there are a few best practices you can leverage: Conduct a materiality assessment. These sometimes behind-the-scenes assessments are a data-driven, holistic view of ESG risks and opportunities to identify gaps and prioritise the issues of focus against business and stakeholder importance. Build an effective communication method for the company’s ESG commitments and progress. This typically takes the form of a disclosure with a newly crafted framework and reporting metrics for standalone ESG disclosures, leveraging industry-leading practices. Formalise ESG governance. Stakeholders must be identified as explicitly responsible for new associated ESG activities. The company needs to craft a defined governance model and roadmap for execution, mobilising internal resources and data for ongoing assessment and reporting. These three steps have helped organisations successfully navigate and focus an ESG pivot and capture the associated resiliency and revenue potential. This is the decade of action to dramatically limit the future impacts of climate change – time is of the essence, and the time to act is now. Ambrose Shannon is a Managing Director at Accenture and CFO and Enterprise Value Lead for Ireland and the UK.

People management has been evolving over the generations, paving the way for productive development conversations that benefit both the organisation and the employee, writes Michelle Halloran. There has been a gradual sea-change in the role of the people manager over the last few decades, but it has taken a global pandemic to catapult us into a new way of working. Now, as we optimistically enter the post-pandemic world, it is time for a radical break with the past, to ditch our outmoded perspectives on people management and take a hard look at the role of the 21st-century people manager. From the top down, organisations must stop pretending that managers with staff reporting to them can perform a fully loaded, 40-hour-a-week job, with a bit of ‘HR soft stuff’ thrown in on the side. Organisations need to start budgeting – in terms of time and money – for the investment required for their people to properly function and perform well in the new world of hybrid working. Old habits die hard Many of us have inherited a view of ‘people management’ involving uniform nine-to-five working hours, little flexibility, a strict dress code, and the expectation of often-unquestioning respect and compliance. Structured, objective performance management and review processes are a relatively new replacement for the once-a-year ‘quick chat’ to be told whether or not you were going to get the much longed-for pay rise. Your boss was typically a white male in his forties or fifties – benevolent when you did well; strict and disciplinarian when you did not. This model of people management has its roots in the traditionalism of the generation born from 1928 to 1944, at a time of economic hardship, when the old class system was still prevalent, and you respected authority unquestioningly. Evolving workforce generations The ‘Baby-Boomer’ generation (born 1945 to 1964) wanted much more from their working lives. They had learned from the experiences of the previous generation, seeing them gain very little in terms of improved quality of work and life in the post-war years, despite their sacrifices. However, while they may have done some hell-raising in their youth, and instigated the beginnings of a more equitable society, by the time they hit their mid-twenties, most were settled down and working even harder than their parents in evolving white-collar roles – you didn’t have to be American to buy into the American Dream. While their style and tone were less formal, and there was a shift in the gender balance at work, they (male and female) continued the patriarchal style of people management. Generation X (born 1965 to 1979) threw down the gauntlet in the area of gender equality, and achieved some real change in terms of family-friendly working hours. They also introduced and implemented performance management in the workforce, a concept driven by increased global business competition, where pay was linked to the achievement of targets, and an employee review was conducted once a year at which an employee’s rating was discussed and explained. Then came Generation Y, or the ‘Millennials’, (born 1980 to 1994). Since 2016, ‘Gen Y’ has comprised the majority of the workforce; therefore, knowing how to lead and motivate them is vital to the success of any people manager. The first ‘digital natives’, with access to vast resources of information and opinion, they do not unquestioningly accept what their boss tells them. With businesses driven hard to compete by rapidly advancing technology and globalisation, Gen Y has to work smarter, harder and faster than any previous generation. To maintain this level of productivity – adapting to unprecedented levels and speed of change – today’s employees need a lot of time, emotional sustenance and practical support from their managers, without which they will feel let down and move on to another employer. The early indications for Generation Z, born after 1994, are that they view being an employee and having their own professional ‘gigs’ on the side as not being mutually exclusive. Understanding how precarious job security can be, they are emerging as self-reliant and flexible but needing at least as much emotional support at work as Gen Y. The 21st-century people manager As a 21st-century people manager, your language and approach needs to move away from performance reviews towards ‘development conversations’, or even, simply, ‘check-ins’. These should be planned and scheduled. The more frequently you, the manager, make these calls, the shorter they will be, as they become part of a running conversation between you and your team member. This is especially important in a hybrid work environment where we cannot avail of ad hoc, informal conversations as we could pre-pandemic.  Allocate roughly a day a week into your schedule to have these employee check-ins. These should be strategic, not tactical conversations, with the emphasis on how the team member feels they are performing and coping with their work. This discussion must sit outside other routine discussions and communications about what needs to get done. In Table 1, I set out a suggested plan for managing development conversations with each of your team members (reporting to you as their line manager), outlining the frequency and purpose of each conversation, and useful questions to ask. (Quarterly and monthly meetings can encompass weekly check-ins as they fall due.) The business case So, you may be asking, if I am going to spend all this time talking to my team members, helping them to perform, how do I get my own job done? I can’t afford to spend a day a week on employee development conversations! Well, you can’t afford not to. There is extensive research on the positive impact of proper employee engagement on profitability and productivity. For example, a comprehensive report published by Gallup in 2017, involving meta-analysis of 339 research studies across 230 organisations in 49 industries and 73 countries, found that business or work units in the top quartile of employee engagement outperformed bottom-quartile units by 10% on customer ratings, 17% in productivity and 21% in profitability. Work units in the top quartile also saw significantly lower staff turnover, theft, absenteeism, and fewer safety incidents and quality defects. Taking as the baseline Gallup’s 21% increase in profitability as a result of higher employee engagement, if one day per week is allocated for people managers to have development conversations with their team members, costing 20% of the organisation’s people managers’ time, the impact on profit will be positive. Further gains and savings are available from increased productivity and customer satisfaction, lower staff turnover and absenteeism, reduced wastage, higher quality adherence, and so on. The business case for allowing people managers time to manage their people is clear. Human nature being what it is, however, such change will be resisted, despite the pressures from the generational transition outlined and the recent acceleration towards complex, individually tailored working arrangements. An organisation could introduce such change through a pilot scheme, evaluating results after 12 months using metrics like internal and external customer satisfaction, team productivity, absentee rates, staff turnover and quality of output. Budgeting time for people management is a change in approach that is long overdue. We have the motive – a more profitable business and a happier place to work – and with the shift towards hybrid working, we now have the opportunity. Michelle Halloran is an independent HR and people management consultant.

Brendan McGurgan FCA explains the four facets of Sebastien Tondeur’s Magic Diamond of Performance, which has helped the MCI chief’s company scale at speed and generate annual revenue of over $500 million. Sebastien Tondeur, CEO of MCI, has led the company on an incredible scale-up journey. From a team of 30 operating in his home country of Switzerland, MCI has grown to employ almost 2,500 across 60 cities in 30 countries. Today, the company has revenue of over $500 million. There are, of course, many facets to this success, but I want to focus on the novel way Sebastien manages company performance. The Magic Diamond of Performance, as he calls it, focuses on four areas: Financial success; Employee promoter score (eNPS); Customer promoter score (cNPS); and Sustainability (aligned to purpose). Sebastien argues that you don’t need to measure and manage hundreds of different metrics. Instead, focus on these four areas and you will save time, energy, and resources. You will also remain acutely sensitive to the pulse of the business. Let’s look at each in turn. Financial success Anyone leading a high-growth or scaling organisation understands the importance of financial metrics. As a Chartered Accountant, I am only too familiar with ROCE, ROE, EBITDA, ROI, APT, etc. Put just about any three letters together, and it will likely be an acronym for yet another financial measurement. The question, of course, is which should you focus on? Sebastien cites four, which combine to capture financial performance. This is positioned at the apex of the diamond. Sales growth; Gross profit margin; Net profit margin; and Cash headroom. Sales growth Sales growth indicates the sales team’s ability to increase revenue over a fixed period (current month vs prior month, current quarter vs prior quarter, current month vs same month prior year etc.) It is calculated as follows: As a benchmark, a scaling company has average annualised sales growth of 20% over three years. Gross profit margin Gross profit margin indicates the amount of money remaining in sales after deducting the costs of goods sold. The calculation is as follows: Gross profit margin assesses how efficiently the company generates profit from sales. For example, suppose your gross profit margin is low compared to your peers in your industry. In that case, it may point to inefficiencies in your manufacturing or lost opportunities in terms of realisable sales price vis-à-vis the value you are delivering to your customers. Net profit margin Net profit is arrived at by deducting all company expenses (excluding the cost of goods sold) from gross profit. Net profit margin is the ratio of the net profit that is generated as a percentage of revenue. It indicates how much of the revenue you earn is actual profit. Here is the formula: Net profit margin = net profit/total revenue x 100 Net profit margins vary by business size and industry. As a rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered good, and a 5% margin is considered low. A consistent net profit margin aligned with sales growth is reflective of a successful scale-up. Significant fluctuations in net profit margin while a company is growing is often symptomatic of deficient processes and systems capable of supporting sustainable growth. Cash headroom There is an old saying in business: “sales is vanity, profit is sanity, and cash is reality”. This is very much the case in a scaling business, where cash is the fuel for growth. I led the finance function of a dot-com company through the boom and bust of the early 2000s. It was my first taste of industry, and it provided a lasting and salutary lesson in the importance of cash. It was there that I learned the golden rule: “s/he who has the gold makes the rules”. Cash headroom refers to the difference between a business’s required monthly cash resources and the available cash resources. For example: assume a business must pay out £1,000 per month to cover overheads and expenses. If, after payments from customers, it has £5,000 in the bank, the business has cash headroom of five months. To put it another way, if there are no further customer orders, there is sufficient cash in the bank to cover five months of committed overheads and expenses. In my previous business, we targeted a business KPI of six months’ cash headroom. Anything more would trigger a conversation about where to better deploy the surplus cash. Anything less triggered a deeper look at the reasons why. Are orders declining? Are customer payments late? Have we seen a general increase in costs? Employee net promoter score (eNPS) If people are the most important asset in business, then leadership should protect and nurture that asset. To do this, you need to know how happy your team is and how engaged they are with your business. Good business leaders want their people to bounce into their workplaces, to bring high energy levels and a keen desire to provide amazing service to customers. A good leader wants to provide fulfilling, meaningful, vision-aligned work to the people they employ. One of the world’s leading experts on customer and employee loyalty is Fred Reichheld, the founder of Bain & Company’s loyalty practice. Fred created the Net Promoter System (NPS) in 2003 and since then, it has been used by a range of leading companies such as Apple Retail, Philips, Charles Schwab, Allianz, American Express and Intuit to generate extraordinary results. In essence, Fred’s work laid bare the link between loyalty and profits. eNPS measures employees’ willingness to recommend the organisation to others as a great place to work. It indicates engagement levels, motivation, and intent to remain with the company. It also uncovers the likes and dislikes of employees as they pertain to the company. How do you calculate it? The genius of eNPS lies in its simplicity. In an era of survey fatigue, it provides an incredibly easy and efficient way to survey employees. First, they are asked one quantitative-based question: “How much would you recommend working here to a friend or colleague?” The employee uses an 11-point scale from zero (not at all likely) to ten (extremely likely). Follow this up with an open-ended question: “Why do you feel this way?” Those who score between zero and six are detractors. They are unhappy, disengaged, and could be looking for roles elsewhere. Those who score seven or eight are passives. They don’t love working for you, but nor are they entirely disengaged. Those who score nine or ten are promoters. They love their work and won’t hesitate to tell everyone. The eNPS score for a period – typically a month – is calculated by subtracting the percentage of detractors from promoters, omitting the passives from the calculation. The score is then displayed as a number rather than a percentage. eNPS: a worked example There are ten employee responses in ‘Improve Your Workplace Inc.’: 3, 4, 5, 6, 8, 8, 8, 9, 10, 10. This equates to: • Four detractors (3, 4, 5, 6) = 40% • Three passives (8, 8, 8) • Three promoters (9, 10, 10) = 30% The calculation: 30% – 40% = -10 What is a good score? Jennifer Willy, Editor at Etia.com, says that anything above zero is generally acceptable: “Different companies and organisations have different standards and benchmarks to measure their performances. But generally, a score between 10 and 30 is considered good while anything near 50 is excellent.” Why is eNPS important? A State of the Global Workforce report published by Gallup in 2017 showed that 85% of employees worldwide are either not engaged with their work or are actively disengaged. Disengaged staff are less productive and are more likely to make mistakes. Worse, negative attitudes can contaminate an otherwise positive workplace culture. Conversely, employees engaged in their work are more productive and tend to positively influence their teammates. Consequently, employee retention rates will improve, and your team will produce better results for your clients. To put it simply, happy staff means happy clients. Customer net promoter score (cNPS) Successful scalers are obsessive about delivering value to customers. They are consciously tuned into why they do what they do and how that impacts their customers’ lives or businesses. Assessing the customer’s engagement with you is critical. It helps guide and inform loyalty initiatives and overall brand-building, and it forms the third area of focus in the Magic Diamond of Performance. How do you calculate it? cNPS is calculated the same way as eNPS. It is defined as the willingness of customers to recommend a company’s products or services to others. Like eNPS, customers are asked a single question: to rate on an 11-point scale (zero to ten) the likelihood of recommending the company or brand to a friend or colleague. Based on their rating, customers are classified into three categories: detractors, passives, and promoters. As with eNPS, cNPS is found by subtracting the percentage of detractors from the percentage of promoters. The result will be a number between -100 and +100. A cNPS score above zero is considered good, as it indicates that your audience is more loyal than not, and anything above 20 is considered favourable. Bain & Co., which pioneered this methodology, suggest that above 50 is excellent and above 80 is world-class. These are general guidelines, however. A good cNPS will depend on the industry and country in which the business operates. Sustainability (aligned to purpose) MCI’s purpose is as simple as it is profound: “when people come together, magic happens”. This purpose permeates every part of the business and is the slide-rule for all decisions. The company may have pivoted several times in its evolution, but that core purpose – bringing people together to build communities and create experiences – has remained. Sebastien explains that with growth came a consciousness of the company’s impact on the world. As MCI’s reach became global, it began to understand that it could accelerate change and promote a more sustainable and inclusive society. Anchored by its purpose, the company’s goal is to encourage an active culture of care and responsibility, backed up by concrete actions. This forms the last area of focus in the Magic Diamond of Performance. Why is sustainability important? A view common in SMEs is that sustainability issues are for governments and larger corporates, as smaller entities are simply too busy wrestling with the day-to-day demands of the business. Sebastien, however, sees sustainability as an enabler of company growth. “I don’t think we have a single under-25-year-old candidate that hasn’t asked us about the sustainability programme. I don’t even think it’s an option for any business. You just have to have an answer when the question is asked.” Sebastien is not alone in this view. Marga Hoek, author of The Trillion Dollar Shift, puts it like this: “Business for good is good for business”. What do you measure? Sebastien’s mantra is “think big, start small, scale fast”. It’s all about learning as you go. MCI used the UN Sustainable Development Goals (SDGs) to guide their sustainability initiatives, picking a small number of the entire 17 to make a start. “We give a lot to the community as a business – doing volunteer work, helping kids, working on cleaning projects… and then, over time, we became more sophisticated. Now, we have a large community of what we call sustainability leaders. They cover a range of areas – environmental, social, diversity, inclusion. Belonging is a big topic right now. I give them a budget, I give them approval, and I rely on them to give me recommendations. They communicate to the company and engage the people.” MCI’s sustainability journey, which started with a single small step, has become a hugely impactful sustainability strategy based on four SDG-aligned pillars: people, planet, profit and governance. For example, under the ‘planet’ pillar, the company successfully reduced its carbon footprint by 20% in 2020. And as Sebastien points out, the most sustainable companies are the least wasteful. Waste is tangible in some industries, but how do you reduce waste in a knowledge-based company? In my previous business, we put our pre-sales function under the microscope and found that only 7% of sales leads converted into sales orders at our worst. That’s 93% wasted effort in customer calls, follow-ups, budget quotations, design drawings etc. So we zeroed in on our customer conversion ratio and, over time, increased our conversion rate to 20% – not by generating new leads, but by becoming more efficient in processing the leads we already had. Have fun with this aspect of the Magic Diamond of Performance. You don’t need headline-grabbing initiatives or noble sustainability targets, not at the start at least. Instead, look for an area of your business where you generate waste and aim to reduce it. In so doing, you will leverage your people’s time and creativity. In time, this process will compound to greater employee engagement and productivity, customer advocacy, and an improved bottom line. Conclusion Sarah Kennedy is Vice-President of Global Marketing at Adobe Experience Cloud. She says: “The companies that will excel long-term are the ones that know it’s not just about shareholder value… it’s also about focusing on the customer and employee experience, and how those, in turn, contribute to society”. If you’ve found yourself drowning in the vast sea of performance measurement options, then the Magic Diamond of Performance could be the lifeboat you and your business need. Brendan McGurgan FCA is Co-Founder of Simple Scaling, a company dedicated to inspiring, connecting and enabling ambitious leaders of SMEs to scale with purpose.

Susan Rossney, Public Policy Officer, writes: It seems that everyone is talking about sustainability nowadays. Accountants in SMPs are watching the news and listening to the debate. You may well be asking questions like: “What can I do in the face of a global issue?” “How will this affect my practice and my clients’ businesses?” “What questions will my clients ask me next?” “ What expertise should I be developing now?” “How will sustainability work for me?” The sense of urgency to address climate change across the world is intensifying. Droughts, floods and wildfires are increasing, ecosystems are collapsing, and in response people are calling for change. But climate change is part of a broader sustainability challenge – one that can be summed up as ‘environment, social and governance’, or ESG. The responsibility to meet this challenge falls on all businesses and firms, including small ones. As ESG continues its rise up the political and corporate agenda, smaller businesses now more than ever need to meet certain ESG criteria so they can access finance, win contracts or be part of larger companies’ value chains. Clients and consumers also expect businesses to have a positive impact on the environment and to be doing their part to contribute to change. Companies that want to prosper in the future will have little choice but to become sustainable. Small businesses have a crucial role in the transition to more sustainable economies and societies. Accountants are key financial advisors for those businesses, but also need to understand and implement sustainability practices for their own businesses. This article discusses the opportunities for small businesses – and their advisors – in embracing sustainability. “Practices who want to engage particularly with the next generation of staff and clients need to be able to take sustainability seriously and need to be able to demonstrate that” Conal Kennedy, Head of Practice Consulting, Chartered Accountants Ireland Environmental, social and economic issues present huge risks for businesses. Examples include: losing out to competitors; having reduced access to capital; developing weaknesses in supply chains; developing succession risks; and failing to meet the requirements of stakeholders, including consumers, clients, banks, business partners, staff and regulators. Accountants can identify and quantify these risks for their own practices, and develop policies for themselves and their clients to address them. But managing risks against ESG factors can also benefit businesses directly. As this article will show, if properly addressed, it impacts employee welfare, improving employee experience and leading to greater output; it affects ability to access finance; it enhances an organisation’s reputation, helping to attract new business and staff; and it can help companies comply with supply chain requirements of their larger clients. Preparers and auditors of financial statements will also need to consider these issues going forward. Generating new business Many accountants are now adding “sustainability consulting” to their services to clients. As trusted advisors, they can play a key role in helping SME clients think about their potential sustainability risks, and leverage opportunities offered by the sustainable transition. For example - Accountants can help clients to: assess sustainability impact and risks improve efficiencies reduce costs avail of grants acquire finance identify opportunities to expand their range navigate the changes Sustainability is also an increasingly important factor in tendering for contracts with larger organisations which have stricter sustainability goals. Some of these large organisations perform assessments of potential suppliers. Others also carry out regular risk screenings of existing supply-chain suppliers, and/or conduct internal audits and onsite supplier audits to verify that their supply chain suppliers are conforming to their policies. Accountants have a huge role to play in helping companies prepare this information, and in doing so themselves if they are part of these supply chains or are tendering for contracts. Accessing Finance Embracing sustainability is working towards ensuring the financial future of accountants’ businesses or their clients’ businesses. Investors are actively looking to invest in sustainable projects, and are screening out certain sectors or companies (like those heavily reliant on fossil fuels, for example). Businesses seeking this investment benefit from being able to collect and report on their sustainability-related activities against a recognised standard. Many banks are also adopting sustainability criteria and may require proof of sustainable practices from companies looking to avail of finance. There are also business grants as well as support schemes and tax incentives available for organisations looking to transition to more sustainable practices. Again, accountants have a huge role to play in guiding clients through this. Savings Operating in a sustainable manner saves costs. While there may be short-term costs associated with transitioning to a sustainable business model, businesses can recoup the investment they make and can also reduce their business costs by introducing more sustainable ways of working. According to the Sustainable Energy Authority of Ireland (SEAI), the average SME can save up to 30% on its energy bill by becoming more energy efficient. A business with an engaged and motivated team is also less likely to experience high employee-turnover and associated costs. In a drive to decarbonise Ireland’s economy, the rate of carbon tax increased by €7.50 in October 2020 from €26 to €33.50 per tonne/CO2. Reducing your carbon emissions will reduce your cost. Ultimately, though, any costs associated must be reframed as the cost of compliance or risk management. The greater costs are the costs of not being sustainable. Reputation With social media increasing access to companies, there are very few places to hide for organisations which are falling short of sustainability-related expectations. Staff expect it, and customers demand it. Companies not being transparent about their sustainability achievements, or their goals, will be called out by their customers and staff. Likewise, there is little patience for companies that are ‘green-washing’, i.e. presenting a false or misleading green public image. “64 percent of customers are ‘belief-driven buyers’ who will choose, switch, avoid or boycott a brand based on its stand on societal issues.” 2019 Edelman Trust Barometer Special Report: In Brands We Trust? Mobile Survey Attracting clients On the flip side, though, organisations that do embrace sustainability are in a strong position to attract clients. They can do this by becoming more visible in their community. Supporting local literacy or numeracy projects, participating in local charities or sports clubs, or engaging in local-tree planting initiatives not only increases brand awareness of a firm or business: it builds trust with a community. Remember – not everyone may be doing this, so you will have a first-mover advantage if you do. As a greater number of large companies are either required to or decide to report on human rights, diversity and climate-related policies, a greater number of local businesses supplying those companies will also be obliged to disclose their own sustainability practices, and will need help from a financial advisor to do so. Accountants who are experienced in offering clients this support may attract more clients looking to comply with the sustainability requirements of large organisations. Attracting & retaining talent Candidates are actively seeking jobs in companies with strong ESG credentials and are rejecting jobs in those companies not aligned with their own values. What was identified by McKinsey in 1997 as the ‘war for talent’ is as fierce as ever within the professional services sector, and organisations are going to great lengths to recruit talent. These same companies are now including their commitment to ESG values as a competitive differentiation. This is a trend seen by Karin Lanigan, Head of Member Experience in Chartered Accountants Ireland: “I have worked in recruitment for more than 20 years and in recent years, I have noticed a growing trend whereby candidates have become more and more discerning about types of organisations they’ll work for. They are not just considering salary and package; they are looking at the sector, at the reputation of an organisation, and asking themselves ‘will I feel proud if I’m out with my friends on a Friday night to say that I work with whatever the organisation is or whatever the sector is that they are in?’ They want to have sense of pride in their place of work.” Remember: a commitment to ESG does not have to mean having a large sustainability department or running an eco-business. It can also mean being a firm or company that looks after its employees, provides good training and promotion opportunities, and is active in its local community. “With ‘measurements’ everyone thinks of ‘carbon footprint’. But it doesn’t have to be. You can measure staff satisfaction through surveys. You can measure employee-turnover and retention or absenteeism. Encourage staff to measure the number of hours they spend giving back to others in the community.” Teresa Campbell, PKF FKM Impact on Financial Statements Preparers and auditors of financial statements should consider the impact on sustainability and climate change on every entity. Quoted companies, and some categories of larger companies have defined obligations to report on the impact of environmental matters on the companies’ businesses. These specific reporting requirements do not apply to private limited companies reporting under FRS 102. However, climate change and sustainability are major and developing issues that cannot be ignored by anyone. Both IAASA and the FRC have recently commented on matters that they expect to see considered in financial statements. Whilst their comments were largely made in the context of the IFRS framework, much of what they have said is directly applicable to financial statements prepared under FRS 102. Accountants should consider and report on how climate change has impacted on the assets and liabilities of the company, what additional risks have emerged and whether new or increased provisions are necessary. How has climate change impacted on the estimates and judgements applied, and do these need to be disclosed? Consider such matters as the useful lives of property, plant and equipment. Consider also the impact on impairment assumptions. Does the entity have an obligation to remediate environmental damage caused by any of its activities? Have any of its contracts become onerous, or are they likely to? The financial statements, taken as a whole, should contain sufficient information to be useful to stakeholders, and preparers should avoid the use of non-specific boilerplate. See IAASA’s recent observations on published financial statements. The Institute will cover these areas in more detail in future issues of Practice Matters, broadcasts of Practice News, and CPD courses. Some member resources Find more on the Institute’s Sustainability Hub with resources from articles, podcasts and webinars to a glossary explaining the acronyms and terms. You can also find tips in the Institute’s guide on Sustainability for Accountants. This free guide for accountants describes what to do – and where to start – to operate sustainably, successfully and cost-effectively.  

Marie Donnelly, Chair of the Climate Change Advisory Council, discusses her organisation’s role in helping Ireland achieve  its ambitious climate change targets – and how Chartered Accountants, and we as individuals, can support that work – with the Institute’s Public Policy Leader, Cróna Clohisey FCA. Cróna Clohisey: First, as Chair of the Climate Change Advisory Council, could you explain your organisation’s purpose, remit, and ambitions? Marie Donnelly: The Climate Change Advisory Council was established by the Climate Action and Low Carbon Development Act in 2015. We are an independent advisory body, and our role is to assess and advise on how Ireland is making the transition to a low-carbon, climate-resilient and environmentally sustainable economy by 2050. It is probably relevant to point out that in July of this year, there was an amendment to that Act called the Climate Bill Amendment Act and it has had a material impact on the Council, both in terms of its operations and structures. For example, the Council is now mandated to bring forward carbon budgets for the five-year periods 2021–2025, 2026–2030 and a provisional one then from 2031–2035. These budgets set out the maximum amount of greenhouse gas emissions that can be emitted by Ireland in the five-year period. The budgets are all-economy budgets and once the Government receives them and hopefully accepts the budget from us, the Government then allocates the budget across each of the sectors with ministerial responsibility for keeping their sector within the budget. That’s the most immediate and visible action emanating from the Act. Each year, the Council also conducts an annual review. The annual review heretofore was a catch-up on a range of things. The Act is now quite specific in that the Council must review each sector, identify the emissions coming from each sector, and identify the policies and actions that are working or, as the case may be, not working. It’s a sectoral review, and much more detailed than has been the case up to now. The new form of review will begin in October 2022. In principle, the cycle is that the carbon budget will be published, the Government will allocate a budget to each of the sectors, and Government will then publish a Climate Action Plan. This plan has policies, practices, and initiatives by sector designed to reduce emissions and stay within the carbon budget. We then comment on each sector’s emissions and the following year, the Climate Action Plan will be adjusted because some things will have been done, or more needs to be done. We are into a rolling cycle of activity thereafter. It is often said that time is running out in our fight against climate change. For context, can you explain where the world is currently in terms of that fight, and what might happen in the decades ahead if the appropriate corrective action is not achieved? I think it is clear to everybody that climate change is already happening, even here in Ireland. If you look at the IPCC (Intergovernmental Panel on Climate Change) report that was published this summer, it was very well presented in that they had maps so you could pick up your own area and learn what is likely to happen. It is probably fair to say that the implications of climate change for more southerly countries include extensive droughts with a shortage of water, impacting on food production and, indeed, the capacity to live in some of those spaces. Further north, you could have greater cold measures with higher rainfall, snow and ice. The island of Ireland is in the middle. We are a temperate climate so for us, we are looking at warmer and possibly drier summers and somewhat colder and probably wetter winters. The impact on Ireland is likely to come from a number of things, though. First, we are likely to have more storms and they are likely to be more intense. I don’t think there was a hurricane in Ireland before Ophelia, so we’ve had our first hurricane and we have seen some horrendous storms. The number of named storms we have is increasing every year. Second, and we can see this for ourselves, is rainfall that can be almost tropical in nature. This is leading to floods. Third, the sea is warming and sea levels are rising at about 1mm per year. We did a coastal workshop recently and the implications for coastal cities like Cork, Dublin, Galway and Limerick are really quite significant over the next 30-50 years. We may need to look at coastal defences for these cities because of sea rise. There are implications, even in a country like Ireland. We are a small country and a temperate climate, but even in Ireland you can see the implications coming down the track so action clearly is necessary. Now, people have argued that Ireland is so small, our efforts don’t really matter – but that’s not correct. We need everyone to put their shoulder to the wheel or we won’t succeed, so there isn’t a free pass for anybody. It doesn’t matter whether you are big or small, rich or poor, we all have to do something in this space. That’s the urgency for us – to do something, and to get on with it. The Paris Agreement was a time of hope, but events have arguably diminished that optimism with some extreme weather events this year alone – not to mention that climate change and its impacts are reportedly accelerating. In that context, what does the COP26 event in November need to achieve? Sometimes words are very important, so I think there must be a declaration of ambition and a commitment to that ambition from each of the countries. Ireland has declared its ambition of a 51% reduction by 2030 and we need to put it into action. We have seen numbers come from other countries – the US, Canada and the EU member states – but what we are really looking for is the other big countries to make that commitment, and first among them would be China. We then need an acknowledgement from fossil fuel-sourcing countries such as Russia, Saudi Arabia and Australia, for example, to make the kind of commitments that are necessary – to at least make the pledges. Then, the second stage must be to put them into practice. In that challenging context, is net-zero genuinely achievable by 2050? Yes, and I have no doubt that it is achievable. I would admit, however, that I could not tell you today how we will achieve it but I am absolutely convinced that solutions will be developed in the coming years that haven’t even been thought about today. Technological evolution and the capacity to innovate will be brought to bear in this space, but it is a black box for the moment. Nonetheless, for now we must use the technologies that are available, and intensify our efforts.  There are many levels of responsibility when it comes to fighting climate change – political, corporate, societal, individual. In your view, what is the route to sustainable life in the medium-term and who bears the brunt of the responsibility for bringing about change? Everybody has a role, but there are distinct responsibilities for various groups. Certainly, the Government has a role. It has to set the ambition, which indeed it has, but it must follow-up that ambition with the economic environment, the behavioural environment, that allows for success. Part of it will be ‘command and control’, such as the standards in our building regulations, part of it will be through a carbon tax, part of it will be through grants and incentives, and part of it will be through ensuring that the policy environment allows both businesses and individuals to make the right choices. So I do think that Government has a really important role to play. But, of course, it won’t be able to deliver on this itself. I also believe that industry in its widest sense has a huge role to play. It needs to be a leader in itself and many companies are making announcements regarding net-zero or carbon reductions, for example. Some of these announcements could be interpreted as marketing activities because they say that they will reduce their carbon footprint by a certain amount, but they are going to buy carbon credits to achieve that. It’s good, and I don’t wish to denigrate that, but it isn’t the depth of action we need. Industry has a hugely influential role in the context of its stakeholders and if you add up the number of contacts an organisation has with clients and customers, the communication potential is enormous.  While I do see industry as being very pivotal in this space, it’s also down to you and me as individuals. Ultimately, we will be presented with choices and sometimes, the choices might be a little bit more expensive or difficult. But really, the onus is on us to make the right choice because in the end, it will benefit ourselves, our families and the climate. Our more than 30,000 members are often relied upon for guidance in this space as advisors to, or within, a business. So, what is your message for Chartered Accountants specifically with regard to their role in fighting climate change? The first thing is to know your number. Accountants are very well-placed to know what the number is for the business or activity. By that, I mean: what is your emissions profile today? You can have a pseudo-calculation of that by looking at your energy because you can then do your calculation from energy into emissions. If you happen to be sourcing products from the agricultural sector, you might have to take methane into account as well. But the first thing is to put a number on it and understand the composition of that number. Doing so allows you to then develop a plan to tackle the number. It’s like any business activity – what’s the number, and what will the cost of investment be? Once you know the cost of investment, you can plan each of the steps on that basis. I would also say that it isn’t just the accountants that should know the number; it’s important that all others in the business know the number too. Sometimes, the number can be impacted by something as simple as daily routine in the workforce. That kind of information is really the first step, and then you can build various mechanisms to reduce emissions thereafter. A recent op-ed in the New York Times asked whether we need to shrink the economy to stop climate change. In your view, can economies continue to grow while we rely on “rapid market-led environmental action and technological innovation” to diffuse the threat? First, we need to consider what we mean by growth. Sometimes people talk about GDP growth and other times, they talk about job growth or quality of life so the metric you use for growth is important in this context. If I start with quality of life – will that improve in a more sustainable world? To that, the answer is a clear yes. There is no discussion that a more sustainable world will be a healthier world because we will have cleaner air and water. It will be a more comfortable world once we get our houses both comfortable and carbon-free. The world will be sustainable in itself because we will not be depleting natural resources to the point where we won’t have any left, we will recycle them. So, the answer to that is quite clear and obvious – but it is difficult to put a number on it because how do you quantify quality of life? It’s not necessarily a monetary thing. If I look at jobs, this whole change we are going through will have an impact on jobs. I’m old enough to have lived through the digitalisation process. Way back in the 1990s when we were talking about computers and the internet, the horror was that computers were going to displace people from the labour force as the work would be done by computers. Some of that was correct in that jobs that were there in the 1990s are not here anymore. But we are employing more people today, in different ways and doing different things. The change this time around will be exactly the same. However, we need to focus on those who will be adversely affected and ensure that measures are in place to allow them to be aware of, and access, training and alternative opportunities. Those who will be somewhat impacted – plumbers or electricians, for example – will need opportunities to upgrade their skills. They will still be there, but they will be doing different things going forward. I think it’s a manageable process on the employment side. The positive for Ireland is that we have discovered a natural resource that will power our economy going forward. We can substitute importing that energy with our own, and that’s very positive in terms of jobs. In terms of the GDP element of the economy, it’s going to cost money. Different numbers are put out there, some people are talking about 2% of GDP into the future but there are two elements to consider. If you look at our capital expenditure, how much additional expenditure will be required? And more importantly, how much of our current capital expenditure should not be spent in the areas in which it has traditionally been spent and should instead be diverted? That will be the challenge in terms of the more macroeconomic considerations. You spent many years working at a European level to promote energy efficiency and global leadership in renewable energy. Can Ireland do more, in your view, as an island nation to lead the charge in renewables? Yes, and we are really at the cusp of that right now. When we talk about wind, solar energy and – in time, perhaps – marine, the opportunity is, of course, that it is a natural resource. There is a higher capital investment, yes, but a much lower operational cost and that’s a characteristic of renewables in any context. Take the electric car, for example – a little bit more expensive to buy, but cheaper to run. The electricity system on this island is unique in Europe in that we have a pooled electricity system with Northern Ireland. It is the only integrated electricity system in Europe. We are an island off an island, and the analogy in size would be Demark. But unlike other countries, we have a very distinct characteristic vis-à-vis Demark in that Denmark is between Norway, Sweden and Finland on the one hand and Germany, the Netherlands and Poland on the other. It’s part of what’s called the Nord Pool electricity scheme, and it means that electrons can float very easily between all of those countries. So if, for whatever reason, the wind doesn’t blow in the North Sea and the Danish offshore wind electricity volume drops, they can source from Germany, for example, and interchange very easily. Ireland doesn’t have that. We’re an island off an island and at the moment, we just have one interconnector to the UK. So we don’t have what’s called a balancing possibility through a very large electricity system like the one on mainland Europe. We will therefore have to be able to bring variable renewables to our electricity system and balance them on the island. That will require quite a bit of innovation, both in terms of technology and in terms of the management of our electricity system. In order to make that work, Ireland will have to be a real demonstrator of demand management for the electricity system. In that, we will need both industry and consumers to manage their demand. Otherwise, if the peak gets too high, it will break the system. So, we need to spread the demand away from the peak to maintain a stable system. That will be very innovative for electricity systems globally and in that context, I think it’s fair to say that Ireland is a living laboratory. As the interview nears its end, is there anything you would like to add? We are in a situation where we are kicking off a very complicated process in Ireland coming out of the Act. We’re a little bit slow because we are already one year into the first set of five-year budgets, so we will eventually have to catch up. I think the single biggest challenge we will face, however, is not money – although money is always a problem. It’s not even innovation or technology. It’s behaviour – our own behaviour and industry behaviour. That will have to shift because we will not be able to behave in the future as we have in the past. This is what I mean by choices and I think the pandemic has been a forerunner of some of the choices we will have to make. We as individuals will have to think more about the way we live and do things. It’s not that we need to necessarily deprive ourselves, but we do need to box smart as to how we get the services we want. Mobility is a service, for example. If you want to go from here to there, think for a moment about the most sustainable way of getting there. It’s not to say don’t make the journey – although that might be correct at times! – but rather, what is the most sustainable way to travel and can we change our behaviour a little bit in that context. In terms of the way we heat our homes, is there another way of achieving a comfortable living space other than the way we have done traditionally. The other issue about behaviour is the more we can automate it, the more likely we will be to succeed. As an example, using various energy-intensive appliances at home can be done in a more sustainable way. With a smart meter and programming capacity, the use of these appliances at times of low demand, which is probably at night, in an automated way is a real support to behavioural change. Nobody wants to manually put a wash on at 2am but if you automate it using technology, that will be a huge support to behavioural change. Behaviour is the hardest thing to influence, and that is the single biggest challenge we have before us when it comes to tacking climate change. I couldn’t agree more. I have come to the conclusion that putting a carbon tax on petrol or diesel, for example, isn’t enough to change behaviour. But perhaps the simple act of including the amount paid in carbon tax on each receipt could have an effect. Visibility is vital. That’s right. And if we were to eliminate all of the subsidies to fossil fuels as a first step, it would go a long way to paying for some of the climate change measures. It seems like a no-brainer to be perfectly honest. Why tax people when all you need to do is remove the subsidies? This is a serious question we will need to consider into the future.

 Dr Caroline McGroary and Aisling McCaffrey, Chartered Accountants Ireland’s 2020/21 Young Chartered Stars, recently attended the One Young World summit in Munich. They give us their takeaways from the once-in-a-lifetime event. One Young World, the annual summit which brings together young leaders from all around the world, gathered for their 11th event this year, with 700+ delegates live in Munich, 700+ attending digitally and 40+ at the USA Hub in New York. We participated in four transformative days of speeches, networking and workshops, hearing deeply impressive stories of changemakers for peace, humanity, equality, and the environment.  Aisling’s takeaways Overall, the One Young World (OYW) summit was an amazing experience that I am still struggling to put into words. On a personal level, I had the privilege of being the flagbearer for Ireland at the Opening Ceremony and I was also given the opportunity to introduce NBA legend Steph Curry on the OYW main stage. Both of these experiences will stay with me for a very long time! Here are my key takeaways from OYW. 1. Responsible leadership attributes are crucial for facilitating change We heard from top level executives such as Bernard Looney (CEO of BP), Ronan Dunne (CEO of Verizon) and Paul Polman (former-CEO of Unilever), who emphasised the necessity to empower and engage the right leaders to work towards a more purpose-driven capitalism. The COVID-19 pandemic has provided us with an opportunity to rebuild our economies and societies for the better. We must take advantage of this across all sectors with a particular focus on a green recovery. 2. Everyone deserves a seat at the table Whether it is access to culturally effective medical care, education or basic human rights, each and every one of us needs to check our privilege and take action for the benefit of others. We cannot thrive as a community while others are just surviving.  3. “What is the most important thing in the world? It is the people, the people, the people.”  I met so many incredible people at OYW, openly sharing their stories and wealth of experience. In truth – this was my biggest highlight, especially after almost 18 months of intermittent lockdowns. I was gifted with an abundance of inspiration and positive energy which I will be using as fuel to push for tangible change and action going forward. Caroline’s takeaways To put it simply, attending the OYW summit was the experience of a lifetime. I had the opportunity to meet people from all over the world from a diverse range of backgrounds, listen to their stories, learn from them and engage in meaningful discussions. I was also delighted to have the opportunity to go on stage to talk about some of my own work. Here are three things I took from OYW: 1. Education is the key to transformative change  Many speakers, including Lewis Hamilton (F1 Champion), Ronan Dunne and Dame Vivian Hunt (Senior Partner at McKinsey), discussed the importance of universal access to quality education as a catalyst to solving many global issues. As a university lecturer, these discussions encouraged me to reflect on my role in this area.  2. Climate change is our collective responsibility  We heard from many climate activists highlighting that the climate crisis is expected to have a devastating impact on human life by 2050. Speakers, including Bob Geldof and Mary Robinson, described climate change as a “matter of life or death” and that “now is the time for action”. On a personal level, these discussions brought home the urgency of this issue and the individual role we all have to play.  3. Health and wellbeing must take priority   A number of different speakers highlighted the mental health crisis affecting many groups in society. One theme was the burnout culture that is ingrained in many organisations and how this has the potential to destabilise people of all ages. Recognising the need to prioritise health and wellbeing, we were encouraged to speak up about this issue.   Reflecting on our experiences, we both feel honoured to have been chosen to represent the accountancy profession on this global platform. As One Young World Ambassadors, we have now joined a network of 13,700+ leaders in over 190 countries. We encourage others to get involved in this community through initiatives such as the Irish FinBiz2030 Taskforce and to also consider going forward to become the next Chartered Star.

Hybrid working has improved our lives in a lot of ways, but it definitely has not made keeping ourselves safe from fraud an easy task.  Hybrid working has forced organisations to reimagine how and where we work. Most organisations have shifted from the conventional view of the workplace as always 100% on-site. Some are considering 100% remote working, and many are looking at a variation of the countless, agile, ‘hybrid’ models that lay in between. Whether you’re a Chartered Accountancy student or a newly qualified accountant, you may have some uncertainty about hybrid working – especially in the area of cybersecurity – as you juggle home and office life and everything else in between.  As you probably have already discovered, hybrid working means less verbal communication than the 100% on-site office environment, which increases the number of digital messages you receive and send daily. This can result in you becoming less vigilant for phishing emails, and other social engineering cyber-attacks. In addition to this, you may be required to work with unfamiliar technologies, and this can introduce new risks as technologies are used inappropriately, are misconfigured, or are not used with the security measures that were envisioned when they were designed. With cyberattacks nearly an everyday occurrence, causing massive disruption and financial loss, businesses and their employees need to do more to protect themselves. Cyber-risk priorities have evolved from focusing on information security to a more holistic focus on digital risk management right across the organisation and involving all members of staff. Businesses and their employees that lead on safety, security, reliability, data privacy and ethics have a competitive and reputational edge. What does this mean for you?  Ultimately, the success of hybrid working from a cybersecurity perspective will be highly dependent on how clearly cybersecurity is understood and embraced in our new ways of working. From now on, cybersecurity awareness will increasingly have to reside as much with the employee as the employer. With this in mind, here are some key cybersecurity considerations to enable you to become more cyber secure, which should give you a good standing as you begin your Chartered Accountancy journey. Keeping devices secured Help protect sensitive information by keeping your devices safe from theft and unauthorised access. Tips on securing devices: Lock your screen when you are away from your computer even for a short amount of time. Locking your screen will prevent unauthorised individuals from accessing your laptop without your password. Change your passwords frequently. Don’t re-use the same password for multiple websites or devices. Shutdown your laptop when no longer in use (e.g. end of day). If you need to store it overnight, secure it safely in a locked cabinet, locker or file drawer. Do not share company-issued laptops and devices with family and friends.  Never step away from your laptop in public places. If you are leaving laptops or other devices in a car, secure everything out of sight (the car boot is usually the best option) and lock your car.  Protecting your data when working… from home: Keep all business conversations private. Be mindful of phone conversations that may be confidential and that you do these in private. Do not use personal emails or personal cloud storage accounts for work. Don’t send work or client-related documents to personal email addresses. Keep your desk clean by putting away all work-related documents and notes. Do not share work devices, phone, laptop, or tablets with others. Secure your wireless network with a password protected option. Do not leave it open for others to connect. Turn off guest networks if you’re not managing them. Change router admin access credentials.  in public: Shield your work from ‘shoulder surfers’ – someone may see you type your password or see sensitive information on your screen. Consider using a privacy screen. Consider public network security by verifying public Wi-Fi names and, if relevant, use your organisation’s VPN connection to ensure encryption and security.  Using social media safely Sharing information on social media can be a cause of a data breach if you’re not careful. Also, it can be used to gain information about you to leverage for a targeted phishing attempt. Tips on using social media: Never post your client’s information on social media sites. Always keep business accounts and personal accounts separate. This will help prevent association of your personal life with your work life. Define your privacy profile and settings to control the type of personal information you share. Controlling the information about you on the internet can reduce the amount of personal information usable against you. Count to three before you press ‘post’ to make sure what you are sharing is appropriate. Protecting yourself from phishing For every email, verify the email address of the sender. Hover your mouse pointer over the email sender’s name to check the sender’s email address.  Do not click hyperlinks or download attachments from suspicious emails. Hover your mouse pointer over the link without clicking to check the web address. Be wary of any attachment you weren’t expecting or coming from someone you don’t know. Use ad blockers where possible to prevent malicious pop-ups appearing. Use caution when reading unsolicited text messages. From unknown senders, do not tap on any hyperlinks or provide any personal information. Continue correspondence over official channels. If you receive a text or call from someone that claims to be a client or bank for example, follow up by contacting their official phone number or email address.  Use caution when answering unsolicited phone calls. If you were not expecting a call, especially if it is from an automated voice messaging system, it may be fraudulent. Report any suspicious activity immediately to your IT department or relevant personnel. Will O’Brien is the Director of Cyber Security at PwC.  PwC has a number of Graduate and Experienced Hire roles available. If you are interested check out the our careers site www.pwc.ie/careers

Bríd Heffernan provides an update one year after the Monitoring Group issued its proposed reforms to international standard-setting boards. In July 2020, the Monitoring Group issued its much-anticipated paper outlining reforms to the international standard-setting boards – namely, the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA). This article will reflect on the reforms proposed in the July 2020 Monitoring Group paper and analyse where the reforms stand one year on. The journey so far The Monitoring Group is a group of international financial institutions and regulatory bodies committed to advancing the public interest in international audit standard-setting and audit quality. The last set of reforms faced by the standard-setting boards were agreed to in 2003 by the International Federation of Accountants (IFAC) and the Monitoring Group. These 2003 reforms created the Public Interest Oversight Board (PIOB), which was tasked with increasing investor and stakeholder confidence in the standard-setting boards and ensuring that standards are responsive to the public interest. The 2003 reforms put IESBA and IAASB under the oversight of the PIOB, thus making them independent of IFAC. This, in turn, led to IFAC providing support to the standard-setting boards. The proposed July 2020 reforms do not change this structure, but they do propose changes to address the Monitoring Group’s concerns. Effectiveness reviews were built into the 2003 reforms. Every five years or so, the Monitoring Group conducts an effectiveness review and makes recommendations to improve the system. In the early reviews, the recommendations were made and agreed upon, and enhancements were implemented. However, the most recent review in 2015 resulted in the 2017 Monitoring Group consultation paper. Since then, there has been extensive discussion between the Monitoring Group, IFAC and other stakeholders culminating in the issuance of the July 2020 Monitoring Group paper. Monitoring Group concerns The July 2020 Monitoring Group paper titled Strengthening the International Audit and Ethics Standard-Setting System set out recommendations for reforming the standard-setting process. Below is an overview of the Monitoring Group’s main concerns that led to the recommendations, which are also discussed later in this article. The public interest is not given sufficient weight throughout the standard-setting process. Stakeholder confidence in the standards is adversely affected as a result of the perception of undue influence of the accountancy profession on the following two grounds: IFAC’s role in funding and supporting the standard-setting boards and running the nominations process; and Audit firms and professional accountancy organisations providing the majority of standard-setting board members. Standards are not as timely and relevant as they need to be in a rapidly changing environment. IFAC’s response As IFAC operationally runs the standard-setting boards, the Monitoring Group’s concerns and recommendations directly impact IFAC. In an update to its members, IFAC’s Chief Executive, Kevin Dancey, stated that IFAC was focused on agreeing on a workable set of changes that would enhance stakeholders’ trust and confidence in the standard-setting process. These reforms also provide an opportunity for IFAC to address its own issues with the current process, which are: That PIOB members are almost exclusively from a regulatory background. IFAC believes that the PIOB should have a multi-stakeholder composition and perspective. That the PIOB must be more transparent, and there is a need for clarity on its role and the role of the standard-setting boards and how the PIOB carries out its mandate. 2020 recommendations  The July 2020 Monitoring Group paper proposals retain the two standard-setting boards with the same mandates, and they will be retained in a similar size (16 members, down from 18 members). The respective roles of the PIOB and the standard-setting boards are also clarified. The Monitoring Group’s proposals clarify that the standard-setting boards are responsible for developing, approving and issuing the standards. The role of the PIOB is oversight. Combined with making the workings of the PIOB more transparent, this is a step forward. Responsibility for ensuring that the standards were responsive to the public interest was a source of confusion in the past. Was this the responsibility of the standard-setting boards or the PIOB? The July 2020 Monitoring Group paper contains a public interest framework, which confirms that it is the standard-setting boards’ responsibility to certify that the standards are responsive to the public interest. The PIOB will also have to certify that the standards are responsive to the public interest as part of its oversight function. Both the PIOB and the standard-setting boards will have a multi-stakeholder composition. For the PIOB, this means that its members will not simply be representatives of the Monitoring Group members. And for the standard-setting boards, this will ensure a diversity of views at the standard-setting table. Recognition of the significant role of both IFAC and the accountancy profession is a key improvement over the 2017 consultation paper. Current practitioners can still become members of the standard-setting boards, up to a maximum of five practitioners. Impact of the changes on IFAC With respect to IFAC, its ongoing role has been acknowledged in the July 2020 Monitoring Group paper: IFAC will continue to provide operational support to the standard-setting boards, the only difference being that it will be set out in a formal service level agreement. IFAC’s role in adopting and implementing the standards, promoting the standards, and monitoring their adoption and implementation has been acknowledged as an important ongoing responsibility. There will be a change to the nominations process for IAASB and IESBA members, however. The process is currently run by the IFAC Nominating Committee, which is chaired by the IFAC president. To ensure adequate independence in the nominations process and ensure good governance, the July 2020 Monitoring Group paper recommends that the nominations process sit under the supervision of the PIOB. The legal structure will also change. Currently, the standard-setting boards are committees of IFAC. The July 2020 Monitoring Group paper calls for the standard-setting boards to sit under a separate legal entity, independent to IFAC. Furthermore, changes have been recommended to the staffing model for the standard-setting boards. The proposals call for an increased staff complement and for staff to have greater responsibility for drafting the standards with less responsibility in the hands of the standard-setting boards. Since IFAC provides operational support for the standard-setting boards, this request for an increased staff complement will impact IFAC. Transition planning phase It was assumed by many observers that, with the issuance of the July 2020 Monitoring Group paper, all would be known. However, five years after the initial review, the reform process is only at the end of the beginning, seeing as many of the details remain unresolved. According to IFAC, the July 2020 paper is a significant improvement on the proposals outlined in the 2017 consultation paper. It is evolutionary rather than revolutionary. It sets out several high-level recommendations and principles that can be worked with. Right now, IFAC and the Monitoring Group are in the transition planning phase of the reforms – but many outstanding items must yet be worked through. The transition planning phase consists of IFAC and the Monitoring Group developing an implementation plan by participating in 26 workstreams. The goal is to work through all outstanding issues and finalise the recommendations in 2021. The implementation of the recommendations will then take place over the next three years, up to 2024. The changes will be phased in to ensure a smooth transition and no disruption to the current standard-setting process. Funding of the reforms  It is clear from the July 2020 paper that there is no new funding model. The profession’s resources were stretched before COVID-19, and this limitation will be exacerbated post-pandemic. This represents a significant fiscal constraint on implementing the reforms. IFAC’s funding for 2021 is down 13.5% from 2018, and there is no improvement anticipated in the funding outlook beyond 2021. Therefore, a key challenge is to reconcile the cost of the Monitoring Group’s recommendations to the funding available. Next steps As noted, the process is currently in the transition planning phase. The goal is to resolve all outstanding issues in 2021 while reconciling the cost of the recommendations to the funding available and reaching a deal on the phased implementation of agreed changes by 2024. While there is a long way to go before the reforms are implemented, it is positive to see progress that ultimately serves the public interest. Bríd Heffernan is Associations & Institutions Leader at Chartered Accountants Ireland.

Dr Margaret Cullen explains the characteristics of good directors, which in turn contribute to board effectiveness and sustainable companies. Although there is no comprehensive definition, the Companies Act 2014 describes a director as “any person who occupies the position of director by whatever name called”. While under previous company legislation, courts recognised some practical differences in capacity, role, duties and responsibilities, the distinction between categories of directors is not widely recognised in the Act. It is within governance codes and guidelines such as the UK Corporate Governance Code, the Code of Practice for the Governance of State Bodies, and the Central Bank of Ireland Corporate Governance Requirements for Credit Institutions that this distinction is made. Executive directors are those involved in the day-to-day running of the company. Non-executive directors, on the other hand, are not actively involved in the day-to-day running of the company. They are typically appointed because they bring particular expertise that can contribute to the company’s success and sustainability. Within the non-executive director element of the board, there are non-executive directors (NEDs) classified as non-independent directors and those classified as independent non-executive directors (INEDs) because they meet the independence criteria specified within the applicable code. NEDs can be further delineated into directors employed within the group to which the company belongs and those who do not work for the group but do not meet the criteria necessary to be deemed independent. A principle enshrined in many corporate governance codes is that at least half the board should comprise NEDs whom the board considers independent. Adam Smith wrote in 1776 that executive directors or managers of companies, “being managers of other people’s money, cannot be expected to watch over it with the same vigilance with which they watch over their own”, thereby articulating the classic agency problem. This agency problem and its solutions constitute the crux of the most articulated corporate governance theory: agency theory. At the heart of agency theory is the assumption of managerial opportunism: that managers are motivated solely by self-interest, not by moral obligation. Thus, agency theorists advocate for monitoring devices, incentive mechanisms, and checks and balances to ensure managers do not abuse power to the detriment of shareholders. INEDs are one such mechanism. The conceptual underpinning of corporate governance codes around the world is the need to respond to this agency problem. Therefore, it is not surprising that principles related to INED representation on boards and INEDs chairing board committees are typically front and centre in these codes. Interestingly, agency theorists assert that the sole objective of a company (de facto the board) is to maximise returns for the shareholders. However, this assertion is inconsistent with directors’ duties under common law. There are, of course, alternative theoretical perspectives that articulate more positive assumptions on the character of managers – stewardship theory, for example. Although they advocate for INED representation on corporate boards, stewardship theorists’ advocacy relates to the advisory and guidance dimension that INEDs bring to the board rather than the need to protect the company from managerial misconduct. Anyone who has sat in my corporate governance class will know that I sit in this camp. I say this not because I am naive as to the propensity for poor behaviour within organisations. On the contrary – we have seen enough corporate governance scandals over the years to know that unscrupulous and greedy people can do bad things. However, for every scandal, thousands of companies survive, prosper, and make significant contributions to society and the economy. I hope that the current gusto in relation to company purpose and environmental, social and governance (ESG) criteria will further influence companies’ societal and environmental footprint to the benefit of all. Sometimes, companies make headlines for a breakdown in controls or sub-optimal risk management rather than any deliberate attempt to defraud the company or customers. Unfortunately, the distinction between the former and the latter is not often made clear by – or to – stakeholders. NEDs are not involved in the day-to-day operations of the company. The entire board should work hard to create a governance framework (across the company and in the boardroom) bespoke to company context, where accountability is created and the board receives the information necessary to do its job. The board is entitled to rely on the integrity of information emanating from within this framework once it has no reason to suspect that the people providing this information are not fit and proper. Wilful blindness to inappropriate behaviour is, of course, not acceptable. If I start as an INED from a position of professional mistrust, however, I am starting from an impossible position. Trust must be at the heart of the board/management relationship. Therefore, the leadership qualities of the CEO/executive directors and the company’s culture are hugely influential on the standards of corporate governance within. INEDs must bring an appropriate balance of trust and professional scepticism to the boardroom. By taking on a pseudo devil’s advocate role, INEDs add an extra governance dimension, enabling the board to make effective collective decisions and/or determinations based on the information to hand that is considered in an honest and responsible way. Getting this balance right is the hallmark of a good director and requires INEDs to understand what being non-executive truly means. Stakeholders must also understand this. Readers of this article will be familiar with the long-standing debate on whether auditors should be viewed as watchdogs (who bark if they see something suspicious) or bloodhounds (who search for something suspicious). Confusion about this distinction serves to undermine the audit process. Equally, considering the collective responsibility of a board, the non-executive nature of INED roles needs to be understood for what it can – and should – entail. To quote my mentor and colleague, Professor Niamh Brennan, it’s “nose in, finger out”. Agency theorists look at corporate governance practices and behaviours through the lens of the agency dilemma. This is an abstraction at the level of the company and its governance structures rather than board behaviour. While recognising the different lenses that categories of directors bring to the boardroom (for example, the knowledge that comes with day-to-day executive involvement versus the information asymmetry attached to being non-executive), the most effective directors demonstrate objectivity and independence of mind. As so much governance is done outside the boardroom, this objectivity across executive directors and executive committee members sets companies up for long-term success. It manifests itself in executive meetings and discussion forums where challenge and debate are encouraged, management information is scrutinised, tactical and strategic opportunities and threats are acknowledged, alternatives are considered, and decisions requiring board approval and areas that would benefit from board-wide input are identified. In short, the executive directors and executive committee can go a long way towards setting the board and the company up for success. Apart from their specific domain of experience, INEDs bring an extra layer of objectivity (with the balance of trust and professional scepticism referred to earlier) to the board to contribute to collective board effectiveness. Group NEDs bring the group perspective (on strategy and risk appetite) and related challenge, requiring equivalent objective mindsets of other board colleagues. This is particularly important, as group NEDs must always act in the interest of the local company. While much is made of the concept of non-executive director independence related to a schedule of criteria, I have always argued that independence of mind across all aspects of governance and all categories of directors is critical to board effectiveness and sustainable companies. There are, however, other behavioural characteristics critical to board success. Several years ago, in the process of designing a governance programme, I had a brilliant discussion with another colleague of mine, Frank Ennis – an experienced independent non-executive director – on what makes a good director. We had previously agreed on the importance of independence of mind (the first ‘I’) for all directors. We explored the importance of technical skill, experience and knowledge to contribute to collective board strength, but determined that it is how these skills are harnessed rather than the skills themselves that are key. We landed on the second ‘I’, intelligence, referring to the capacity of each director not to allow anyone to insult theirs. This second ‘I’ reflects and extends beyond the professional scepticism discussed. Finally, we reflected on corporate governance failures related to fraud and deliberate, inappropriate actions by those in charge and questioned the lack of integrity. We also remembered a keynote speech made by Warren Buffet at Columbia Business School in 2009 when he observed: “Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without the first, you really want them to be dumb and lazy.” Thus, the third ‘I’ became integrity – never, ever compromise yours. We were mindful, of course, that living by the three ‘I’s can sometimes lead to a fourth ‘I’ in the form of isolation, but we agreed that this is a price worth paying. Dr Margaret Cullen is Founder and Principal of Think Governance Ltd. This article was written in collaboration with Frank Ennis FCA, independent non-executive director.

David Swinburne outlines the practical considerations for members as they prepare to deal with the Small Company Administrative Rescue Process. With the much-anticipated legislation for the Small Company Administrative Rescue Process (SCARP) ready to be enacted, it will be interesting to see how the process evolves. SCARP aims to rescue struggling businesses that form the backbone of the Irish economy – small and micro companies. These SMEs provide the greatest number of jobs in Ireland. The process, by and large, mirrors the successful examinership process, which has been around for 30 years. However, the costs associated with SCARP are expected to be significantly lower than those associated with examinership. Under SCARP, there is no automatic involvement of the Court. Therefore, the costs associated with legal representation for both the company and the examiner are not applicable. Under SCARP, a company does not have protection from its creditors. However, there is the comfort that the Court is there should it be required. Of course, if recourse to the Court is required, costs will increase. What should a company or its external accountant be doing now? In a typical examinership case, there is invariably some event that occurs at very short notice or an unforeseen shock that pushes the company into insolvency. This, in turn, leads to an urgent application to Court for protection and the appointment of an examiner. Thus, the process for the duration of the examinership becomes a pressure cooker. For SCARP to be successful, planning at a very early stage and engagement with an insolvency practitioner (known as the ‘process advisor’ under SCARP) is vital. The insolvency practitioner will need to quickly assess whether or not the company is a suitable candidate for SCARP. The company can only be a suitable candidate if it has the prospect of survival, which means that it must be viable. Before commencing the SCARP process, the company will therefore need to determine (in as far as it can) that there is a strong likelihood that it will emerge successfully out the other end. For this, it must have a viable core business and source sufficient financial resources to fund the SCARP (if its creditors are to be settled immediately instead of over a period of time). The company’s stakeholders will want certainty on the outcome for them. This will form their decision as to whether or not they will support, and therefore vote in favour of, the SCARP. Fail to plan, plan to fail Early engagement with an insolvency practitioner will also allow them to identify creditors that are likely to be more challenging to deal with in the SCARP due to the complexity of the contractual relationship between such a creditor and the company. Such creditors may include landlords and others to whom the company has more onerous obligations. These creditors can be dealt with under SCARP (subject to their consent). However, if the issues are likely to be difficult to resolve, an application to Court may be required. Identifying such creditors before the process begins will be crucial in setting out the options and, consequently, the further anticipated costs that may arise in dealing with them. Based on recent applications before the High Court, it is evident that the Court will want the company to endeavour to engage with creditors and attempt to resolve difficulties before bringing the matter before the Court. Therefore, the Court should not be the first port of call in resolving issues with any creditor. Excludable debt The possibility for State creditors (with a particular focus on Revenue, which is likely to be a creditor in any SCARP scheme) to opt-out of the process has generated mixed reactions. In my experience, however, Revenue is not a blocker. Instead, it is – and will continue to be – supportive of company restructurings, whether informal or formal (i.e. SCARP or examinership). For Revenue to take such a supportive stance, the company and its directors will need to have a compliant and transparent record in their dealings with Revenue. Therefore, companies must continue to meet their Revenue filing obligations – even in circumstances where the company has warehoused debt and is not in a position to discharge its ongoing taxes as and when they fall due. Directors’ duties Under SCARP, there is a requirement for the process advisor to report any offence to the Director of Public Prosecutions (DPP) and the Office for the Director of Corporate Enforcement (ODCE). It is therefore vital that all directors act honestly and responsibly at all times. When will SCARP cases commence? There is a view that as long as COVID-19 State supports are in place, companies will not succumb to the pressure that they may face after the removal of all State supports. However, not all Irish entities are receiving State support. And those that are not are heavily reliant on their trading partners to discharge their obligations to ensure their own survival and future success. Formal insolvencies are at an all-time low. Given the impact of the last 17 months on the economy, you would expect insolvencies to have increased, not decreased. There is no doubt that the various extensive State supports, coupled with payment breaks and holiday periods from other key creditors and stakeholders, have ensured the continued survival of businesses that would otherwise have run out of cash. As the ‘new normal’ continues to be rolled out and we all adjust and adapt, creditors will be forced to become more active in their efforts to collect cash and recover amounts owing. This is when a company becomes vulnerable in terms of its future survival and direction, as its creditors start to take matters into their own hands. Control in terms of survival will quickly switch from being with a company to its creditor(s). Therefore, as highlighted above, early engagement with an insolvency practitioner and an assessment of SCARP as a credible option is a must. Time-frame The end-to-end time-frame for a SCARP is much shorter than examinership (70 days versus 150 days), which means that much preparatory work will take place before the SCARP is formally kicked off by the directors via a resolution and the appointment of the process advisor. Getting difficult and challenging creditors onside is time-consuming. If certain creditors are unlikely to be supportive before the commencement of the SCARP, it is more likely that they will object to it. This will result in an automatic application to Court to seek approval for the SCARP, which impacts the certainty of the outcome for the company, its employees, and its consenting creditors. What should I do next? If one of your clients is struggling now or is highly likely to struggle in the future, or you own or lead an SME that is eligible for SCARP (see sidebar), you should consult now with an experienced insolvency practitioner. David Swinburne FCA is an insolvency practitioner and Advisory Partner at FitzGerald Legal & Advisory, Cork. SCARP eligibility An SME will be eligible for SCARP if it satisfies two of the following three criteria: Turnover of up to €12 million; A balance sheet of up to €6 million; and/or Up to 50 employees.

Myles Thompson has spent 35 years working in audit for KPMG and over ten years supporting the work of Accountancy Europe, culminating in his recent election as President. In this article, he shares his thoughts on operating in an environment of uncertainty, the challenges facing the profession, and the potential for accountants to make a big impact on the most pressing issues of our time. Today, the accountancy profession faces many competing demands. In that context, how do you prioritise particular issues for Accountancy Europe to pursue? Accountancy Europe has always had a clear strategy in terms of what it’s working on. That’s developed continuously and every two years, with a new president, it’s looked at again. About a year ago, when I knew I would be the president from 1 January, I worked with the Accountancy Europe team and the CEO to consider how we wanted to develop the strategy. We came up with six key strategic areas to work on: corporate reporting, audit and assurance, corporate governance, sustainability, COVID-19 recovery, and – linked across all these areas – the impact on SMEs. Even though they are very broad strategic areas, we then had to identify what’s important for our members and where we can make a difference. That informed our focus, taking into account the resources available at Accountancy Europe. In some instances, we agreed to work on a particular project because it’s vital for the profession, while in other cases, we would have liked to work on a project but, for various reasons, we couldn’t. So it is a prioritisation game. We also work through this process with Accountancy Europe’s board, which has representatives from ten countries, including Ireland. We discuss the strategic objectives and consider what we should be working on with the Accountancy Europe team, which frames how we work. But we’ve got to be agile. The European Commission has said that it will look at audit reform, for example, and we will have to adapt to that because it will be significant for the profession. Sustainability reporting and assurance is an emerging area of discussion and debate. What role do you see the profession playing in this space? Sustainability reporting is very high on the European Commission’s agenda. It has established a process to develop corporate sustainability reporting standards for Europe, and the IFRS Foundation is also looking at this. There are several roles in that sphere for the profession. First, we must work with the European Commission to help them develop appropriate corporate reporting standards. But we also have a role to play, especially as Accountancy Europe, in ensuring that the European Commission and the IFRS Foundation work together towards a global solution – because most of the companies this will impact are global. Regarding comparability, the problem is that various bodies developed standards, but they’re all slightly different. So, this is an opportunity for the European Commission and the IFRS Foundation to bring it all together in one global set of standards that the Commission is happy with and can use – and can build on. These standards will represent the baseline, but certain countries or regions will always want additional reporting on top of that. And I think that’s fine, as long as you have an agreed starting point. Investor groups are increasingly seeking environmental reporting, which provides significant momentum for companies – and then we move into the area of assurance. To get consistent, high-quality reporting by entities, you need assurance. The Commission has already announced that the reporting it will put in place will be subject to assurance. The profession, therefore, has a significant role to play in ensuring that this is not overly burdensome and that it’s proportionate to what we’re trying to achieve. Linked to that, we must recognise that many companies will not have the systems and processes necessary to develop the reporting required. It’s going to take time for companies to get the right processes and systems in place. From that perspective, the profession must work with these entities to get them ready for assurance. The time needed to get companies to report will be short in terms of the potential transition period. Indeed, the Commission has put forward a very ambitious timetable whereby companies will be reporting in two years based on revised standards. But we’ve got to recognise that when companies start to report in that initial period, there will be bumps in the road and they will need time to get that reporting process right. Assurance needs to follow after this, and perhaps companies will need a couple of years to work with their auditors before public assurance can be given. We don’t want assurance that simply keeps telling people that the reporting is wrong; that won’t help anyone, and companies will need time to get it right. The audit profession is facing reform in the UK, driven by the Department of Business, Energy & Industrial Strategy (BEIS) consultation process. Do you expect similar reforms at the EU level, particularly in light of the recent Wirecard scandal? Audit quality has improved enormously over the past 20 years, and we need to recognise that. There has been more regulation and scrutiny, and even the regulator admits that audit quality has improved. But of course, it needs to continue to improve.   It is easy to blame the auditors for a company failure, but the auditors aren’t the cause. The whole ecosystem needs to be looked at, from the entity’s corporate governance to the directors, the regulators, and the audit. So, it’s good that the UK’s BEIS consultation looks at that whole ecosystem and recognises that everybody in that process needs to improve. The UK consultation is important because the European Commission recently announced that it would look at the outcomes of the 2014 audit reform. They will consider whether it has made a difference in audit quality, concentration, and independence, but they will also look at the whole ecosystem. They recognise that this is not just about the audit. That is coming in the autumn, and it needs to involve all stakeholders – business, regulators and auditors – to thoroughly debate all views and perspectives, not least those of the accountancy profession. Commissioner Mairead McGuinness is saying the right words at the moment, that this must be done collaboratively. I’m sure they’ll look at the outcome of what is happening in the UK and the Netherlands. When it comes to the UK and Europe, I think some of the issues are very similar. For example, when you look at the audit firms, they will consider governance processes, independence and non-audit services, concentration, and improving regulation. However, some of the solutions may be different. Many possible solutions that have been discussed in the UK are very UK-specific, mainly because the regulator is the regulator of both companies and auditors. It handles both sides, and that’s unusual. In the US, for example, the SEC (Securities & Exchange Commission) oversees the companies while the PCAOB (Public Company Accounting Oversight Board) oversees the audit. Emerging from COVID-19, economies will have higher debt burdens. How will economies stabilise, and what role will the profession play in this regard? The first thing to say is that nobody knows what will happen. This is new territory for everybody, so we have to be flexible and learn as we go. But for me, the critical area where the profession can help is in working with the SME sector. So much regulation concentrates on listed public interest entities, but the SME sector constitutes 80% of the European economy. The accountancy profession is a key advisor to SMEs, and we are uniquely placed to help them deal with this crisis while working with governments and banks in various countries. There is a considerable concern that banks in most countries are being encouraged by their respective governments to give companies time, but it will be fascinating to see how banks react. As things start moving, will they suddenly decide against servicing a particular company or area? The number of UK companies that have gone insolvent in the past year has reduced dramatically because furlough schemes and banks have shored them up. However, those supports will eventually diminish, and there will be an increase in insolvencies down the line. The profession will be vital in helping companies through that chasm. In terms of advocacy for this important sector, Accountancy Europe has worked with the European Commission to push it on policies for SMEs. But this type of advocacy needs to happen on a country-by-country basis because it’s very difficult to have Europe-wide laws. The profession can act as the voice for many of these SMEs at a local level and work with SME groups. For example, Accountancy Europe works with SME United, a Brussels-based group representing SMEs in Europe. We need this kind of collaboration to get the best for companies. You have worked through many economic shocks during your more than 35 years at KPMG. What did these experiences teach you about leadership? I remember the 2008 banking crisis distinctly because I was trying to help audit clients through that process. It is similar to the current crisis in the sense that you have to be practical and transparent to identify the issues and solutions. In some instances, people assume that companies have suffered badly in a crisis. But many have reinvented themselves, they’ve emerged much stronger. They achieve that by being clear on their position and debt burden, for example. Of course, some companies will fail, but the profession must help these companies be transparent on issues like resilience and going concern. That’s why I’m a big supporter of companies talking about resilience in the context of what could happen in three to five years. I’m also a big advocate of detailed audit reports and robust audit reporting. We’ve driven that enormously over the last six years in the UK – talking about the risks and highlighting concerns. We must underline to investors what the issues are in a company, but it is also imperative to ensure that the board and directors are fair and balanced in what they say about a company’s performance and prospects. We can do a lot of work in that area in the future. If I was to share one piece of advice, it’s to cultivate your role as a professional advisor – whether you work in practice or industry – so that we can help companies develop and grow. We must see that as different from the auditor; the auditor must be independent and not part of the business. But when you’re not the auditor – and many SMEs don’t require an audit – the profession needs to be there as an advisor. We must help SMEs get through whatever crisis they’re in, help them with their supply chain, help them with their processes, help them deal with their debt burden, and make them as efficient as they can be. In short, we must strive to be trusted advisors to business. How has the work of Accountancy Europe changed over the term of your involvement? I’ve been involved with Accountancy Europe for over a decade. Accountancy Europe was historically very technically focused. It mainly responded to technical consultations, whether from the international standard-setters globally or the European Commission. But over the last five years, it has become much more strategic and much more involved in helping the Commission develop its agenda early in the process. One example is sustainability reporting. Accountancy Europe has been involved from the beginning in helping EFRAG, the group dealing with this issue. So while the technical activity remains, Accountancy Europe has become much more strategic in its focus, and that’s important. What other issues do you expect to come into focus for you and the accountancy profession in the years ahead? The profession has a lot on its plate with sustainability reporting and audit reform, to give two examples. But for me, the profession needs to keep improving and ensure that it deals with public and regulatory expectations, especially on the audit side. The profession could do more to explain its role in that respect. Whenever a company collapses, the focus often falls on the auditor, and the question is always: ‘why didn’t the auditor see it coming?’ If the profession continues to explain the role of audit and how it works, that would be helpful. But as I mentioned earlier, auditors don’t bring down companies. So, the profession needs to keep explaining its role and what it does, and that will be important as we work through the fallout from this crisis and in the years ahead. Myles Thompson is President of Accountancy Europe. Myles Thompson on… the expectation gap There should be an expectation that auditors are doing the job to the highest quality that they can. And I think that is a very important expectation that we should have. But I think it is also relevant to recognise that other stakeholders may well have a greater expectation of the profession than is currently required by the regulators and by standards. The expectation gap exists; it’s been there for many years. I don’t think the profession helped itself by not dealing with it or explaining the process. But we shouldn’t hide things and say: ‘well, that’s not our responsibility’. We need to explain what we do and what we can do. And if, in the end, society decides that we need to do more, that can be done. Audit is a risk-based process, and of course you can do more – you can lower the risks and test more, and we are doing more of that through technology. Technology may be crucial because when it’s used appropriately, it can be a really powerful tool in identifying unusual transactions. A large company may transact thousands of times a day, but we have artificial intelligence tools now that can analyse every transaction in every day of the year to see if something stands out. But we still need to understand the expectations of us as auditors and deal with that. Myles Thompson on… Brexit There are two areas to consider. First, we need to recognise that London is a significant capital centre, and many European companies are listed in London. So, we need to make sure that such companies can transact appropriately and work in that capital environment in the UK. Before, everything was equivalent, so we need to make sure that it works. And from a profession point of view, we need to ensure that we continue to have proper recognition of the profession across Europe. Because again, before Brexit, the qualifications in one country were recognised in others. Work is needed on this because there are many UK qualifications used by member bodies in other countries. If a qualification is not going to be recognised, then that could have a significant impact.  Thankfully, the biggest area of cooperation is between the UK and Ireland, which is being dealt with in an appropriate way. I see the relationship between the UK and Ireland as separate from that between the UK and mainland Europe because the UK and Ireland have always worked together very strongly. For example, Chartered Accountants Ireland is a member body for north and south, and many firms operate on that basis also. The profession works across borders, and it must continue to do so in that respect. So, I’m less worried about the UK and Ireland and more concerned about how the UK and continental Europe will work.

Digital proved to be a vital tool in helping businesses navigate the upheaval during COVID-19. But now, it needs to move from a tactical response to a key pillar of strategy, writes Cormac Hughes. Businesses crave certainty. After the past year, however, that precious commodity is in short supply. So how can organisations be ready for and respond to uncertainty, both to make themselves less vulnerable to risk and to be prepared to take advantage of opportunities that emerge in unpredictable times? The answer is digital transformation. However, those two simple words disguise a more complex readjustment. Going digital is not just about building a new website. That would be like applying a fresh coat of paint to your organisation’s existing building when in reality, it is a fundamental restructuring from the floorboards to the ceiling. It is a wholesale realignment that touches every part of an organisation and puts digital at the heart of its strategy. In this article, I will outline the benefits of this approach, identify the areas of your organisation most impacted by the change, and provide practical advice on the steps to take wherever you are on the journey. From survival to strategy The first thing to say is that we are not at the starting line for digital transformation; the race is already underway. Many organisations had to rapidly hit their full stride because they had no other choice: the COVID-19 pandemic turned the digital agenda from a marathon to a sprint. The move to remote and distributed workforces at scale was only possible with digital technology. In many cases, online channels became the default means of interacting with customers and suppliers. That so many managed the change so effectively without dropping the baton is a testament to people’s incredible spirit and collective effort. But the swift onset of that crisis meant that many of the solutions put in place were short-term and tactical in nature. Now, as we can all catch our breath and start looking to the future with some optimism, we have an opportunity to evaluate the lessons learned. And the biggest lesson of all is that digital is not an enabler of strategy but a driver of it. We can say this with confidence based on a global study of 2,860 executives in the commercial and public sectors, which Deloitte carried out earlier this year. This research concluded that digital is fast becoming the norm across all sectors. Nearly two-thirds of respondents believe that organisations that don’t digitise in the next five years will be “doomed”, so having the right strategy that takes advantage of digital possibilities and capabilities will ultimately differentiate the winners and losers. Digital maturity confers advantage Deloitte’s research showed that the more digitally mature an organisation is, the better able it is to navigate rapid change and the better it performed financially. 78% of leaders surveyed said that their organisations’ digital capabilities played a significant part in helping them stay resilient as the COVID-19 crisis evolved rapidly. A similar percentage reported that their digital transformation initiatives were already having a significant positive effect on their businesses. Against this backdrop, digital spending is increasing. This might seem counter-intuitive because many organisations came under financial pressure during the pandemic. Yet, according to a CEO survey by the technology research company Gartner, over 80% of organisations planned to boost their investments in digital transformation. The firm forecasts that spending on enterprise digital transformation will grow at a 15.5% compound annual growth rate from 2020 to 2023. The Deloitte study supports this finding: 69% of the leaders surveyed intend to commit more spending to digital transformation in response to the pandemic. Our figures also show that their budgets for digital transformation represent a higher percentage of their annual revenues than in prior years. The agility to react to new opportunities Digital transformation also changes the competitive field and creates new opportunities for organisations to differentiate themselves. With the experience of the past year, it is now clear that digitally sophisticated companies are especially well-placed to react to new customer trends or buying habits. At the same time, our study found that many commercial leaders believe that their main competitor in five years will be an emerging start-up or a ‘digitally native’ company that hasn’t needed to shed the legacy of older technology (more of which later). Fewer than one-third of our respondents believe that their biggest threat will come from a current competitor. It is worth emphasising here that the window of opportunity for embracing digital remains open. For example, several Irish retail banks recently announced plans to form a consortium to develop a money transfer app to compete with emerging fintech providers. The findings above hint at the extent of the dynamic situation, so we dug deeper into leaders’ perceptions of change. More than three in four leaders anticipate that their business will “change significantly” over the next five years and more so than the previous five. Instability, by its nature, brings uncertainty, and it is not surprising that more than half of respondents believe that the fast pace of technology change is “not good” for their organisations. In our opinion, this makes it even more important to take a proactive approach to digital transformation rather than just letting it happen. Against this backdrop, how do organisations further embed digital across the business? We have considered this question across several areas: talent, finance, operations, and customer. Let us look at each of these in turn. The talent opportunity The past year has had an enormous impact on how we think about the nature of work. Business leaders need to consider this from a multifaceted perspective: who does the work? What kind of work do they do? And where do they do it from? From our engagements with clients, many will need to assess the skills they have in their workforces today and map them to the capabilities they will need in the future. This could involve identifying candidates for training so they can take up new roles. The ability to work remotely could be an opportunity to recruit talent that would previously have been unavailable because those people lived beyond a commuting distance to an office. It is also a chance to re-frame HR practices, such as moving to a more flexible team-based model rather than having people work in fixed roles organised along rigid departmental lines. The finance opportunity The finance function plays a vital role in a digitally transformed business, but it too must change to carry out this newly expanded remit. Traditionally, the job of finance was to report on what had already happened. Now, finance must look forward and spend most of its time and resources on planning and forecasting. To do this effectively, it must be able to use powerful analytics tools that can sift through data and deliver the insights the business needs to drive its decision-making. When this is in place, finance can become a strategic business partner and apply analytical thinking to solve challenges. The operations opportunity Operations is the through-line connecting every part of an organisation, from the customer-facing online channels to support, order processing and fulfilment. When the customer engages through a website, online store, app, or chatbot, they judge the success of that interaction on the seamlessness of the experience. How swiftly can they complete a transaction? When is the product or service ready? What updates do they receive about the progress of their order? Data is the glue that binds all parts of an organisation together. Every aspect of the operation needs to be digitally enabled and connected to have the data it needs, in real-time, to fulfil the order and share relevant information with the customer. Then, operations can analyse this data to identify areas where it can continually optimise. These improvements can be internal (streamlining processes that employees must use) or external (delivering a more efficient service to customers). The customer opportunity This leads us neatly to the customer: top-performing digitally-enabled organisations realise it’s not all about them. They put the customer first, delivering an experience that’s easy, convenient, and secure. This helps strengthen customer loyalty and trust. At the same time, they also dig deeper to understand their customers’ needs. They know that although digital may be the default means of engagement in today’s world, there are nuances to different customer segments and groups. Looking closer at the behaviour of those groups uncovers distinctions that enable businesses to target their offerings more effectively, identify up-sell and cross-sell opportunities, and stay competitive at a time when the customer has never had more choice. The cloud imperative The four areas outlined above have one element in common: the cloud. This is fast becoming the dominant model for organisations to avail of IT services. Delivering technology and services through the cloud equips people to work from anywhere. It also enables finance to get data faster and move from historical reporting to forecasting while empowering all elements of operations to work together more effectively and deliver a seamless customer experience. Cloud offers a consumption-based pricing model that links IT spend to the demand for that service. It also offers speed: unlike legacy infrastructure, the cloud enables businesses to test new products and services far faster than before. And when an organisation’s IT platform is adaptable, that means its business is adaptable too. With no data centres or servers to maintain and run, leaders can focus purely on the business and reduce the need to ‘mind’ the technology. Cloud also makes it easier to access the latest technology such as artificial intelligence, machine learning and robotic process automation, and high-powered analytics that can identify new areas for improvement. This is a very wide-ranging agenda for any organisation, so it may be helpful to think of it as follows: first, set the strategic direction for operations, finance, talent, and customer-facing functions from one direction. In parallel, begin a managed transition from the business’s siloed and legacy technology systems today to cloud platforms that provide the agility and flexibility the business will need. Moving to the cloud provides the basis for the strategy to come to life, but it can be complex in an organisation with a lot of existing IT. When creating a roadmap to move to the cloud, four useful stages are: Step 1: Identify the business problem Determine where the biggest burning need exists in your business today, as this will have a strong technology element. Find a problem that is a priority and will let you cut through all the decisions you have to make in your cloud adoption journey. Step 2: Start small and target quick wins Start with a small project, work to tightly defined parameters, and measure business value as you build support at all levels of the business. For example, this might be a non-critical application or a legacy system nearing the end of its support contract. Use cloud’s agility to your advantage. The ability to launch new systems quickly shortens the typical procurement cycle to days. This means you can identify a project that will deliver quick wins, act as a proof of concept, and build momentum from there. Step 3: Apply lessons and expand Use the proof of concept to identify what has been learned, build a business case, and bring stakeholders on the journey as they become familiar with the cloud. Starting small also allows the enterprise to develop the people and process aspects necessary to succeed in cloud adoption. The technology alone is not enough; there needs to be a change in culture and skills in addition to transforming processes in the business to embrace agile ways of working. Step 4: Build capability in the business in parallel to IT As the cloud project develops, ensure that those in charge have identified the necessary skills in the team, whether they exist in the business today, and whether you need to supplement the team with external expertise. That can be achieved by recruiting or working with a partner that can supplement your resources. Bear in mind that the skills for successful cloud projects go beyond technology alone. Your cloud team should also cover governance and operating models so that you implement suitable structures that can evolve as your cloud adoption matures. What’s next? When the cloud underpins digital transformation, scaling becomes easier because the organisation no longer relies on the capacity of technology it acquired at a moment in time. It can be more agile by quickly identifying and responding to customer needs. Growth is returning, and tomorrow’s world is one of expanded skillsets, a workforce that’s no longer tied to one place, and a wide range of opportunity. No matter what change awaits, the digitally transformed business can be ready. Cormac Hughes is Head of Consulting at Deloitte Ireland. Prepare now for the next disruption Despite the COVID-19 pandemic, digital spending is still on the rise. Deloitte’s 2021 Digital Transformation Executive Survey reinforces this expectation of growth, with 69% of surveyed leaders globally planning to increase their financial commitments to digital transformation in response to the pandemic. This vigorous growth in digital transformation investment makes it even more critical for   enterprises to make digital transformation a foundation of their strategy. Organisations should assume that their competitors are just as committed to developing their digital capabilities right now. The winners will be those that successfully move digital from a tactical response to a key pillar of strategy. To do this, CEOs must make explicit choices about their strategy across several areas, including talent, finance, operations and the customer. Doing so will help improve efficiency, power new products and services, enable new business models, and ensure that the customer experience is easy, convenient, and secure. Ultimately, it is about being as ready as possible for what may be next as further disruptions will come.

The need for structured, robust, and reliable business intelligence has mushroomed in recent years. As an increasing number of businesses grapple with the issue, Paul Cullen  explains the critical elements for implementation success. Data volumes within businesses have increased dramatically in recent years, primarily driven by cloud-based data solutions. Many companies struggle to harness this data in a way that enables them to focus on the key drivers of their success and to know if the strategies they have executed are having the desired results. Proper and well-planned implementation of a business intelligence (BI) solution can give management the real-time information they need to maximise commercial opportunities and ensure organisational coherence to deliver on agreed performance metrics. Why Excel just doesn’t cut it for BI Accountants have always loved Excel, and it still has a pivotal role as an analytics tool. However, when it comes to flexible reporting and giving end-users the ability to dive beyond the headline numbers to get to the ‘why’, Excel falls short in several key areas: Model maintenance headaches: in a 50-tab reporting workbook, any change to the layout can be very time-consuming (and often error-prone). I frequently encounter client reporting workbooks riddled with errors because one sheet has a misaligned row, which results in an incorrect aggregated summary. The dreaded invisible F2 edit: how many times have you spent hours pouring over an Excel workbook trying to figure out why the individual tabs don’t agree with the summary, only to eventually discover that someone has keyed in a manual F2 edit in a cell? Distributabilty: so you have built this all-singing, all-dancing Excel reporting pack, but it’s 70MB and cannot be shared via email. You also realise that some information needs to be segmented so that specific users can only see select slices of the data. These issues usually mean that multiple Excel models must be maintained, amplifying the risk of error and potentially compromising data integrity. Limits on row numbers: Excel’s sheet row limit has increased to one million in recent years. While this sounds more than adequate, you can easily exceed this limit if you include transactional data. Housing data in this way within Excel will usually result in slow, large file-size models. Usually dependant on one key user: there is typically only one key person who knows how to run and maintain a reporting model. Therefore, reporting quality, outputs, and cycle time rely to a worryingly large degree on one individual. The need for structured, robust, and reliable BI has mushroomed in recent years. As a result, dedicated BI platforms like PowerBI, Tableau, Qlik and ZapBI have evolved to address these shortcomings and provide analytics visualisations and end-user self-service reporting that goes far beyond Excel’s capabilities. Key obstacles to getting good BI Master data Many finance professionals underestimate just how unstructured their data is. I often hear clients say: “Yes, but we use NAV/Dynamics 365, so our data is really good”. They often fail to understand the inconsistencies across the company in how transactions are coded or recorded by staff. These inconsistencies make life difficult when you need to connect transactions across different platforms. For example, say you want to connect salary data for an employee from an HR system with data in a time-recording system. The employee ID is, say, PCULLEN250 on the HR system but CULLP on the time-recording system. This is just one example of the data-mapping tasks that must be undertaken for BI to succeed. I have seen this to varying degrees in every BI project I have delivered because, for many years, siloed teams have had their own ways of doing things. They simply didn’t realise that there would be a future requirement to bring all this data together at a transactionally-connected level. Historical processes or ways of working The ways in which your teams have historically coded transactions on source systems will almost certainly present challenges in initially setting up your new BI platform. I once worked with a ship management group with 1,000 ships under their control. Management wanted to get to ‘vessel profitability’, and we knew that cost allocation would be a challenge due to the complexity of the company’s operating structures. However, we were surprised to find that revenue for each vessel wasn’t available from the ledgers because the company issued just one monthly invoice to each carrier, even though some had more than 50 vessels under management. Furthermore, payroll costs for vessel crews were recorded by office location, not by vessel. Both of these historical processes gave rise to significant re-analysis work and new process design to enable the required analyses. Similarly, one healthcare client wanted to understand their profitability by treatment type. They believed that everyone across the more than 100 clinics they owned used roughly the same few hundred treatment type codes. In fact, there were over 6,000 live treatment codes in use and in some instances, clinics could even create their own codes at will. So expect to change some of your ways of working as a result of embarking on a BI implementation. How far back to go? Once it becomes clear to key stakeholders just how much insight a good BI implementation will bring, there is typically a desire to have as much history loaded into the model as possible. This is often the case where the company is private equity-owned, or a sale is planned. My advice here is the old 80/20 rule. Yes, it might be nice to see this new level of insight going back five years. But if your company is one of those where a lot of re-analysis will be required, you have to ask: is it worth it? I instead recommend that older historicals should, where possible, only be incorporated in aggregate. You should then ensure that the new data processes are designed and implemented so that future analytics are both robust and reliable. How often is too often? When implementing a BI platform, the next consideration is how often the data and outputs should be refreshed. It’s tempting to think: “Great, I can see what the sales team are doing every morning and then follow-up to discuss what’s going on”. However, this approach can quickly create a situation where staff have to spend time each day figuring out what just happened. And this, of course, can lead to ‘paralysis by analysis’. Be judicious about how often BI data should form the basis of a trading or operations conversation, and otherwise use it to indicate the company’s direction of travel. Introducing a new performance management BI tool will initially strain your executives and managers as they sift through a deluge of new and revealing information. This takes me to the following consideration: the need for culture change if a BI solution is to work correctly. Warning! Culture change approaching Imagine you are a sales or production manager, and you wake up to a new, live, web-based BI portal that shows everyone in your organisation where things might not be going so well on your patch. Senior management must avoid using the BI solution to shame or berate colleagues. Instead, it should be seen as a tool to identify opportunities and enhance performance across the business. Tread carefully here and avoid the ‘big bang’ approach of rolling out BI. You want your teams to embrace this new way of working, not run away from it or, worse still, seek to discredit it. With all this new performance management data at your fingertips, you may wish to consider redesigning your legacy compensation and bonus systems to ensure that these insights drive the right behaviours across the organisation. Embedding a robust BI solution in your organisation can be the catalyst for undoing the traditional silo mentality that can arise when different functions perform to their own narrow targets. Factors affecting implementation speed The following four issues will affect the length of time it takes to build and roll out your new BI platform. Poor data mapping: it is critical to understand how different naming conventions are used across your systems. You should conduct a thorough data-mapping audit to ensure that independent systems can be bridged on common field names (by employee ID, customer ID, or product ID, for example). Doing this during the development of the BI solution is time-consuming, but products like Caragon Flex can make the process much more manageable. Organisational readiness: prepare your team for the effort required to clean up your data and, more importantly, how this information will be distributed and reviewed once it is live. Having a new suite of detailed analytics can be overwhelming for data consumers if it is not clearly understood what it will be used for. Also, inform your colleagues that they are not expected to understand every data point that surfaces in the reports. Absence of a project champion: projects that should take weeks often take months due to the lack of an internal project champion. It is vital to appoint one and empower them to ‘herd the cats’ to ensure the project is delivered on time. Unclear output requirements/moving targets: consider what you want to get out of the new BI platform and be ruthless in identifying the key reports and key performance indicators you will need at the outset. Solution providers will typically build a proof-of-concept model to illustrate the art of the possible. This is a good time to agree on the minimum requirements for Phase 1 – but don’t bite off more than you can chew. Some processes must change As the earlier examples show, digging deep on data to build robust processes across multiple systems will invariably highlight process weaknesses that, if not remedied, will compromise the integrity of any BI platform. Therefore, it is essential to understand at the outset that go-live and the ultimate success of the project will be contingent on staff being adequately trained in the new ways of working. This might, for example, mean retraining payroll staff on payroll coding so that the correct costs are tagged to the relevant activity. Similarly, invoicing processes may need to change to ensure that revenue can be appropriately tagged to achieve the desired level of reporting granularity. You should also introduce tighter controls on crucial data fields across your systems (customer codes, product codes or employee IDs, for example). In my experience, this is best achieved by having a data governance standing group, to which all data changes (or new data field creations) must go for approval and communication to other potentially affected users. In conclusion A BI implementation is an exciting journey for a company. To get the most from it, here are my top four tips: Appoint a data champion and BI steering committee to ensure the project both gains and sustains momentum, and the business is prepared for what’s coming. Take the time to fine-tune your data mapping processes. Phase your BI roll-out in bite-size chunks to avoid overwhelming the organisation. Create a sense of ‘new frontiers’ within the business as it embarks on its data-empowered journey. Paul Cullen FCA is CEO at 1Truth, a Belfast-based management information solutions provider.

Aoife Donnelly and Thady Duggan explain how the role of the chief financial officer will evolve as digital change continues apace. As chief financial officers (CFOs) continue to take on more responsibility for strategy and execution, and for the sustainable future of the enterprise, they must build technology strength to unleash breakthrough speed. Doing so is the way to drive breakout value across the business. Accenture’s recently published report titled CFO Now: Breakthrough Speed for Breakout Value identified themes common to a select group of CFOs who deliver significant value to their organisations. We found that, aided by digital transformation, the pace of change is greater than ever before. This was further accelerated by the pandemic, with 79% of CFOs surveyed compelled to ramp up organisational transformation due to the effects of the past year. As chief executive officers (CEOs) embrace speed by accelerating their digital transformation, they turn to finance for guidance. The pace at which finance can support business leaders in real-time is critical and has resulted in the accelerated adoption of digital technologies in the finance function. CFOs said that 60% of their traditional finance tasks have been automated in our CFO Now research, up from 34% three years ago.  Some CFOs are delivering real value from their digital transformation. Our research identifies several key characteristics of these ‘winners’ – finance teams that can provide the business with insights to drive transformation with speed and agility. Economic guardians Compared to their predecessors, the breadth of responsibility and expectation faced by today’s CFO is increasing. To thrive with this increased responsibility, the finance function must transform itself to enable CFOs to support the rest of the business effectively. The pace of technological change in recent years has opened opportunities within finance. Huge strides have been made to optimise processes, maximise the capabilities within existing enterprise resource planning (ERP) systems, and implement other technology enablers. However, this is using today’s technology to fix yesterday’s problems. Timely, accurate, and complete reporting is important, but it should be considered a mere hygiene factor for a high-performing finance function. The business needs informed guidance to navigate the present and anticipate the future, not comfort for the past. That’s where the most significant shift is occurring in the role of CFOs as economic guardians. High-performing finance functions can and should provide predictive insights, but less than half (43%) of CFOs surveyed have used advanced financial modelling in the past two years to identify future risks and opportunities. How can CFOs be economic guardians if they don’t have a perspective on what tomorrow will bring? High-performing CFOs use internal and external data with advanced models to better understand leading indicators of demand well ahead of trends that might show up in the company’s profit and loss account. Others, however, are not sure how to maximise the benefits of digital transformation – only 21% of CFO Now respondents have used operational data to identify new sources of value, and only 20% have used macroeconomic data to support their forecasting. Cloud architectures offer a whole new world of possibilities to the CFO, allowing for much faster decision-making. Yet, only 23% of CFOs use the cloud to provide new insights and only 16% use it to identify new sources of value. Combined with this data and technology utilisation comes a renewed focus on aligning and nurturing talent within the finance function. According to Accenture’s latest CxO Pulse Survey, 75% of CFOs believe that their company is on a course to redesign how people work and reinvent their culture to support new behaviours and mindsets. CFOs understand that finance professionals can’t be left out of this talent revolution. Our CFO Now research shows that they are acting by re-prioritising the skills needed in their functions. Traditional finance and accounting skills are still important but, along with general management skills, are now among the lowest priorities. The top skills being actively introduced are data exploration and analysis (41%), followed by scenario planning and horizon scanning (38%), innovation (37%), and storytelling (34%). Architects of business value CFOs have always played an important role in the organisation, but they now increasingly influence and direct value creation across the enterprise. This enhanced role requires increased collaboration between the finance function and other parts of the organisation, with 86% of CFOs surveyed increasing the frequency and scope of collaboration across the C-suite. The current pandemic and the strains it has placed on business has changed mindsets at the C-suite level, turning what was once a competitive environment into a more collaborative one that enables the CFO to deliver on their expanded role. Leading CFOs understand the power of technology to support these efforts and take appropriate action to ensure that they play a significant role in any major technological decisions. Indeed, 72% of respondents said they have the final say on the technological direction of the enterprise. Catalysts of digital strategy The modern CFO needs to champion digital transformation across the enterprise to support the central theme of our research – breakthrough speed for driving breakout business value. Outside their own function, there are three key areas where the impact of digital strategy are most striking. Business models: our research shows that 41% of CFOs are driving new business models within their organisations. That’s a great start, but it still falls short of the 72% of CFOs who thought their business would need to completely re-think processes and operations to be more resilient in the face of impending disruption. Throughout the past year, organisations had to reconsider their business model and its resilience for the future. Irish companies have used this crisis as an opportunity to reassess their ambitions, using the shift to digital to re-evaluate their global ambition and identify business lines, markets, and other opportunities that were not considered possible before. Security: the most cited barrier preventing CFOs from realising their full potential as drivers of strategic change was concern about cybersecurity. Yet only 28% of finance professionals are engaged in managing risk through data security to a meaningful degree. In many organisations, chief technology officers and chief risk officers report to the CFO. Given this responsibility, it is incumbent upon the CFO to better understand and become more actively engaged in data security. Environmental, social and governance criteria: one striking finding from our CFO Now research was the extent to which CFOs are seen as responsible for their company’s environmental, social and governance (ESG) policies. In fact, 68% of respondents said that CFOs take ultimate responsibility for ESG performance within their enterprise. Driven by the growing concern about the global climate crisis, Irish CFOs are also trying to understand their role in any future ESG reporting requirements. The impact on the finance function The role of finance within the organisation is evolving and expanding. The enterprise expects more, and at greater speed, from the finance function. To deliver this, the function must change. One enabler of this change is the accelerating adoption of digital technologies. This impacts the speed and type of finance activities being performed. Leveraging technology to perform more of the mundane tasks allows the CFO and the finance function to spend more time planning, analysing, and advising on the growth agenda, thereby better serving the enterprise’s changing needs and expectations (see Figure 1). Given this shift, a significant change in the skills being introduced to the finance function makes sense. CFOs know that their teams must gain insights from data and then, crucially, communicate these insights to the business. In conjunction with the shift in the type of work performed by finance teams, the composition of the workforce is also changing with fewer people using more technology to deliver better insights (see Figure 2).  The combination of enhanced capabilities within finance, improvements in technology enablers, and the explosion in data offers an amazing opportunity. To maximise the benefits from this digital transformation, the finance operating model must evolve (see Figure 3). Corporate: group-level functions, the scope of which differs from entity to entity but may include activities such as finance governance, tax strategy, treasury strategy, investor relations, internal audit, and others of a similar nature. Intelligent finance operations: the engine room where both transactional and non-transactional finance activities such as purchase to pay (P2P), order to cash (OTC), record to report (RTR) and significant components of management reporting take place at scale to maximise technology enablers. Business unit finance: direct support to the business, often in the form of finance business partnering, operational planning, and forecasting. Working closely with other teams within the finance function and the business to provide actionable insights to the business unit. Centre for value optimisation: instead of having static groups working on the same thing for months at a time, we see teams with multidisciplinary skills assembling for several weeks to take on short-term projects with defined goals and outcomes. Once work is completed, these teams then disband and new teams with different members tackle the next initiative. These teams are not finance-specific and will typically include non-finance partners. The work they do is supported by the data and analytics hub, where they work with experts to develop recommendations for business leadership. Data and analytics hub: the hub has the dual responsibility of ensuring the veracity of finance data and augmenting the teams in the centre for value optimisation with data scientists, who run multiple models to prove or disprove hypotheses. If the value optimisation squads are the ‘brains’ of the function, the data and analytics hub is the ‘heart’, pumping much-needed blood in the form of data to provide the brain with the fuel required to do its magic. Many of our Irish clients have established the first three components of this operating model. However, they are only starting to fully investigate the potential benefits of multidisciplinary teams that use a single source of truth to identify opportunities and drive insights. What does this mean for Chartered Accountants? The remit of the finance function will continue to expand, and its influence will grow in the coming years. 76% of respondents claim that the pandemic highlighted the valuable role finance teams played in feeding early warning insights to the CFO. Finance will become even more critical to future success as it delivers data-driven insights and guidance at speed. However, to do this, CFOs need to consider all the capabilities within the finance team and any potential future capabilities that may be required. Here are three things to consider. Become more technology-savvy and data-savvy. Become technology-savvy to enable finance leaders to make informed decisions on the organisation’s technology strategy; to understand the tools that can optimise the processes in the function and allow leaders to manage teams in which these tools perform a significant portion of the activity. And become data-savvy to understand the opportunities presented by data to make informed decisions that can drive profitable growth; to understand the fundamentals of analytics to challenge the insights generated by analytics teams, if not actually being part of those teams. Get better at communicating financial insights to non-finance leaders. As the role expands and continues to become less about reporting prior financial performance and more about identifying future opportunities for the business, finance leaders need to convert analysis into a compelling story that business leaders can understand and act upon. Consider how to train and upskill the whole team. The shift to a technology-enabled, data-driven finance function is becoming even more pronounced. Trainee and newly qualified Chartered Accountants must gain enough exposure to ‘traditional’ finance activities to understand the fundamentals of finance management while working in a function where these traditional finance activities are increasingly being automated. This is a challenge that must be solved in the years ahead. Aoife Donnelly FCA leads Accenture’s Finance Strategy & Consulting practice in Ireland. Thady Duggan FCA is a Senior Manager in Accenture’s Finance Strategy & Consulting practice in Ireland.

The membership has voted to re-elect the Officer Group for a second term as the Institute and broader profession seeks to re-emerge from the COVID-19 crisis. President Paul Henry, Deputy President Pat O’Neill and Vice-President Sinead Donovan discuss the year that was and explain their priorities for the year ahead. The re-election of the Officer Group for a second term is an unprecedented step in the Institute’s recent history. Can you explain the thinking behind it and outline what it will mean for members as we enter a new phase in living with COVID-19 and its consequences? Paul Henry (PH): At the recent AGM, a proposal was put to – and passed by – the membership of Chartered Accountants Ireland to extend the term of the Officer Group by one further year. The coronavirus pandemic effectively halted important parts of the President’s role, not least outreach and member representation activities. As such, Council felt that an extension of our term would provide an opportunity for the Officer Group to achieve our objectives in a meaningful way for the benefit of members while providing much-needed stability and continuity as the pandemic on the island of Ireland enters a new phase. Over the past year, I have sought to provide leadership at a time of uncertainty as the island grappled with the challenges of COVID-19 and Brexit. During that time, I – along with my colleagues in the Officer Group – supported the advocacy activity of the Institute to alleviate pressure points for members so that they could continue to deliver for their businesses and clients. I also focused on attracting new talent to the profession, continuing a long tradition of positioning the Chartered Accountant qualification as the gold standard for the accounting profession. Looking ahead, the Officer Group will continue to lay the foundations for renewed growth in the aftermath of the pandemic. The future is uncertain and, for many, survival is the sole objective. My goal is to help Chartered Accountants, both in business and as advisors to business, prepare for the challenges that will come as economies re-open and a new ‘business as usual’ takes hold. Pat O’Neill (PON): The profession has worked through many unprecedented issues since the middle of last year, and now we are figuring out how to emerge from a period of significant restriction. We deliberated on the benefits that continuity would bring and concluded that as the economy opens up, the President and the Officer Group will have an opportunity to advance the member-focused initiatives identified at our election in 2020. So in terms of overseeing the evolution of our education model – and in the last year, that has entailed keeping the path to qualification clear and open for our students and member firms – this continuity is vital. We are also focused on supporting our future pathway to being a more digital organisation for the benefit of our members. And not least, we need to support our members in dealing with the challenges of emerging from the pandemic and the Brexit transition. Sinead Donovan (SD): As an Officer Group, we spent much of our time over the past year in fire-fighting mode. We now have an opportunity to make progress on issues of critical importance on a more proactive basis, and our re-election allows us to conclude some complex issues while putting the Institute and the profession on a solid footing as the vaccination programme and economic recovery gathers pace. The virtual environment has been a largely positive experience for the Institute and its members, but not without its challenges. How can members and students expect their Institute to evolve as the vaccination programme continues and restrictions are eased? PH: Since the pandemic took hold, members have benefited from a greater degree of accessibility to their Institute, and that will continue. There will also be a continued emphasis on upskilling and knowledge sharing, as the Institute’s suite of webinars, bulletins, and other digital communications have been invaluable in helping members adapt to remote working while staying on top of relevant technical developments in the profession. We will also continue to work on our digital education offering. Last year, the Institute moved from a traditional in-person examination model to a virtual examination environment, condensing a five-year project into a far shorter period. There have been challenges and setbacks on this journey, and I acknowledge the difficulties our FAE students faced in April. We knew at the outset that there were risks involved in moving all examinations online, and it has been our objective over the last year to mitigate these risks to the greatest possible extent. More than 20,000 virtual exams have now been completed, and we will continue to work closely with our partners to test and develop the platform as we improve the Institute’s digital capabilities into the future. PON: The experience of the virtual working environment has been different for everyone. Large organisations, for example, have central functions, which makes the transition to a virtual working world that bit easier. In contrast, some smaller businesses and practices struggled to adjust to new technology and remote working norms while achieving some degree of work-life balance. And whether you are in business or practice, the process of developing relationships with new customers or clients has been challenging. Indeed, certain ways of working have changed irrevocably, but the value of face-to-face interaction cannot be overstated for many members. We have seen this demand for connection through increased engagement from the membership with services provided by the Institute, such as webinars and digital networking events. Our district societies, both in Ireland and abroad, have played a vital role in this regard, and as Paul said, the Institute was at the vanguard of online education delivery at the very outset of this pandemic. Although the Institute embarked on its digital journey before the arrival of COVID-19, we will continue our measured approach on that journey as we seek to maximise the benefit to our members. SD: One challenge that will become crucial for the Institute is the absence of in-person, on-the-job training, which many trainee Chartered Accountants have now missed out on. The profession may not see the impact of this development for several years. Yet, we must be mindful of this and work to ensure that those trainee Chartered Accountants most affected by the pandemic from a training perspective are upskilled accordingly in the months and years ahead. PH: That is correct, and we must also bear in mind that the current crop of students is missing out on vital peer-to-peer networking opportunities. One of the most notable benefits of my training has been the number of people who studied alongside me that ultimately became lifelong friends and business acquaintances. Unfortunately, students are missing out on that engagement and vital on-the-job learning that helps them develop critical soft skills, which are increasingly crucial for the Chartered Accountant of the future. The business community continues to grapple with a host of issues from Brexit and sustainability to good governance and diversity and inclusion. How is the Institute maintaining its focus on these issues while supporting its members through the COVID-19 crisis? PH: The Institute has adopted a proactive stance on these key issues, notably Brexit. There has been much debate about the Northern Ireland protocol. Irrespective of your position on it, the profession must endeavour to make the best of the situation in the best interest of the island of Ireland while becoming more familiar with the associated operational issues. In terms of sustainability, there is a clear opportunity for members to lead the charge in tackling the climate crisis. As business advisors, we can help people understand and record their sustainability activity and begin to report on that activity in a meaningful and confident way. This work will evolve greatly in the coming months.  The Institute also continues its work in critical areas such as diversity and inclusion and ethics and governance. Many members volunteer their time and expertise on a range of expert working groups, and I would like to express my gratitude to them for their involvement in the Institute and selfless work in the interest of the broader profession. This individual commitment is reflective of the broader societal contribution that we can make.  PON: It has been remarkable to see the extent to which, in particular this year, organisations have pivoted their narrative reporting to highlight their focus on issues such as governance, climate, and diversity and inclusion. We continue to promote these agenda items for our members through member committees, including those devoted to ethics and governance and diversity and inclusion. Much good work has been done in the past year or more, but the journey is just beginning in many respects. The Council of Chartered Accountants Ireland is very gender diverse. However, we have been working to ensure that diversity and inclusion are more formally incorporated into the appointments process for the Institute’s many boards and committees. I am glad to say that the Institute is moving in the right direction and at pace on many fronts. SD: 2021 is the year in which we need to take a giant leap forward in some of these areas. I fully appreciate the need to move forward with care, but the pandemic has also presented a catalyst for change. The past year has forced people to think about what has happened and what could happen in the future. At a very practical level, I have seen a distinct change in the rhetoric used around diversity and inclusion. There is still a degree of nervousness when it comes to asking specific questions of our membership, but I sense that the membership is becoming increasingly receptive to speaking out about diversity and sharing the many stories that are there to be told by our 29,500 members. And it isn’t just about our current members. The Institute and the profession as a whole must endeavour to be dynamic, vibrant, and attractive to the next generation of Chartered Accountants. We have made very good advances on that front in recent years, and it is up to us to maintain that momentum. Your re-election seeks to bring a sense of continuity to the profession at a critical juncture. But looking to the future, what is in store for the profession and its members in the decade ahead? And how will the Institute help them prepare for the changes that will come? PH: The future for Chartered Accountants is, in my view, very positive. People need advice in an increasingly complex world, and the members of our profession are trained to handle, interpret, and communicate technical information and data in a clear, accurate and insightful way. As the level of complexity grows, so too will the importance of those communication skills. And while artificial intelligence will support us in providing advice to clients, I don’t see it as a threat in any way. Instead, it will improve the insights we provide to our clients. PON: The Institute is working through its implementation of Strategy24. If I’m honest, the pandemic has meant that we need to be agile in terms of planning ahead. So, looking out to the end of our strategic planning period is difficult to do with much accuracy at the moment, not to mention beyond that. That said, issues such as the increasing digitalisation of business and the profession will be a challenge. Cybersecurity, automation, and analytics are becoming increasingly real for businesses. Business leaders – and, by extension, Chartered Accountants – must continue to embrace these developments. Taking a longer-term view, the Institute is also engaged with the Department of Education regarding the accounting syllabus in secondary schools in Ireland. This is an excellent example of the Institute looking forward and playing a very positive role in ensuring that the accountancy profession continues to play its part in shaping the education of the next generation of Chartered Accountants. What have you learned about leadership over the past year? And what do you see as the main challenges for leaders as the profession develops a shared understanding of the new world of work? PH: For me, the number one lesson has been the importance of communication. We have achieved a high level of communication at the Officer Group level and within the Executive Team at Chartered Accountants Ireland. However, many of the challenges faced by businesses worldwide during the pandemic arguably arise partly due to an inability to read the room in an online setting or notice nuances or concerns during a virtual meeting. I don’t think you can overstate the importance of this.  Another big lesson has been the importance of understanding the human side of your colleagues, and not just the professional side. It is vital to make time to get to know your colleagues and support them as we work through the months ahead. It could be something as simple as a 10-minute call with a cup of coffee to chat about anything other than work. Gestures such as this don’t take much effort or time, but the impact on your colleagues could be huge. PON: Flexibility is the word that springs to mind for me, the importance of adapting your leadership style. During this pandemic, I have learnt the importance of understanding the challenges and pressures my colleagues face beyond the office. It is important to reassure people that it’s okay to feel under pressure, to prioritise family and to look after their own wellbeing. Flexibility affords us all the opportunity to prioritise different areas of our lives while still achieving our professional goals, and harnessing this opportunity will be of great importance into the future. SD: I agree wholeheartedly with the point about communication. I have found that people with different personality traits have responded differently to the pandemic and the resultant lockdowns. So for me, the big lesson has been taking time to check in on individuals on your team, particularly those who might be closer to the introversion end of the scale. The extroverts, I have found, have managed during the pandemic as they can get their feelings across in a virtual setting, but that is not the case for all colleagues. If you want to get the best out of people and ultimately avoid losing excellent talent, leaders need to communicate and engage with their people in a meaningful way and on an ongoing basis. In that context, wellness must be a priority for all leaders – including us. As an Officer Group, we will therefore continue to raise awareness about the benefits of wellness initiatives and promote the many valuable webinars and other wellness initiatives hosted by CA Support and the various District Societies. Finally, what is in focus for you as you enter your second term? PH: The focus will be on building supports for members as the vaccine roll-out continues, economies re-open, and the recovery takes hold. There is also an opportunity to support the government and the public sector. We have begun to increase our activity in this space – not least with the recent publication of a position paper on proposed reforms to Irish public sector accounting, launched by Minister Michael McGrath – and that will continue in the year ahead. I would also like to take this opportunity to thank Barry Dempsey and the leadership and staff of Chartered Accountants Ireland for their sterling work over the course of the last year. It was a year of many firsts – the first virtual annual general meeting, the first virtual conferences, the first virtual conferring ceremonies, the first virtual student recruitment campaign, and the first virtual regulatory inspections. The staff have ensured continuity of service for members in the most challenging circumstances while innovating beyond what we thought possible just two years ago. Their efforts are greatly appreciated by the Officer Group, Council, and the membership at large. PON: There will also be a strong sense of continuity in the second term. For example, the Institute has made great strides in advocacy and raising the voice of the profession – and that will continue. The Institute is undoubtedly the best spokesperson for members in terms of the challenges they will face and the supports they will need as we re-emerge from the COVID-19 crisis. We will also seek to play our part in building trust in the profession. This is an emerging area, particularly with regard to developments concerning regulation in the United Kingdom. These developments will directly impact our members in Northern Ireland and possibly have a trailing impact for members elsewhere. It will be important to support our members through that process and we will do so in the first instance by responding in July to the United Kingdom’s consultation on proposed reforms to restore trust in audit and corporate governance. SD: Re-emergence is probably a good word to describe the theme of our second term. There will, of course, be an initial knee-jerk reaction to bring people together and enjoy face-to-face interaction once more, but we must not lose sight of the benefits of the hybrid working model. We need to ensure that we re-emerge from this pandemic in a safe and protected manner, but also in a way that embraces change for the benefit of our colleagues and organisations.

Paul Henry shares his thoughts on the challenges ahead following his re-election as President of Chartered Accountants Ireland for a second successive term. It has been my privilege to serve as President of Chartered Accountants Ireland for the last year, and in a sign of these unusual times, I find myself at the mid-way point of a two-year term of office. I feel incredibly fortunate to represent our almost 30,000-strong membership once again as we move into what I hope will be a brighter time for us all. I want to express my appreciation to my colleagues on Council, and my fellow Officer Group members, for affording me the opportunity to continue to lead the work we started together this time last year. It is a pleasure to be joined by Pat O’Neill and Sinead Donovan in this issue of Accountancy Ireland for a round-table discussion on the issues of importance for our members and students. This will be a year of adaptation as we recover and grow again. It is more crucial than ever that I, as President, my Council colleagues, and our entire organisation channel our collective energies to empower our profession to fulfil its mandate, “for tomorrow, for good”. For society and the economy at large, the last year has been one of worry, isolation, and loss. The public health crisis has persisted for longer than most of us expected, and it has tested us. As human beings, we are not designed to operate at such removes from each other. We are now at an inflexion point, as a combination of prudent public health measures and successful vaccination delivery facilitate reopening and a greater sense of sustained optimism than there has been to date. This time of year is an inflexion point for Chartered Accountants Ireland too – a chance to reflect and plan for the coming months. While it may feel like we have been running to stand still during the pandemic, it is important to reflect on what has been achieved. It was a year of firsts: our first virtual AGM, our first entirely virtual conferences, the virtual completion of examinations, our first virtual conferring ceremonies, and our first virtual student recruitment campaign, to name a few. We have seen a surge in member engagement, which shows that what we are doing is resonating. I thank the Institute’s staff for their commitment to making this possible. I thank our members for their perseverance and resilience in delivering to the high standards that our profession demands in practices, businesses, and the public sector at home and abroad. Our profession has played an instrumental role in supporting businesses in keeping the show on the road in the face of immense challenge. And there is so much still to do. I said last year that recovery from the pandemic would be the challenge of a generation, and all of us will be called on to show even greater leadership and resilience. I look forward to leading the Institute in meeting this challenge. Chartered Accountants Ireland will continue to work on behalf of members this year as your strongest supporter and ceaseless advocate. We will work to promote the profession in which we hold such pride to a new generation. And above all, we will position our shared expertise to contribute to a meaningful and sustainable recovery. I was asked recently as President what career tips I would give to my younger self, and right up there was my advice to build a strong team and keep hold of them. The stronger the team, the better the outcome. None of us can meet the challenges of the future without a collaborative approach, and I look forward to working with you, and for you, this year. Paul Henry is the President of Chartered Accountants Ireland.

Minister Michael McGrath provides an update on the National Recovery & Resilience Plan and the National Development Plan, as Ireland sets about rebuilding its economy with a focus on sustainability and resilience. In the past 15 months, the world has been hit by a massive health and economic crisis, unprecedented in modern times. No country could possibly try to tackle this on its own. By collaborating with international partners, we have been able to harness the best available medical knowledge for diagnosis, treatment, and vaccination against COVID-19. It was clear from early on in the pandemic that, as well as a concerted medical response to the crisis, there would need to be a dedicated economic plan to mitigate the economic impact. In July of last year, EU leaders met against a backdrop of growing turmoil in member states over the impact on people’s livelihoods. At this summit, an agreement was reached on a recovery package to complement the work of national governments.  The National Recovery & Resilience Plan NextGenerationEU The European Union’s €750 billion NextGenerationEU recovery instrument, along with the Union’s trillion-euro budget for the next seven years, is central to the EU’s response to the global pandemic. There is an important difference in the EU’s response to the global pandemic compared to the response to the financial crash. Lessons have been learnt, and the EU moved quickly to reassure member states that we would be supported. NextGenerationEU aims to help repair the immediate economic and social damage brought about by the pandemic and prepare for a post-COVID Europe that is greener, more digital, more resilient, and fit to face the future. The Recovery and Resilience Facility is the largest component of NextGenerationEU, making €672.5 billion available to member states in the form of grants and loans to stimulate economies and improve conditions for citizens. Every crisis is also an opportunity and, as we move on from COVID-19, we must use these funds to make a real difference to our country, reform where it’s needed, and put climate action at the top of our agenda. The Recovery and Resilience Facility and Ireland Ireland is expected to receive €915 million in grants under the facility in 2021 and 2022. A further set of grants is to be allocated in 2023, taking into account economic developments between now and then. To access this funding, Ireland has developed a National Recovery & Resilience Plan for approval by the European Union. The plan sets out the reforms and investments to be supported by the facility. My Department of Public Expenditure & Reform is responsible for preparing this plan, along with the Department of the Taoiseach and the Department of Finance. Other departments have also given their input to ensure a coordinated ‘whole of government’ approach. We are all on the same page when it comes to using these funds wisely and getting the best possible value from this investment. Recovery and Resilience Facility The Recovery and Resilience Facility is structured around six pillars:  Green transition; Digital transformation; Economic cohesion, productivity and competitiveness; Social and territorial cohesion; Health, economic, social and institutional resilience; and Policies for the next generation, as well as seven flagships identified by the Commission. Addressing green and digital transition is a hallmark of the facility. National plans must devote a minimum of 37% of expenditure to climate and 20% to digital investments and reforms. Plans should also seek to address seven flagship areas identified for reforms and investments: Clean technologies and the acceleration of development and use of renewables; Energy efficiency of public and private buildings; Sustainable, accessible, and smart transport; Roll-out of rapid broadband services, including fibre and 5G networks; Digitalisation of public administration; Increase in European industrial data cloud capacities and the development of powerful and sustainable processors; and Adaptation of education systems to support digital skills and educational and vocational training. Member states are required to embed the measures they plan to take in their national budgetary processes. The plans must also strike a balance between reforms and investments and seek to address challenges identified in the relevant Country Specific Recommendations. Ireland’s Plan and Projects Ireland’s Plan has a particular focus on green and digital transition, as well as supporting economic recovery and job creation. It is aligned with the National Economic Recovery Plan and has been developed alongside the ongoing review of the National Development Plan. Priorities for the National Economic Recovery Plan aligned with the National Recovery & Resilience Plan include climate actions and reforms; digital delivery of public services; social and economic reforms; digital transformation and adoption of artificial intelligence (AI) technologies by SMEs; and research and innovation. The National Recovery & Resilience Plan includes a suite of projects focused on: Advancing the green transition; Accelerating and expanding digital reforms and transformation; and Social and economic recovery and job creation. Several large-scale reforms and investments are included to maximise the impact of the funds provided. Next steps National plans must meet stringent EU requirements set out in the Recovery and Resilience Facility regulation before they receive approval from the European Commission and the Council of Ministers. Intensive negotiations with the European Commission have been underway in recent months, and Ireland’s plan will be considered carefully for two months before it is approved. The facility is a performance-based instrument, which means that demanding milestones and targets must be met before funding can be drawn down – and this is as it should be. As well as milestones and targets, requirements include green and digital expenditure tagging, detailed costings, an appropriate control and audit framework, and compliance with the ‘do no significant harm’ principle. Plans should demonstrate a lasting impact on member states, whether by strengthening job creation and social resilience, whether the expenditure is reasonable compared with the expected return, and whether suitable control mechanisms are in place to prevent corruption, fraud, and conflict of interest.   European solidarity The lifetime of this Government will see Ireland mark 50 years of EU membership. Our membership has played an immense role in our social, economic, and political development. The values of the European Union are our values. That is why the Programme for Government sets out a vision of Ireland at the heart of Europe and global citizenship. During the five decades, we have benefited from the solidarity that comes with membership. We have seen this over the last year as we responded to the global pandemic and in the previous five years as we navigated the challenges posed by Brexit. In the Recovery and Resilience Facility, we see further evidence of that solidarity. In the coming weeks and months, the National Recovery & Resilience Plan, along with the National Economic Recovery Plan and the National Development Plan, will enable us to move beyond the pandemic to rebuild the economy and improve our country for all. We have been through a difficult period, and the economic and social scars cannot be underestimated or dismissed. However, decisions at the EU level have shown that we really are all in this together. Member states will be supported in finding their way forward, and we will emerge as a stronger and more resilient EU. The National Development Plan Creating our shared future Like accountants, ministers and civil servants are analytical thinkers, carefully scrutinising the driving forces of change, the prevailing macro-economic factors, and the views of the people we serve. We depend on evidence and numbers, and this analysis is vital as we craft the revised National Development Plan, which is due for publication later this year. The National Development Plan is one half of Project Ireland 2040. Launched in 2018, it sets out the investment priorities that underpin the implementation of the National Planning Framework. When this Government took office last July, we set about tackling the many challenges we face as a country, including the COVID-19 pandemic, Brexit, housing, and an uncertain political landscape. Our country is at a critical stage in its development, and there has been much discussion about an ‘infrastructure-led recovery’ across the globe. We know that we need to create opportunities to rebuild a better Ireland for all, as without substantial reform, we risk repeating the mistakes of the past. Investment decisions must support broader economic, environmental, and social outcomes. Our national recovery requires a holistic approach involving the contribution of both urban and rural areas. It is my view that we should take the opportunity to create the foundations for long-term, sustained economic growth. That is why, on taking office last July, I asked my officials to bring forward the mooted review of the National Development Plan. Economic context Our population is set to grow by one million people by 2040. The infrastructure implications of that alone are enormous. We must ensure we have thriving and sustainable communities for future generations. Ireland’s economy was the only one to grow in the EU last year. The European Commission expects Irish GDP to grow by 3.4% in 2021 and marginally faster in 2022. These are solid numbers considering the global challenges we’re facing. The impact of COVID-19 on our working lives has been seismic. We have undertaken the greatest global home-working experiment ever, moving it from the fringes to the mainstream. The Government’s National Remote Work Strategy helps to make remote working a permanent option in Ireland. It plans to give employees a legal right to request remote working and to introduce a code of practice on the right to disconnect. The Strategy commits to investment in remote work hubs and the development of the national broadband plan. The Programme for Government characterises the climate emergency as the single greatest challenge facing humanity. We are the first generation to truly feel the effects of climate change, and we may be the last to have an opportunity to reverse it. This is why we have to act now. In the public consultation we undertook, there was near consensus that the revised National Development Plan will have to be viewed through a climate lens. Public Spending Code We need to ensure that the right policy settings are in place. Rigorous cost-benefit analysis is essential, particularly in the current economic climate. As part of the ongoing reform of Ireland’s public investment management system, the Department of Public Expenditure & Reform has reviewed and updated the Public Spending Code. The review was informed by an extensive consultation process involving engagement with public officials and an examination of international best practice. Importantly, the Public Spending Code also incorporates learnings from various capital projects in Ireland, including the National Children’s Hospital. The update to the Public Spending Code specifically strengthens the existing guidance to better reflect the realities of project delivery with a particular focus on financial appraisal, cost estimation, and risk management. The updated Public Spending Code: Supports public bodies in delivering greater value for money; Provides greater clarity on roles and responsibilities; Revises the project life-cycle to reflect the realities of project delivery; Strengthens guidance; and Increases transparency through the publication of business cases and evaluation reports. This update followed an extensive consultation process, and as a result, there is a stronger focus on cost estimation and professional project management. We have also learned from international experience when it comes to managing mega-projects over €100 million. There are at least 40 projects in this category in the National Development Plan. Later this year, we will have a new governance and assurance process for major projects. This will involve two external reviews of major projects at key points in the project life-cycle by independent experts in infrastructure delivery. I have asked my ministerial colleagues to rigorously assess the costs of existing planned projects to ensure that those costs are up-to-date and realistic. I am also developing a new external review process for all major projects worth over €100 million. The process In early April, I published the Phase 1 Report on the Review of the National Development Plan. The work carried out as part of Phase 1 included:  Macro-economic analysis; Public capital expenditure and infrastructure demand analyses; Consideration of climate action, housing, and planning; and Alignment with the National Planning Framework. The Phase 1 report also includes detail on the successful public consultation process, Review to Renew, which generated 572 submissions. Phase 2 will involve detailed engagement with colleague departments to agree on capital allocations for the coming period and priority programmes for inclusion in the new National Development Plan. Combined, this is a solid evidence base that will allow us, as a Government, to make informed decisions and bring forward a new National Development Plan in the summer of 2021. Michael McGrath is Minister for Public Expenditure & Reform, a TD for Cork South Central, and a Fellow of Chartered Accountants Ireland.