Articles

Ethics and Governance

At a recent event entitled, ‘Navigating a Successful Career as a Non-Executive Director’, an expert panel of experienced NEDs and corporate governance advisors answered questions such as: What role do NEDs play in organisations today? How can Chartered Accountants prepare to become a NED and how do interested Chartered Accountants find non-executive directorships?  Launching the event, David W. Duffy, author of A Practical Guide for Company Directors, warned the 200+ audience that “no board is risk-free”. Emphasising the need to carry out due diligence before accepting a non-executive directorship, he advised the audience to consider what ratio of risk to reward they would be prepared to take. Listing important questions to ask before becoming a NED, David recommended that prospective directors should query the organisation’s structure and budgeting practices in particular.  Sean Casey, NED and Risk Committee Chair at Allianz Ireland, advised attendees on how to find a directorship that best suits them, and recommended that they update their professional profiles with relevant experience, skills and governance qualifications, such as a diploma in corporate governance. Urging the audience to build a strong network of people whom they have assisted and supported in the past, he reminded them that they will “get repaid many times over if you have a good network”. Marie O’Connor, former PwC audit partner and experienced NED, explained that boards are looking for people with genuine interest in their business and who think strategically. NEDs should have good, sound judgement and some previous board expertise. Energy, curiosity and confidence are also important to becoming a NED, Marie said. Finally, Anne McFarland, corporate governance advisor, stressed the need for, and importance of, independent NEDs on boards to improve the accountability of organisations, despite recent negative press. NEDs, Anne advised, should look at the strategy of an organisation, and should make sure that appropriate goals have been set for management and that the board is being properly evaluated. It is imperative for NEDs to understand the financials of the company, to assess all risks, and to consider whether the remuneration of the executive and management is proportionate and appropriate. “I do not believe the time is up for non-executive directors,” Anne added. 

Aug 01, 2018
Spotlight

SMEs in the Republic of Ireland can access four major tax relief regimes, which is laudable, but there remains room for improvement in each.   Over the past few years, Ireland has introduced, expanded or streamlined many new tax reliefs and regimes with the stated aim of encouraging research and innovation, providing alternative sources of finance and improving the environment for entrepreneurship. While the government of the day will laud these new initiatives as being beneficial to Irish small- and medium-sized enterprise (SME), it is often the case that the initiatives are not taken up in any great numbers or are used primarily by multinationals operating in Ireland. In this article, the author considers why these targeted tax incentives are not achieving the expected take-up among Irish SMEs – and what could be done to rectify this. Is it a question of education, perception or restrictions within the tax incentives themselves? Employment and Investment Incentive Scheme The Employment and Investment Incentive Scheme (EIIS) is an extremely important source of finance for start-up and early-stage SMEs as for many of these businesses, the friends and families of the business owners may be one of the few sources of finance available. The EIIS is a successor to the old Business Expansion Scheme (BES) and while it covers a larger variety of trading activities, it is less generous in the tax relief available. This is because, under the EIIS, the income tax relief is spread over two tranches – 30% relief in the year of investment and 10% after three years of trading. Furthermore, the second tranche of relief is not guaranteed and is dependent on the company increasing employee numbers during the investment period. Compared to BES, lower numbers of companies have availed of the EIIS. This has been attributed to factors such as the spreading of income tax relief over four tax years and the €150,000 annual investment limit applicable to each EIIS investor. Unhelpfully, recent changes to the EIIS have further reduced the attraction of EIIS for SMEs. Finance Act 2015 incorporated the EU General Block Exemption Regulation (GBER) rules into EIIS legislation. Some of the most significant restrictions included in these provisions are: The company must be trading for less than seven years. Where such a company has previously raised EIIS funding and wishes to raise a second round, the second round must have been envisaged in the business plan submitted for the first round – before the GBER rules were in force. To add insult to injury, Revenue has taken a very prescriptive approach in this regard; and If the company has traded for more than seven years, it must be entering a new geographical market with a new product or service, or have previously raised EIIS/BES funding within the first seven years of trading. More recently, Finance Act 2017 introduced new “connected party” rules, which make the tax relief unavailable to any investor and their associates (including relatives, which are broadly defined) who already hold shares in the company before EIIS funding is introduced. Previously, income tax relief was available to EIIS investors who held less than 30% of the company, and even this restriction was relaxed where the total value of the EIIS investment was less than €500,000. These new restrictions may neutralise the EIIS for many SMEs that are badly in need of this alternative source of funding. Research & Development tax credit While the lower and likely diminishing take-up of EIIS by SME companies can be attributed to stifling legislative restrictions, the same cannot be said of the Research & Development (R&D) 25% tax credit. The tax credit regime was significantly simplified with the removal of the “base year” and incremental allowable amounts from 1 January 2015. In addition, Finance Act 2012 introduced the concept of the qualifying company surrendering some or all of the R&D tax credit to a “key employee”. The continuing concern for all companies claiming R&D tax credit (and SMEs in particular, as they have less resources to deal with penalties and interest in the event of getting it wrong) is the uncertainty around what exactly constitutes “qualifying” R&D activity. Some relief for small business on this issue was set out in Revenue’s eBrief 17/17. This stated that, where a small or micro enterprise is in receipt of Enterprise Ireland/IDA grants for its R&D activity and the value of the R&D tax credit claim in an accounting period is less than €50,000, Revenue will accept that the activities are “qualifying” under the relevant tax legislation. There is an acknowledgement that these thresholds are too low and will only give comfort in a small number of cases, but there is no indication that this concession will be expanded. While the idea of the surrender of the R&D tax credit to key employees is a fine one, this aspect of the regime has had little take-up from SMEs. This is perhaps because the key employee must not be a director of, or have a “material interest” in, the company (i.e. hold at least 5% of the company’s shares). As SMEs typically have a small pool of overlapping shareholders, directors and key employees, most will breach this condition. Another issue that limits the incentive for R&D activity are the maximum spending caps in relation to outsourcing: Outsourcing R&D work to third parties is restricted to 15% of the in-house R&D expenditure or €100,000 (whichever is greater); and Outsourcing R&D work to universities is restricted to 5% of the in-house R&D expenditure or €100,000 (whichever is greater). These limits contradict international best practice, which typically encourages collaboration between innovating businesses and/or education. They also disproportionately affect SMEs as, with fewer resources, a collaborative approach may be the only way for an SME to progress. Knowledge Development Box A relatively new incentive introduced in Finance Act 2015, and one that is not yet widely known about, is the Knowledge Development Box (KDB) regime, which complements the R&D tax credit and is the second phase of incentives around research and innovation. The R&D tax credit is available in respect of the spend on “qualifying R&D activities” while the KDB regime applies a reduced 6.25% corporation tax rate on profits arising from the exploitation of a “qualifying asset” derived from these same R&D activities. While this regime is regarded by many as being targeted at multinationals, it is in fact Irish SMEs that may benefit the most from it. The KDB regime is most beneficial to companies that carry out most or all of their underlying R&D activities in Ireland, which of course would apply to Irish SMEs. There are also two aspects to the “qualifying asset” requirement that work for Irish SMEs: Within the mainstream KDB regime, a “qualifying asset” includes inventions that are patented as well as computer programs. Irish tech companies that carry out their R&D activities in Ireland and are entitled to an R&D tax credit may therefore be entitled to the reduced 6.25% corporate tax rate on future profits; and There is an SME-specific KDB regime, which applies to companies and groups with annual turnover not exceeding €50 million and KDB profits not exceeding €7.5 million. The definition of “qualifying asset” for these companies includes computer programs as well as novel or useful inventions that do not have to be patented. Key Employee Engagement Programme Finance Act 2017 saw the introduction of the KEEP scheme, which was presented as a tax-efficient way to incentivise key employees within SME companies. The scheme allows for the tax-free grant of share options to an employee (as long as the options are granted at market value), followed by capital gains tax (CGT) on gains arising on the ultimate sale of the shares by the employee. As the KEEP scheme only commenced at the beginning of this year, there are several excessive legislative restrictions and practical issues. Many commentators and representative bodies have lobbied the Department of Finance and Revenue on these issues to make the new scheme fit-for-purpose. Some of the major issues include: The requirement for a Revenue-agreed share valuation method, given that the scheme relates to shares in private companies often with no external market; The practical issue of creating a market for these shares so that a KEEP employee has a method of selling the shares and realising a gain. Calls have been made to allow the employer company to buy back the KEEP shares and for the KEEP employee to secure CGT treatment on that buy-back by the buy-back being regarded as a “benefit” for the company’s trade; Under the current rules, a “qualifying individual” must not hold more than 15% of the employer company shares. This restricts the usefulness of the KEEP scheme for SMEs which, as we noted earlier, will have a small pool of shareholders and key employees; and Calls have been made to extend CGT entrepreneur relief on disposals of KEEP shares, thereby reducing the CGT on €1 million gains arising to 10%. Conclusion This article has focused on the four major tax regimes available to SMEs in the Republic of Ireland – EIIS, R&D tax credit, KDB regime and KEEP – and we have seen that some of these regimes are specifically targeted at SMEs. While there is always more for practitioners to do in terms of educating clients on the availability of reliefs, many of the legislative changes and/or administrative practices within Revenue in recent years have reduced the effectiveness of these reliefs. It is a case of what the right hand giveth, the left hand taketh away. With Brexit looming, this approach is damaging to Irish SMEs – which are the lifeblood of our economy – and does not sit with the Government’s stated aim of encouraging entrepreneurship in this country. Kerri O'Connell FCA is Principal at Obvio Tax Services and author of Small and Expanding Businesses: Getting the Tax Right.

Aug 01, 2018
Management

Being a people-pleaser and being an effective team player are two very different things.   Does your office have a people-pleaser? The person who just can’t say no? Every office has one and regardless of how often they say yes, they will rarely be appreciated for their efforts. People-pleasers yearn for attention, external validation and the approval of the group. Their self-esteem is tied up with this effort to be seen as worthy of inclusion and living up to the expectations of others. This type of behaviour can get out of hand and before it does, it is important to ask some basic questions about how it started in the first place. How do we become people-pleasers?  More often than not, it’s a characteristic that goes back a long time. We learn over time that being helpful, pleasing, attentive and reliable brings rewards. Our sense of accomplishment and achievement becomes tied to the external validation we receive from others. Being a people-pleaser often makes us the ‘go to’ person. It also means that our colleagues take us for granted and we are viewed as the office doormat. People-pleasers see themselves as only existing in the service of other people. Children learn that they are a good girl or boy at a very early stage in life. Being ‘good’ and ‘bad’ is determined by the emotional effect they have on the adults in their lives. It is an early lesson that small children learn very quickly. They know that they can gain their parents’ attention by being compliant or defiant. Compliance brings better rewards.  To stop being a people-pleaser we have to address the anxiety that pleasing assuages. For many people-pleasers, the idea of stopping being a pleaser raises enormous anxiety. At its core, that anxiety relates to our very sense of self: will I have any function or worth if I am not externally validated? So what can you do to stop pleasing and start progressing? Address the anxiety: put yourself first. Ask ‘why am I doing this?’ There’s nothing wrong with being helpful, but it’s not always appropriate. Practice saying no: imagine a number of scenarios where you would normally jump in to say ‘yes’ and then practice saying ‘no’. Observe how this makes you feel and rather than squashing that feeling down, stick with it and try to understand what it’s telling you. Recognise that your self-worth isn’t tied to other people: it’s perfectly normal to be ambivalent about others and it’s equally normal for them to feel ambivalent about you. It’s not possible to be positive or helpful all the time. You will disappoint: you will disappoint others, and they will disappoint you. If we are not disappointing and disappointed, then we are not having real, mature relationships. The workplace cannot function without real emotion: in the fantasy workplace, everybody is happy. People are kind and helpful, and our colleagues rarely have an ‘off’ day. No workplace is like that (just as no family is like that). Being a people-pleaser robs individuals of their self-esteem and reinforces the idea that being ‘nice’ means being helpful. Sometimes it’s better to say ‘no’ and stop being the office doormat. Try it sometime, you just might like the new feeling! Dr Annette Clancy is an organisational consultant and also researches organisational behaviour, in particular emotion in organisations.

Aug 01, 2018
Strategy

There are four distinct phases in the negotiation process, each one with its own unique pitfalls and opportunities. Negotiation is a central feature of day-to-day living. Whether it’s negotiating your fee for client services, manoeuvring through the maze emanating from the Brexit vote, or agreeing on who is responsible for cooking the dinner this evening (and cleaning up afterwards!). It’s all about negotiation. For some people, this can be a formidable challenge, so they too-readily give in to their counterpart’s arguments and demands. Thereafter, emotions of resentment and ill-feeling about a ‘lousy deal’ kick in, to the detriment of both parties. But it doesn’t have to be like that. For starters, it’s worth remembering that you are a negotiator. In fact, you’ve been negotiating since you first looked for pocket money, swapped toys or cried in the cot. That is, you’ve always engaged in purposeful persuasion and constructive compromise. While the key criteria for successful negotiations are information and power, to get the best deal, there are some unwritten rules that should be noted. First, agreement is the aim of negotiation. However, the wish of both parties to reach a mutually satisfactory conclusion does not preclude the use of threats, sanctions and associated tactics like attacks, hard words and (controlled) losses of temper. These are all part and parcel of the charade we call ‘negotiation’. Another tactic extensively deployed in consequential negotiations is the ‘off-the-record’ discussion. This is a means of probing attitudes and intentions, and smoothing the way to a settlement. In tense scenarios, this approach often enables progress when parties return to the formal negotiating arena. It is also important that each party be given an opportunity to state their (opening) position, which they will move from as negotiations proceed via alternate offers and counter-offers, eventually leading to a settlement. To enable progress, concessions made are not withdrawn. Nor are firm offers withdrawn, although it is legitimate to make and withdraw conditional offers. To smooth the process, adjournments are taken by mutual agreement, serving the purpose of reviewing progress against one’s objectives and assessing your counterpart’s objectives or latest offer or proposal. That is, adjournments provide an opportunity to update strategy. It’s also an unwritten rule that third parties are not engaged until both parties are agreed that no further progress can be made. Whatever the stakes, you’ll get the best deal if you break the negotiation process into four stages: preparing, opening, negotiating and closing. Preparing The key at the preparatory stage is to establish one’s objectives and to assign a relative priority to each one. This process also entails knowing: The ideal settlement point you would like to reach; The minimum you will accept or the maximum you’re prepared to concede; and The opening claim or offer that will help you achieve your target and provide sufficient room to manoeuvre in pursuit of your target. The difference between the ‘claim’ and the ‘offer’ is called the negotiating range. Thereafter, the good negotiator decides the ideal route or stages to be followed in moving from the opening to the closing position, and the negotiation package or items that one is prepared to trade in pursuit of his or her goal(s). In other words, at this preparatory stage you decide what needs to be achieved and how to achieve it. Good preparation also involves assembling all relevant information and structuring it in a logical manner. Identify your strengths and include facts to support your case. Support for your negotiating position may also be derived from an existing or previous agreement, comparator norms, custom and practice, previous statements from your counterpart and hard evidence. The good negotiator will also know the main weaknesses in his or her position. As one’s negotiation counterpart is likely to raise these points, prepared responses are essential. As Nelson Mandela put it when negotiating a change of regime in South Africa, “I rehearsed the arguments they might make and the ones I might put in return”. Opening The main purpose of the opening stage is to reveal the broad outline of one’s position while gathering as much information as possible about that of your counterpart. The more extreme the opening positions, the more time and effort it will take to discover if agreement is possible. To keep your negotiation partner at the table, it is advisable to open realistically before challenging their position, exploring their attitude(s), asking questions, observing behaviour and, above all, listening. This should enable assessment of their strengths and weaknesses, tactics and the extent to which they may be bluffing. One should not make concessions at this stage. Negotiating After the opening moves, the main bargaining phase begins. Now, the gap is narrowed as parties persuade the other side that their case is strong enough to force him or her to move. This negotiating stage is about exchanging – something gained for something given. Ideally, something relatively unimportant or cheap to you is traded in exchange for something that is valuable to you. This is the most intense stage of the process. The best way to avoid disaster is to lead with conditions: “if you will do this, then I will consider doing that”. Related to this, good negotiators negotiate on the whole package. By stating that nothing is agreed until everything is agreed, you refuse to allow your opponent to pick you off item by item, and you extract the maximum benefit from any potential trade-offs at the final hurdle. Closing When and how one closes negotiations is a matter of judgement and depends on the assessment of the strength of both cases. Standard techniques include: Make a concession from the package, preferably a minor one, which is traded off against an agreement to settle: “if you agree to settle at X, then we’ll concede Y”; Do a deal (e.g. split the difference, introduce something new such as extending or  shortening the settlement timescale, phased increases, making a joint declaration of intent to do something in the future such as review the deal); Summarise what has happened to date, emphasise the concessions made and the extent to which you have moved, stating that you have reached your final position. But never make a final offer unless you mean it; Apply pressure (e.g. a threat of dire consequences if your final offer isn’t accepted); and Give your opponent a choice between two courses of action: “you can have X or Y, but not X and Y”. This closing stage is a dangerous time for negotiators. If one is too keen to get agreement, it is easy to neglect the finer details of that agreement. This can cause problems when the agreement is implemented and each side has its own interpretation of what was agreed. The final agreement should therefore mean exactly what it says – that is, unless it needs to be what Henry Kissinger described as “constructively ambiguous” whereby the parties carve out spaces within which more than one interpretation is possible for the purpose of securing a deal. It should also be borne in mind that while a successful outcome is important, so too is the maintenance of the relationship between the parties. Hence, one’s negotiation ‘opponent’ can become one’s negotiation ‘partner’. This helps when problems arise at the negotiation table, as progress is more easily achieved when parties have a good relationship based on mutual respect and trust. Dr Gerry McMahon is Managing Director at Productive Personnel Ltd., a human resources consultancy and training company.

Aug 01, 2018
Spotlight

Integrated reporting isn’t just for large entities. It can also help SMEs develop and grow in a strategic manner. It is generally recognised that the financial picture is only one facet of the performance of a business and that there are risks and opportunities associated with broader issues such as social, environmental and economic challenges. To give a simple example, a business’ financial report may show high profits, but if the organisation is also creating pollution and likely to be regulated out of business in the future, it is not a good long-term investment. Rather than providing a mere snapshot of historical performance, Integrated Reporting (IR) seeks to provide a more complete and accurate picture of the performance of the business and how it will continue to create value in the short-, medium- and long-term by bringing together financial information with other information that is material to the organisation’s success. The IR framework refers to different capitals – manufactured, intellectual, human, social and relationship, and natural as well as financial – recognising that value is not stored only in the financial. In looking to provide the broader range of measurements that contribute to longer term value and the role the business plays in society, it takes account of intangible as well as tangible assets. Ocean Tomo’s 2015 Intangible Asset Market Value Study demonstrated that 84% of the S&P 500 market value was accounted for by intangible assets, so their impact cannot be ignored by anyone seeking to understand the true value of a business. The benefits of IR IR provides benefits within the organisation and to external stakeholders. It allows for the uniqueness of the organisation, enabling the business to tell its story of value creation. Doing so provides better quality information and a far more complete picture of material issues to a greater range of stakeholders (e.g. customers, suppliers, employees, communities, legislators and regulators, as well as the providers of financial capital). Stakeholders can gain a deeper understanding of the company’s strategy and performance, and how value is being created. The quality and breadth of material information also enable better understanding of risk and interdependencies for both internal decision makers and other stakeholders. With the growing emphasis on ESG (environmental, social and governance) investment, there is a strong argument that IR may help attract investment. Better quality information also allows for a more efficient allocation of capital. Integrated reporting requires integrated thinking, and that prompts management into integrated decision-making about what is truly material in creating value in the short-, medium- and long-term, thereby making the business more resilient. IR also encourages management discipline. You manage what you know is going to be measured, so IR helps drive the performance and management of what is really important for business success for the longer term. The aim of IR is not just the report. Far more important is the integrated thinking and better decision-making that it encourages in management. We have seen moves towards broadening the range of reporting such as the EU Directive on Non-Financial Reporting, which requires larger organisations to disclose information relating to environmental matters, social and employee aspects, human rights, anti-corruption and bribery, and diversity in the board of directors. Since it is anticipated that IR will become the norm over time, it makes sense for all businesses to be early adopters, develop the processes and skills required to report in this manner, and realise its benefits sooner rather than later. The challenges of IR A business may not be capturing all valuable data. Legacy systems often fail to capture data that, with our integrated thinking hats on, we see as necessary for the proper long-term management of the material issues and the determination of strategy. So managers need to review measurement systems and determine the metrics they need for the future. This challenge is, of course, a benefit since without the right data, the managers and board will not be enabled to make good decisions about strategy. Comparability and consistency of metrics across a number of years is sometimes challenging. This can be related to legacy measurement and capturing of data, as previously described, or it can be related to changes within the business, which may require explanation to help readers get behind the surface data. For example, increased emissions for manufacturing per tonne could be due to a business getting more orders last year for units of a complicated product which utilises more energy in the manufacturing process rather than poor management of energy, which might be the initial interpretation. The greater focus on the more complicated product may not be an industry norm, thus making comparisons with industry benchmarks difficult and again requiring explanation to create clarity for the report reader. Organisations that currently prepare an annual report often have a well-oiled system for doing so. The challenges of integrating a much greater range of data, which comes from a variety of sources within the organisation and is possibly collected for the first time, should not be underestimated. Even in organisations that currently publish a corporate social responsibility (CSR) report or sustainability report, it is my experience that combining data in one report to meet a required annual report deadline can be very difficult. Connecting the dots to develop a holistic picture of the inter-relatedness and dependencies between the factors that affect the business’ ability to create value requires the collaboration and input of individuals throughout the organisation – not just in finance. People need training to understand IR and what organisations seek to achieve with it. They often need help to step out of a siloed mentality and leave behind their need to put a positive ‘spin’ on information and metrics arising from their area of responsibility. IR demands that material matters are reported in a balanced manner, both positive and negative, which precludes cherry-picking what you will report in any given year. The focus on stakeholder relationships in IR often proves challenging. Despite the positive narrative from organisations about their engagement with stakeholders, many businesses lack evidence and data to support the extent to which they understand, take into account and respond to the needs and interests of their stakeholders. Or they focus on too narrow a range of stakeholders, perhaps giving lots of attention to customers but excluding other legitimate and important stakeholders such as suppliers or local communities. Is IR useful for SMEs? The simple answer is yes. SMEs can gain all the benefits described above – better ability to tell their unique story; better communication with a broader range of stakeholders; attraction of investment; better management decision-making and discipline; and enhanced understanding of risk and how value is created. There are other potential benefits for SMEs. Compared with large businesses, SMEs are often more reliant on their connections with specific stakeholder groups such as the local community, specialised suppliers or providers of finance. IR forces a focus on stakeholder engagement and enables a much better sharing of information with stakeholders, which builds trust and understanding. SMEs can be seen as high-risk or assessed only by their most recent financial performance, which can be a significant barrier to development. IR gives the business an opportunity to counter this by presenting a fuller picture of how it is creating value, reducing risk and how it intends to do so in the longer term. With smaller management teams and less siloed structures, many SME management teams are actually more adept at collaborating effectively and engaging in IR thinking than those from bigger organisations. Gráinne Madden is a corporate responsibility and business ethics specialist, and lectures in corporate responsibility to MBA students.

Aug 01, 2018
Spotlight

As small businesses are more likely to be victims of fraud than larger ones, this article explains how SMEs can keep themselves safe. Emerging technology and improved connectivity have helped small- and medium-sized entities (SMEs) take advantage of new business opportunities, but they have also presented fresh opportunities for fraudsters. While most financial fraudsters still use telephone and email to commit the crime, the frauds themselves are increasingly sophisticated. SMEs are faced with many fraud types, from old-fashioned cheque fraud to cyberattacks such as ransomware. Organisations of all sizes are open to attack, but SMEs are often targeted as their security systems may not be as robust as those of larger organisations. Keeping security systems and devices protected with official and reliable software and backups can assist greatly in keeping fraudsters out of your business. It is also important to be aware that your firm may be at risk of indirect fraud if a fraudster compromises a supplier’s system and sends you fraudulent emails from their accounts in an effort to defraud you. Fraud can significantly damage your business both financially (e.g. lost funds, lost revenue, and the cost of any legal action or security upgrades) and non-financial (e.g. a tarnished reputation, loss of trust and low employee morale). It is therefore critical that firms work to prevent fraud from happening in the first instance. So, what is the most common fraud affecting Irish business today? The answer is email fraud. While this might not seem very new or particularly high-tech, the sophistication comes in how the fraudster builds your trust and gets you to take an action that is not in the best interest of your company. Two particularly common types of fraud are known as CEO or executive impersonation fraud and invoice fraud. Both have caught out even the most prepared businesses. CEO or executive impersonation fraud In the case of CEO fraud, the legitimate email of a CEO or senior executive is hacked and malware is then deployed to monitor how the individual writes his or her emails – the tone, common phrases used and how they sign off. Fraudsters generally strike when they know the CEO is out of the office – when on annual leave, for example – at which point they will send an email instructing a colleague with responsibility for payments to pay a supplier while providing the necessary bank account details. If undetected, the funds will then be lodged to the fraudster’s bank account by an unassuming employee. Business owners and advisers should note that it might not be a payment request in some instances, rather a request for personal information such as a P30 or customer information. Invoice fraud Meanwhile, invoice fraud is on the rise in Ireland. Using a spoofed email address, the fraudster presents himself or herself a supplier. The email will mirror an email you regularly receive from your usual supplier, including logos and signoffs, and will inform you that the ‘supplier’ has a new bank account with instructions for all future payments to be lodged to the new bank account. When you receive the next legitimate invoice from the real supplier, your firm will process the payment to the new bank account. Generally, it is only when a reminder to pay an invoice comes in that you realise what has happened. By then, the fraudster has their money and it is too late to recall the payment. Protecting your business As the old saying goes, prevention is better than cure. Implementing controls and procedures to prevent fraud does not have to be a costly task; in fact, low-cost measures can prevent most frauds from happening. Simple procedures such as verifying new payment details verbally can prevent fraud from happening in the first instance. Firms are advised to require dual sign-off on large, if not all, payments. Not only does this minimise the risk of payments going to fraudsters’ accounts, it also reduces the risk of fraudsters being able to hack into your online banking account as two sets of log-in details are required. In terms of software security and anti-virus software, only use well-known providers and do your research. Never install security software by clicking on advertisement links on the internet. A low-cost way to create backups is to use cloud technology; this does not involve the purchase of expensive hardware and is easily accessed should an attack take place. Finally, staff training is critical. Ensure that employees are aware of potential threats, know how to use systems properly and are provided with refreshers in protocols and procedures. This will all help prevent fraudulent attacks on your company or client companies. FraudSMART, a new fraud awareness initiative developed by Banking & Payments Federation Ireland (BPFI) in conjunction with the banking sector, also aims to help businesses and consumers recognise and prevent fraud. Here are its top tips to help you keep your business safe: Be informed Ensure employees are fraud-aware and understand the controls and procedures in place to prevent fraud; Have a verification process in place before changing bank account details for existing suppliers or service providers (e.g. verbally verify bank account change requests with individual suppliers); Provide cybersecurity training for staff and include routine warnings about clicking on links in emails and ensuring that systems are password protected; and Do not assume that you can trust caller ID. Phone numbers can be forged to make it appear as though a particular company is calling but that may not be the case. Be alert Do not fall for the fraudster’s trick of sending an email from a senior person in your organisation when they are out of the office. Also, do not reply to the email as the fraudster is on the other end; Fraudsters can change an email address to make it look as though it comes from someone you email regularly. Look out for different contact numbers and/or a slight change in the email address; Fraudsters may already have basic information about you or your business. Do not assume that the caller is genuine simply because they have these details; Be wary of unexpected or irregular payment requests, or requests that require changes to bank account details – irrespective of the amount involved; and Always check your bank statements. If you notice any unusual transactions, report them to your bank immediately. Be secure Ensure that your firm’s security software is regularly updated and maintained using official and reliable software, and that your data is regularly backed up; Always exercise caution when forming new relationships with potential customers and undertake appropriate due diligence; If in any doubt, do not make a payment unless you have verbally confirmed with your CEO and supplier that the details are correct; and Do not allow yourself to be rushed. Take your time and conduct the relevant checks. Conclusion If you fall victim to a scam or have noticed unusual activity in your bank account, contact your bank immediately. The sooner the bank can investigate potential losses, hold funds in accounts and place recalls on transfers made in error, the better. Fraudsters move fast. They withdraw funds as soon as it hits their accounts, so time really is of the essence. You should also report the incident to your local Garda station. For more information on fraud prevention in business, visit www.fraudsmart.ie where you can also sign up for fraud alerts. Niamh Davenport is Fraud Awareness Manager at Banking & Payments Federation Ireland.

Aug 01, 2018
Spotlight

SMEs might struggle to recruit top talent in today’s tight employee market, but size could be their hidden strength. With Ireland on track to reach full employment by 2019 and the Brexit-induced migration of large corporations such as Bank of America and Barclays, the challenge facing Ireland’s small- and medium-sized enterprises (SMEs) in the so-called “war for talent” appears daunting. Stories abound that large multinational companies develop sophisticated people management strategies, are able to offer higher salaries and a myriad of employee perks such as monthly back massages, free onsite food halls and ping pong tables in the boardroom. Despite some of the advantages that larger corporations inevitably have, SMEs are actually well-positioned to compete with them due to the shifting demands and desires of the workforce. While money is important to people and ping-pong tables are fun, SMEs are able to deliver something greater, something that many workers are looking for today – meaning in what they do. The idea that meaningful work is motivational work has been around for a long time, but research is beginning to identify key workplace factors that help employees find greater significance in what they do. Interestingly, many of the workplace factors that enhance meaningfulness are the bread and butter of SMEs. In search of meaning  So how are SMEs positioned to offer candidates avenues to find meaning in what they do? Well, the very nature of work in SMEs requires a different mindset. With less bureaucracy and more autonomy, SME employees have the opportunity to push forward their ideas, programmes and improvements much easier and quicker. With increased autonomy, employees show higher levels of responsibility for work outcomes and this in turn leads to high-quality work performance. SMEs also require their employees to take on a broad range of responsibilities, using and developing a variety of skills across several business functions. This might include meeting with higher-level clients or presenting recommendations to senior management. An SME employee will not only gain well-rounded exposure to a variety of tasks, but will also be positioned as a serious player at the decision-making table. SMEs, given their size, also have a great capacity to create a strong and motivational culture. This is important because a strong culture appeals to many job candidates. According to research conducted by Hays, 61% of finance and accounting professionals said they would take a pay cut for a better cultural fit. SMEs are also better positioned to provide flexibility to employees, as they are less constrained by the need to maintain standard policies for large pools of employees. Given the above, SMEs provide a fertile greenfield site for employee development. Indeed, Hays note that employees rate career progression and development opportunities as more important than benefits or employer brand when considering a move to a new organisation. Many employees are motivated not just by salary, but in finding a depth of experience in their next role. In that context, SME leadership must engage with job candidates and share with them the benefits and advantages of working at their SME. The war for talent When SMEs stop trying to compete with the offers and perks from larger companies and instead engage in communicating the benefits that SMEs inherently have, they will start to attract the talent that is needed. The first step is to actively advertise and communicate the opportunities afforded to employees in job descriptions, LinkedIn posts and recruitment meetings. Tell future candidates about the variety of work, immediate exposure to significant clients, and projects they will be part of when joining your company. Play to the ambition of these individuals. The next opportunity is to promote the cultural fit and work-life balance of a smaller organisation where people know each other’s family and interests, and can accommodate requests. This can be done by including the CEO and senior management in the hiring process and designing mentoring programmes that allow individuals to build relationships with key team members. These actions show that everyone has access to top managers – far from the reality faced by many at larger organisations. A third recommendation for SMEs is to expand access to feedback and develop a culture in which feedback is not just accepted, but asked for. SMEs have the ability to provide feedback that recognises accomplishments and creates areas of improvement for individuals. Employees yearn for recognition and are increasingly looking to employers to offer and provide development opportunities – a feedback culture provides both. When SMEs take the time to be proud of what makes them a successful organisation and actively promote these characteristics, they will be able to recruit top talent. And just as important, activities that aim to attract new talent are also incredibly influential in keeping current talent engaged. The nature of work at SMEs leaves them well-prepared when combined with a rigorous communication strategy to perform well in the ‘war for talent’. Amanda Shantz is Associate Professor and Director of the MBA at Trinity College Dublin. Andrew Clark is an MSc candidate at Trinity College Dublin.

Aug 01, 2018
Spotlight

Gerry Gallagher explains how SMEs should approach corporate governance in their organisations. Small and medium enterprises (SMEs) face many challenges while trying to survive in a competitive business environment. The lack of scale and resources available to SMEs often results in those running the organisation having to immerse themselves in a wide variety of the everyday operational functions, often to the neglect of the more strategic issues such as corporate governance. In addition, the directors and the managers are many times one and the same. However, good corporate governance is vital to the long-term success of any organisation, regardless of whether it is a multinational or a small, family-owned firm.  The UK’s Financial Reporting Council (FRC), in its Corporate Governance Code, defines corporate governance as “the system by which companies are directed and controlled”. While the FRC’s Code is developed primarily for listed companies, many of the principles contained therein are relevant to all companies. Governance embraces many disciplines: law, accountancy, economics, political science, sociology and psychology. The main challenge for SMEs is to take those principles and tailor them for their own particular situation. This process can be simplified if we examine governance under three broad headings: accountability, strategy and performance. Accountability All organisations are held accountable, but the level of accountability is more onerous for publicly-quoted companies where their actions are subject to minute scrutiny, not just by shareholders, but by a broad group of stakeholders. However, SMEs are also subject to considerable oversight. Sometimes different sectors have specific legislation governing their area. In recent years, many charities, for example, have found themselves open to a degree of scrutiny for which they were ill-prepared.  There is also a great deal of legislation that applies to all companies, such as the 2014 Companies Act. This legislation consolidated all previous relevant acts, in addition to a number of new provisions. It is very detailed and, for the first time, it codified eight duties of company directors. For example, on taking up the role of director, a person must, under Section 223 of the Act, certify: “I acknowledge that, as a director, I have legal duties and obligations imposed by the Companies Act, other statutes and at common law”. That declaration makes clear to the director that they have an onus to be familiar with the provisions, not only of the Companies Act, but also other legislation such as health and safety, employment law and many others. GDPR is one example of legislation that has placed considerable pressure on all organisations to ensure compliance. In addition to specific legislation, there are many codes developed to ensure good governance, such as the UK Corporate Governance Code and the G20/OECD. These are principles-based codes which inform the development of more specific codes in different sectors such as the Central Bank’s Corporate Governance Code for Credit Institutions and Insurance Undertakings, or the Department of Public Enterprise and Reform’s Code of Practice for the Governance of State Bodies. These codes are based on a “comply or explain” approach which allows for flexibility in their implementation, depending on the specific circumstances.  There are also voluntary codes that impact on all sectors such as those of the independent self-regulatory body for advertising, the Advertising Standards Authority of Ireland, which promotes high standards in marketing communication and advertising. Apart from external accountability, firms must also have the appropriate internal systems in place to ensure accountability. Managers need to make decisions based on accurate data and, in particular, financial information. Here, the role of the Chartered Accountant is vital, not just by providing financial information, but by interpreting it in a manner that spells out the implications for the firm and can provide assurance to outside bodies.  Strategy Accountability is only one part of the equation. The FRC definition also refers to how companies are “directed”. Each SME exists for a specific purpose and managers need to be clear on that purpose. The purpose is not to make a profit – that is the by-product of providing goods or a service that customers are willing to buy at a price greater than the cost of production. Such a purpose must be supported by organisational values, including ethical values. There are many examples where organisations have suffered financially, not because they had broken the law, but because consumers turned away due to unethical behaviour. Good reputations take years to build up, but can be destroyed in an instant, particularly in the age of social media. Such reputations need to be protected by ethical values that are an integral part of what the company does.  A clear purpose and set of values will inform the development of the strategic goals and objectives. For small companies, it can be difficult for managers to set time aside from the day-to-day operational imperatives to focus on what the company should be doing and what is important for its long-term success. You can be busy cutting down trees, but there is not much point if you are in the wrong forest. The balanced scorecard is a useful tool to ensure that strategic goals are balanced between long-term development and short-term opportunities. The company’s strategic goals need to be translated into policies and procedures that guide everyday decisions that provide consistency throughout the organisation. In particular, each company must develop a risk management policy to cover all aspects of its operations, covering financial decisions, health and safety, information technology, GDPR, human resource management and geopolitical risks such as Brexit. Managers must be able to recognise each risk, assess its likely impact on the company, evaluate the probability of that risk, determine what the company’s policy should be and monitor how the risk is rolling out. In addition, the company also needs to develop policies on diverse issues from whistleblowing to corporate social responsibility. Performance Both accountability and strategy are required to work in tandem to ensure the effective performance of the company. Such performance is achieved through people – directors, managers, employees and other stakeholders who are committed, engaged and working together as a team. The company’s directors may also be the managers, and this poses a significant challenge as being a director requires a different skill-set from dealing with the operational issues facing the company on a daily basis. Managers and directors need training specific to their roles so combining the two can be a challenge for the individual and bring on challenges for the SME.  Having the right team on board is essential. This requires careful selection of employees to ensure a good fit with the organisation’s values. Employee training is also important – initial training as part of induction as well as ongoing development. This should cover the technical aspects of their job, but also legal requirements, safety and other areas to ensure the effective performance of the employee and the company. Employees must have a clear understanding of what is expected of them, but they must also be free to make a contribution or to voice any concerns so clear, open communication between employees and management is essential. All of this is underpinned by the organisation’s culture. Louis Gerstner, a former CEO of the computer giant IBM, described culture as what people do when no one is watching. The culture should be one of high performance but predicated on sound ethical principles that guide people in making the right decisions. Culture is the basis for everything that happens in organisations. This requires strong leadership and clarity of purpose. Conclusion In recent years, most aspects of Irish society have been impacted by poor governance, from how we regulated the banks to how charities were run. Across the board, we need to improve on how governance is conducted in all organisations, big and small, and in a manner that reflects the common good. Governance is a holistic approach to running organisations that ensures full accountability to all relevant stakeholders while achieving steady and sustained performance over the long-term. It requires strong leadership, teamwork, and a culture committed to both ethical and operational values. Governance is central to the success of every SME. Dr Gerry Gallagher is a lecturer in governance and corporate strategy at IT Tralee and author of Corporate Strategies for Irish Companies.

Aug 01, 2018
Strategy

Chartered Accountants can help businesses translate abstract Brexit scenarios into strategic planning. Another significant milestone on the road to Brexit came and went at the end of June, leaving businesses none the wiser about the future shape of the UK’s relationship with the EU. Then, in July, at a meeting at Chequers, the British Cabinet agreed on a plan for negotiations with the EU. Briefly, this envisages maintaining “a common rulebook for all goods” but not for services. The UK is proposing a “combined customs territory”, one benefit of which would be to prevent a hard border in Ireland. However, at the time of writing, due to political developments in the UK, the prospects for this plan are unclear. It also remains to be seen how the detail of the plan will be received by the EU. Meanwhile, a survey conducted among local communities in the border region between March 2018 and May 2018 found that most respondents (59%) now think that a ‘hard’ border is more likely than they previously anticipated. Since the last issue of Accountancy Ireland was published, both houses of the UK parliament have agreed on the text of the European Union (Withdrawal) Bill 2017–19. This legislation enables EU law to be transferred into UK law and allows work to begin on preparing the UK statute book for Brexit. The bill now awaits royal assent, when it will become an act of parliament. Readers will recall that when the draft legal text of the withdrawal agreement was published by the EU in March, it included a “backstop” solution to prevent a hard border on the island of Ireland and avoid a “cliff-edge” Brexit by creating a “common regulatory space” where goods could flow back and forth without border checks. Subsequently, on 7 June, the UK Government published a technical note proposing that “in the circumstances in which the backstop is agreed to apply, a temporary customs arrangement should exist between the UK and the EU.” The UK said this temporary arrangement should be “time limited” pending finding a solution to the border question, which it expects to be in place by the end of December 2021 at the latest. However, the EU’s chief Brexit negotiator, Michel Barnier, said the backstop cannot be extended to the whole UK because it is designed for the specific situation of Northern Ireland. More recently, in the run-up to the EU Council meeting at the end of June, UK and EU negotiators issued a joint statement stating that both parties recognise that the backstop requires provisions in relation to customs and regulatory alignment and are committed to accelerating work on the outstanding areas. Negotiations will continue over the coming weeks. Meanwhile, frustrated by the slow pace of the negotiations, various UK businesses and representative organisations have been highlighting the practical problems this creates for businesses. Accountancy Europe, the organisation that represents one million professional accountants, auditors and advisors from 37 countries, has warned that Brexit-related disruption in audit services could threaten the stability of markets. A recently published paper entitled Implications of Brexit on Cooperation within the European Audit Profession stresses the need for a favourable regulatory framework post-Brexit, where the European audit profession can continue to cooperate effectively and efficiently in the provision of statutory audit. This position is supported by Chartered Accountants Ireland. A Moore Stephens study of 653 owner-managed businesses in the UK, published in February 2018, showed that 94% of respondents feel that the UK Government ignores their concerns on Brexit. When asked about their specific Brexit-related worries, 38% of owner-managed businesses said that the introduction of trade tariffs was their biggest concern. 30% fear a loss of EU labour while 23% are concerned about loss of European customers. Only 33% said that they had no concerns around Brexit. In a risk assessment published in June, Airbus said: “While an orderly Brexit with a withdrawal agreement is preferable to a no-deal scenario, the current planned transition (which ends in December 2020) is too short for the EU and UK governments to agree the outstanding issues, and too short for Airbus to implement the required changes with its extensive supply chain. In this scenario, Airbus would carefully monitor any new investments in the UK and refrain from extending the UK suppliers/partners base.” The ongoing uncertainty appears to be slowing the UK’s commercial property market according to business lender, Capitalflow, which has said that some UK developers and investors are now looking to invest in commercial property in Ireland and “unlike their Irish counterparts, who are still having difficulties accessing finance from the Irish pillar banks, UK developers typically have access to multiple sources of finance”. Meanwhile, there is no shortage of Brexit-related reports from official and other sources. One of these, published by the Irish Government in June, looked at the firm-level impact of Brexit on the most exposed sectors of the Irish economy. A list of 20 potential impacts were presented and firms were asked to rate their level of concern for each and to comment on how they understood and evaluated the risks presented. Across all sectors, fear about changes to the free movement of goods was the top concern, followed by fear of reduced freedom to trade in services. Levels of concern varied within sectors. Of the 15 sectors analysed, the chemicals/pharmaceuticals sector expressed the highest level of concern about the impact on their business while firms in the rental/leasing sector expressed the least aggregate concern. In another report, also published in June, the Irish Government’s Expert Group on Future Skills Needs (EGFSN) addressed the skills need arising from the potential trade implications of Brexit. The study deals with skills such as customs clearance, logistics and supply chain management, which will be needed in a potentially more restrictive trading environment with the UK, as well as skills to support diversification of trade to non-UK markets such as international management, sales, marketing, design and development, foreign languages and cultural awareness. The report makes eight recommendations, with 46 associated sub-actions, aimed at enhancing the pool of trade-related skills available to Ireland-based enterprise. At a practical level, skills shortages are a growing problem for businesses across the island of Ireland. EY’s Economic Eye Summer Forecast projects growth of 236,700 net additional jobs in the period 2017–22 across the island of Ireland and reveals that since the day of the Brexit referendum result, 21 financial services organisations have confirmed that they will move all or some of their operations from the UK to Dublin. This positions Dublin as the most popular post-Brexit location ahead of Frankfurt (12), Luxembourg (11) and Paris (8). While the employment rate is currently high, InterTradeIreland cautions that it may be at a plateau and “we are beginning to enter a critical phase of the economic cycle, with businesses across the island taking a collective pause on many key decisions”. Worryingly, InterTradeIreland says that the level of business preparedness around Brexit has improved, but continues to be low with just 8% of cross-border traders having a plan in place. Chartered Accountants have a vital role to play in helping businesses translate what can appear abstract and difficult Brexit scenarios into their strategic planning, focusing in particular on highlighting solutions that could work in specific sectors. Politically, tensions are likely to intensify over the coming weeks and there must be a question mark over whether meaningful progress can be achieved ahead of the next significant milestone, which is the EU Council meeting in October. Michael Farrell FCA is Director at PKF-FPM Accountants Ltd., a service provider for InterTradeIreland’s Brexit Advisory Service.

Aug 01, 2018
Strategy

Connectivity exposure is the new IT risk many businesses are ignoring at their peril. Utter dependence on a single telecoms circuit for connectivity is the IT risk that the vast majority of Irish businesses are ignoring. They do so at their peril. With even the most basic systems and processes tied to the internet, a network fault has the power to bring companies shuddering to a standstill within seconds. As professional advisors, accountants and auditors must be cognisant of their clients’ vulnerability to costly disruptions and educate themselves about network resilience, or ‘redundancy’, as a means of mitigating risk, improving controls and guaranteeing business continuity. Why network outages are the new IT risk Accountants and their clients are acutely mindful of the threat posed to their security by viruses, malware and fraudulent phishing scams. Yet, even the most informed business owners persist in ignoring single circuit connectivity as their biggest IT vulnerability.  The move to the cloud has been touted for so long, we would be forgiven for presuming we all work in one centrally located nirvana by now. There are many legitimate business advantages associated with moving to the cloud, but cloud adopters must be aware that the very move that helps their business opens their company up to a new risk. In short, by trusting critical applications to the cloud, Irish businesses render themselves wholly reliant on a fast, secure and dependable connection to the internet. Head in the clouds Happily, most companies have a data connection that works for them – most of the time. And many enterprises feel entitled to shrug off the risk of outages, confident that they work in a relatively low-tech environment. A quick look around their operations typically tells a different story. Accounting software, payroll, invoicing, CRM systems, databases, point of sale systems, even Microsoft 365 applications generally all require a network connection to operate, making connectivity junkies of us all. Counting the cost  Operating in this highly connected cloud-based reality means that a network fault or outage will bring work in any office, retailer, manufacturing or professional services firm grinding to a halt. Once a connection is cut, the clock starts ticking on missed business opportunities and plummeting employee productivity. VoIP phones go down, along with email and web queries, making it impossible for frustrated clients to get in touch or for a business to respond. This means that the impact of an outage on reputation and client goodwill may reverberate long after the connection is restored. Faults, payments and penalties Fault repair time from the country’s largest broadband providers can stretch to over five days as losses continue to mount – not that an outage has to be lengthy to be damaging. Imagine, if you can bear to, a network fault that coincides with a peak ROS deadline, resulting in a 5% surcharge of tax liability for every late filing. Accountants are not alone on this one. A small company that misses a CRO deadline could lose their exemption and find themselves embroiled in an audit with all its associated costs. Meanwhile, the real-time reporting regime coming into effect on 1 January 2019 will impose mandatory online filing deadlines on every PAYE employer nationwide. One suspects that explaining to Revenue that your internet connection failed may go down like a lead balloon – landing somewhere close to “the dog ate my homework”. Network redundancy  Why would an otherwise prudent business ignore a risk of this magnitude? Simply put, the larger national and multinational companies don’t. Enterprise-class businesses have led the way in managing exposure in this field. For years, they have protected themselves against network outages by building wired resilience into their infrastructure. Denis Herlihy, Chief Technical Officer at Ripplecom, feels very strongly about owners, managers and professional advisors who are not countenancing network dependence as a vulnerability. “Any assessment of IT risk that ignores the need for network redundancy in this day and age is quite frankly negligent, in my opinion. One bad experience is more than enough to send companies scrambling for a resilient solution but for a smaller business, one bad experience is more than they can afford.” Management controls to minimise risk  No one believes that accountants should advise their clients to shun the cloud and lose all its advantages. So, what measures can be implemented to manage the risk? Disaster recovery plans are on everyone’s risk management radar but while this will protect files, it is powerless to restore productivity or diminish reputational damage. The custom infrastructure built by large companies is beyond the resources of most companies. However, advances in technology mean that more modest-sized businesses can now incorporate a ‘failover’ solution into their IT set-up. A good failover will deliver the type of network redundancy that larger enterprises have enjoyed for years, but at a fraction of the cost. Failover protection At its simplest, a failover adds a second ‘back-up’ connection that takes over when a network fault occurs or a circuit becomes unavailable. A resilient business with a quality failover will have two diverse network connections – one primary and one secondary. Usually, all internet traffic uses the primary connection but when an outage strikes, all connected systems and devices switch quickly and smoothly to the secondary circuit. Once the main connection is restored, traffic switches back to the primary route. Linked systems and devices continue to operate normally throughout the outage keeping customers, employees and ultimately the business happy. Checklist: how to determine the value of a failover However, not all failover solutions are created equal. When investing in a failover, or advising a client who is, consider that – on top of speed, security and cost-effective pricing – each failover connection should use a distinct access method to reduce the possibility of being impacted by the same outage or physical fault. To add real value, a failover should be automatic (an auto-failover) so that no physical intervention is needed on the part of the client or their IT services company. A market-leading auto-failover, such as Ripplecom’s Orion, will be engineered to continue in the same IP stream to allow for a truly seamless switch from one connection to another. Service disruptions and network faults are outside of a business’ control and are impossible to predict. However, a failover solution that meets these criteria will not just mitigate the threat, it will virtually eliminate it. With a suitable failover in place, owners, managers and advisors can relax knowing that, when an outage does occur, their company will stay securely connected and operational. John McDonnell FCA is a Founding Director of Ripplecom, an Irish telecommunications company specialising in resilient connectivity.

Aug 01, 2018
Business Law

With the Criminal Justice Act 2018 now coming into force, what is required to protect your organisation’s integrity and reputation? The newly enacted Criminal Justice (Corruption Offences) Act of 2018 is a robust piece of legislation that introduces new corruption-related offences, extra-territorial reach, tougher penalties for those convicted of corruption and the potential for companies to avail of a defence based on taking “reasonable steps” and performing “due diligence” to avoid an offence under the Act. The Act was one of the key measures contained in the Government’s white collar crime package, which was published in November 2017. The Act is also intended to fulfil national commitments under various international anti-corruption instruments including the Organisation for Economic Co-operation and Development (OECD) Convention on Bribery of Foreign Public Officials, the United Nations Convention against Corruption (UNCAC) and the Council of Europe Criminal Law Convention on Corruption. The Act introduces the new offence of “trading in influence”, which criminalises bribery of Irish or foreign officials. It has also introduced “strict criminal liability” for organisations. In effect, this means that the body corporate (“corporates” or “organisations”) will be criminally liable for the actions of its directors, managers, employees or agents should they commit a corruption offence for the corporate’s benefit. Key measures The Act includes the following key measures: Active and passive corruption: a person who corruptly offers, gives or agrees to give a gift, consideration or advantage to any person doing an act in relation to his or her office, employment, position or business shall be guilty of an offence. A similar provision also applies to the acceptance of a gift, consideration or inducement on this basis. The offences address corruption within both the public and private sectors. Furthermore, the reference to office, employment, position or business is intended to cover all public and private sector positions, including those in voluntary bodies such as sporting or charitable organisations; Trading in influence: the Act includes a new offence of “trading in influence”, both active and passive, which criminalises both the offering of a bribe in order to induce a third-party to exert an improper influence over an act of an official, and corruptly accepting the bribe on these grounds; Extra-territorial reach: the Act provides for extraterritorial jurisdiction over acts of corruption outside Ireland committed by Irish persons or companies, or other Irish-registered entities; Presumption of corruption: the Act introduces a presumption of corruption where benefits have been given to an official. It also introduces the concept of a “connected person”, which was one of the key recommendations arising from the Mahon planning tribunal; Strict criminal liability offence: a fundamental element of the Act is the section that will make organisations liable for the corrupt actions committed by its directors, managers, secretaries, employees, agents or subsidiaries. Section 18(2) of the Act affords a possible defence that the corporate took all reasonable steps and exercised all due diligence in order to avoid the commission of the offence; and Penalties: the Act provides for sentences of up to 10 years in prison and unlimited fines for conviction on indictment of serious corruption offences. There are also additional penalties in respect of office holders and public officials. What to do… Organisations must develop and implement robust anti-corruption policies and procedures. It has become increasingly crucial for organisations to develop anti-corruption programmes to help minimise the risk of non-compliance. Given the extraterritorial reach of the Act, it is important for organisations to take account of both local and international activities. As outlined earlier, in order to present a defence against a corruption charge, a body corporate must prove that it took all “reasonable steps” and exercised all “due diligence” to avoid the commission of the corruption offence. In terms of developing an anti-corruption programme, there is a need to perform a comprehensive, risk-based assessment that takes account of: Country risk: dependent on the level of international activities (i.e. beyond national borders); Sectoral risk: a recent fraud-based survey identified corruption as the most common occupational fraud scheme in every global region, including Western Europe. Corruption poses significant risks to several industries and is more prominent in the energy, construction, manufacturing and government and public administration sectors. The survey estimates that the average loss to victim organisations is $250,000; Transaction risk: certain types of transaction give rise to higher risks (e.g. charitable or political contributions, licences and permits, and transactions relating to public procurement); Project-based risk: such risks might arise in high-value projects, with projects involving many contractors or intermediaries, or with projects that are not apparently undertaken at market prices or do not have a clear legitimate objective; and Relationship risk: certain relationships may involve higher risk. For example, the use of intermediaries in transactions with foreign public officials; consortia or joint venture partners; and relationships with politically exposed persons or those with links to prominent public officials. It is important that the risk assessment is tailored specifically to the organisation’s environment and enables the organisation to identify and prioritise the risks it faces. The risk assessment framework should also recognise: Oversight of the risk assessment by top level management; Appropriate resourcing; Identification of the internal and external information sources that will enable risk to be assessed and reviewed; Due diligence enquiries; and Accurate and appropriate documentation of the risk assessment and its conclusions. Lessons from the UK In many ways, the Act reflects the approach of similar legislation operating in the UK, namely the UK Bribery Act (UKBA) 2010. Under the UKBA, the means of defence against prosecution is based on having established “adequate procedures” to prevent corruption acts. UK-based enforcements and prosecutions reveal that bribery and corruption are significant risks where organisations operate internationally. They also highlight the dangers “associated” persons can pose. In the UK, a common denominator in the numerous enforcement actions to date has been the role of third parties in paying bribes or facilitating payments. Consequently, third-party due diligence, contractual protections and compliance audits continue to be critical components of companies’ anti-bribery and corruption policies and procedures. In certain cases, it is not sufficient for an organisation to merely have a policy in order to invoke the “adequate procedures” defence. This policy must be reviewed over time to ensure it remains fit for purpose and must be properly implemented. Beyond the Act, corporate culture plays a significant role in preventing corruption and this ultimately rests on employees’ behaviour. Boards and senior management need to demonstrate and communicate a proactive stance against corruption. The effectiveness of the “tone at the top” cascading throughout the organisation is a key factor in ensuring the commitment of middle managers and staff across all levels of the organisation. Conclusion The process of developing adequate procedures to minimise corruption risk does not have to be onerous. A sound assessment of the risk of exposure to bribery and corruption is the starting point. Organisations must be proportionate in their response; a well-managed and risk-aware organisation should not have any difficulty in developing adequate procedures, which form the defence against prosecution, and in making these work. Detecting any potential corruption offence is a difficult challenge for any organisation. Understanding the methods by which corruption offences are detected is critical for both investigating schemes and implementing effective prevention strategies. Surveys demonstrate that corruption is likely to be detected by tip-offs, which highlights the importance of having secure whistleblowing systems and procedures in place. It is important to note that, while the promotion of arrangements such as the whistle-blower hotline is often aimed primarily towards employees, organisations should also consider promoting their reporting mechanism to outside parties, especially customers and suppliers. The ultimate test for an anti-corruption programme is whether it actually works, and organisations must be prepared to demonstrate this. Ongoing monitoring and auditing, including culture-based audits, also further strengthen organisations’ means of defence. Ultimately, organisations should take a common-sense and risk-based approach to developing and implementing anti-corruption programmes in order to protect their integrity, interests and reputation. Justin Moran is a Director in the Governance, Risk and Internal Controls division at Mazars.

Aug 01, 2018
Strategy

Building a digital-first finance function from scratch is a daunting, but exciting and eminently doable challenge. Joining a start-up can be a daunting experience, and joining as the first accountant responsible for setting up the finance function only adds to the pressure. In this article, I will share my experience of setting up a digital finance function, with the aim of helping future start-up accountants. I joined UrbanVolt at the beginning of 2016 and there was no Dummies’ Guide to Setting Up a Finance Function that I could refer to. However, my training and experience as a Chartered Accountant had prepared me for the mammoth task. What are you aiming for? Living in an age of digital advances, I realised that this presented an opportunity to find new ways of working. To that end, I established UrbanVolt’s finance function on two main principles: Paperless: UrbanVolt’s aim is to reduce businesses energy consumption and reduce the effects of climate change. As such, I wanted to contribute to this environmentally-friendly ethos by having a paperless finance function; and Built for scale: the founders inspired me with their ambitious vision and I realised that this required financial processes built for scale. However, for a truly paperless finance function that is built for scale, I had to embrace cloud technology. G Suite With this in mind, I convinced the UrbanVolt founders that G Suite should be the primary office application for all employees. I had spent the year prior to joining UrbanVolt working at Google and became familiar with the application. I was surprised that G Suite had similar functionality to Microsoft Office, but being on the cloud allowed Google to enhance the functionality by introducing collaborative tools. This enabled several users to work on the same document, at the same time, from anywhere in the world. G Suite significantly increased UrbanVolt’s productivity. The team can work on documents together in real-time, negating the need for multiple document versions and enabling them to meet deadlines for key client deliverables. Cloud accounting The next step to setting up a digital-age finance function was to find a cloud accounting package built for scale. After extensive research and trials, I finally settled on Xero. I liked the user-friendly interface, automation capabilities and the reporting functionality. I was impressed by Xero’s open API, which enabled the development of a third-party add-on marketplace. If the required functionality didn’t exist within Xero, there was an add-on that would provide that functionality. This turned out to be very important for scaling the business. It should also be noted, that all the underlying transactional data is stored within Xero in the cloud. Having all the data in one place in the cloud makes it easier for compliance, reporting and ultimately, remaining paperless. E-signatures As part of my paperless initiative, I introduced e-signature for all UrbanVolt clients. At the outset, the common belief was that clients preferred a wet ink signature on a physical document. This assumption could not have been further from the truth. From a governance perspective, one of the key benefits of an e-signed document is that you receive an audit report providing the following details: Who: records the person(s) who signed the document (including their email address, title etc.); What: the document is given a unique reference; Where: the IP address of the device used to sign the document is logged; and When: the exact date and time the document was signed is also recorded. The addition of the audit report makes it impossible for an e-signature to be forged. Cybersecurity Running your business in the cloud has many benefits. However, cybersecurity was always at the forefront of my mind. I became obsessed with ensuring that UrbanVolt’s data was kept secure. I had learned at Google that an organisation could have the best IT security systems and policies in place, but your organisation is only as strong as your weakest user. I embarked on a mission to educate the team on IT security and data protection. At a minimum, I ensured that the team was aware of: The importance of password complexity and how to use two-step verification Locking PCs and laptops when away from your device(s); and Mobile device security. It is important to get this embedded within an organisation at the outset, especially if you want to avoid a GDPR breach which could carry a significant financial penalty and the loss of your clients’ trust. Cybersecurity continues to be an obsession of mine. Having recently set up Dappr, protecting client data and retaining their trust is of paramount importance. Set the culture Finally, if you’re one of the first employees, you are in a very privileged position to help set the culture of the organisation for future recruits. So try to keep it positive by embracing work flexibility (which is easier when your business is in the cloud) and focus on outputs rather than inputs. Did it work? UrbanVolt now serves over 270 clients across Ireland, the UK and the US. The company has also secured nearly €100 million in various forms of financing over the past two years. All this activity was aided by having a digital finance function – and this is why I set up Dappr, with the mission of helping SMEs achieve similar success with a digital finance function. Michael J. Walls is the Founder of Dappr and Chartered Accountants Ireland’s 2018 Young Chartered Star.

Aug 01, 2018
Management

Coaching entire organisations could bring the popular concept of self-directedness to life. There’s a bit of a shift going on in how some organisations want to work. We’re hearing the term ‘self-directed teams’ being bandied about frequently now. We’ve even heard about the existence of self-directed organisations. ‘Self-directedness’ has become a bit of a buzzword in leadership seminars and at organisational development CPD events. Guru-type books such as Frederic Laloux’s Reinventing Organisations tend not to use the phrase, but they’re talking about it all the time. According to IGI Global, “key characteristics of self-directedness include motivation, self-responsibility, ability to self-assess, ability to transfer knowledge/skills, and comfort with autonomy”. Meanwhile, over at Wikipedia, they’re calling it “a personality trait of self-determination, that is, the ability to regulate and adapt behaviour to the demands of a situation in order to achieve personally chosen goals and values”. You can see the potential for a dark side but, fundamentally, it feels like a positive thing. Organisations evolving in a people-affirming direction; people owning situations and taking responsibility for outcomes. Its main proponents seem unified in their belief that the most effective way to bring about self-directedness is through coaching. Not just any old coaching, however, but organisational coaching – coaching the whole organisation. Positive deviance So at a recent coaching and mentoring research conference, we duly trotted along to the workshop on organisational coaching in an attempt to get with the programme, eyeball the cutting edge, ride the next wave, move out ahead of the curve and generally find out more about this growing idea – this organisational coaching-inspired voyage towards self-directedness. And we have to report that the workshop was really good. Kaj Hellbom of Helsinki’s Centre for Positive Leadership certainly knows his stuff. The journey towards self-directedness in an organisation begins, says Kaj, with a root and branch search for positive deviance within the workforce. “There is always a positive deviance,” he tells us. “Always.” Richard Pascale-Jerry and Monique Sternin, in their book The Power of Positive Deviance, are a bit more forthcoming. “In every community, there are certain individuals whose uncommon practices and behaviours enable them to find better solutions to problems than their neighbours who have access to the same resources and environment.” Thus, rather than focusing on fixing failures by instituting more control from the outside, positive deviance focuses on success achieved from inside. It leverages the good stuff – the unique; the unexpected brilliance that can be discovered going on in the organisation every day. There is always a positive deviance.  Internal consultants Kaj’s next point builds on this. It’s a fundamental milestone on the road towards creating self-directedness to realise that every organisation already has all the resources it needs to achieve – well, anything really. “All the consultants you need are already working for you,” he suggests, before adding slyly, “If you can find them.” And that is the point at which organisational coaching can make a major impact. First, by working with individuals, duos, teams and large departmental or service groupings to help them unearth the positive deviance in specific individuals and groups. By creating a non-judgmental and encouraging space to facilitate the surfacing of the organisation’s stories; to gauge internal reaction to those stories and interrogate the uncommon practices and behaviours that “enable these individuals to find better solutions to problems than their neighbours who have access to the same resources and environment”; to help colleagues discover a pathway towards having confidence in the thinking of those who have hitherto perhaps been seen as living out their work-life somewhere on the ‘maverick-genius’ scale; and to help them join up the dots between these “better solutions” and hard-numbered organisational results. And then by working some more with those individuals, duos, teams, and larger groups to help them shift their own thinking. To follow the positive deviance for themselves and scale up the thinking in a way that moves an organisation from okay to exceptional. So that was the gist of the workshop – now it’s about doing it ourselves at home.  Begin in the boardroom What might it look like to coach an entire organisation? Where should one start? How long would it take? What would it cost? Who should represent the stakeholders? How should the learnings be collated and curated in a meaningful and helpful manner? Who would own the project? How might they obtain enough organisational buy-in? These are big questions. Finding the answers begins, it seems, in the boardroom. “The development of organisational coaching has been slowed down,” writes Michael Moral, “by the existence of several compliance-based methodologies like, for instance, business process re-engineering and performance management.” Moral argues that these consultant-heavy, top-down approaches give only token attention to “inclusive action-learning approaches, which position organisational players at all levels and locations with shared responsibilities for change”. And this, he tells us, is where organisational coaching is starting to have an impact. Good organisational coaches, he argues, bring a deep understanding of systems theory and corporate structures married with an ability to coach individuals, duos, teams and large groups in four key areas: Behaviours: which can have real impact on the organisational decision system; Emotions: which deeply affect, and to some degree drive, organisational culture; Situation: which is, of course, the area of applying systems thinking to organisational structures; and Cognition: increasingly important as technology becomes a bigger and bigger part of organisational life and thinking. It is, argues Moral, “necessary to traverse all four subsystems to facilitate sustainable change”. And these are the areas on which systemic coaches have been focusing in a deep way for the last five to 10 years. Writers like Peter Hawkins, Simon Western and David Clutterbuck have pioneered thinking in these areas, but many others are taking up the baton. Research is proliferating and coaching practice is beginning to impact whole organisations. Standing in the way at times like these is what is known as ‘immunity to change’, described by Robert Kagen and Lisa Lajey as being “a strongly held belief that not only keeps us in our groove, but also fights any change that threatens the status quo”. This is facilitated in organisations, according to Michael Moral, by the lack of a process or ending that permits organisational members to let go of the past. And in the times of volatility, uncertainty, complexity and ambiguity (VUCA) in which we now live and work, the past can be a very attractive place to inhabit. And here, says Moral, “executive (organisational) coaches who are savvy use resistance as information and energy to accelerate transformation. Coaches expect resistance and know how to use it”. Or as Kaj would put it, “You will meet people who will not move, but this is an everyday coaching issue”. And perhaps it is by dealing with these “everyday coaching issues” on a wider systemic whole-organisation basis that coaching will eventually fulfil its full potential as a positive force for organisational change and development; development that, in this sense, is clearly connected to organisational results and the empowerment of organisational people to produce results in a manner that demonstrated the ability to regulate and adapt behaviour to the demands of a situation. Ian Mitchell and Sîan Lumsden are co-founders of Eighty20 Focus, a real-time executive coaching organisation.

Aug 01, 2018
Ethics and Governance

Would you, as a person in a position of responsibility, know what to do if you received a protected disclosure?   As a senior financial officer, an external auditor, internal auditor, chair of an audit committee or in the myriad of roles that Chartered Accountants fill, it is possible that you will be asked to act as a screener,  investigator or advisor in a case of protected disclosure. Your training and experience are likely to have given you many of the competencies necessary to act in an independent and skilled manner, which should make you a trusted professional in this area. Before you undertake such a task, however, there are several things you should ask yourself. Do I understand the fundamental principles of protected disclosure? The three principles of effective protected disclosure are as follows: Disclosures of wrongdoing in the workplace should be screened and/or investigated; The identity of the person disclosing should be adequately protected; and The discloser, if disclosing based on a reasonable belief, should not be penalised for disclosing. If all these elements were in place, there would not be a need for detailed procedures and policies. Sadly, experience has shown that there have been failings on all three essentials, so you should be familiar with the law, policy and procedures which have proved necessary. Am I familiar with the 2014 Act and the organisation’s policy? Most organisations now have a policy, among its suite of governance policies, dealing with protected disclosures. This policy should derive from the board’s commitment to its culture, which should drive its strategic plan, which in turn gives rise to a business plan that is supported by its policies and procedures. Many organisations have had precursor policies such as, a whistleblowing or speaking-up policy. The 2014 Act refers to “protected disclosures” and so that is now the common nomenclature. The Department of Public Expenditure and Reform and the Workplace Relations Commission have issued guidelines as to what should be included in protected disclosure policies for public and private entities respectively. So, the first thing you need to do is to read the Protected Disclosures Act 2014 and the organisation’s policy. What major provisions do I need to understand? As you read the documentation, it should become clear that the main requirements you need to appreciate are as follows: An entity cannot prohibit or restrict the making of protected disclosures; The 2014 Act applies to all workers – employees, contractors, agency workers and people on work experience schemes. It includes workers in the public and private sectors (including members of An Garda Siochána). Although volunteers are not specifically mentioned, it is recommended that they be included; A worker, having a reasonable belief of wrongdoing in the workplace, can make a protected disclosure to the employer. A designated recipient will normally be mentioned in the policy and there will usually be provision for reporting further up the line if the belief of wrongdoing extends to the designated recipient; Wrongdoing in this context means information that comes to a complainant during his or her employment about a criminal act, failure to comply with a legal obligation, miscarriage of justice, endangerment of any individual’s health and safety, the endangerment of the environment, improper use of public funds, an act of a public body that is oppressive, discriminatory or gross negligence or mismanagement, and destruction of information regarding the above; It is not a protected disclosure if the disclosure concerns personal complaints such as personal employment complaints or allegations of bullying or normal day-to-day operational reporting; The worker must provide information tending to show wrongdoing. The complaint must not be based on a suspicion without tangible foundation. However, the complainant is not expected or entitled to investigate and find proof. The complainant should frame the complaint in terms of information giving rise to reasonable belief of wrongdoing and should not seek to draw conclusions about particular individuals or specific offences; The principles of natural justice and fair procedure must apply to a person against whom a disclosure is made. Any disclosure made in the absence of a reasonable belief will not attract the protection of the 2014 Act and may involve a disciplinary action against the discloser. However, if there is reasonable belief, a discloser cannot normally be sued for defamation; The motivation of the discloser is not relevant. So, even if the discloser will benefit in some way from the disclosure of the information, it does not matter. All that matters is that there is prima facie information about wrongdoing; Anonymous disclosures should be investigated as far as possible, but it can be difficult in the absence of the ability to seek out further details; The wrongdoing does not have to have happened in the State; There is an obligation to protect the complainant’s identity except in circumstances where the recipient shows that all reasonable steps were taken to protect identity, the investigator believes the discloser does not object, disclosure is necessary to effect a complete investigation, or to prevent a serious risk to the State, public health, public safety and so forth; and The complainant must not suffer any penalty for disclosing, such as any suspension, lay-off, demotion, loss of promotion opportunity, transfer of duties, unfair treatment, harassment, etc. What might I be asked to do? You might be asked to do any one of four tasks. First, you might be asked to receive a protected disclosure and conduct an initial screening. This would involve receiving the protected disclosure from the complainant, either in writing or orally. You should take careful notes where the complaint is oral only and ensure that the complainant agrees with your record. You will need to listen carefully and satisfy yourself that the complainant has a reasonable belief of wrongdoing, as defined. You may need to separate out elements of what is being said between personal complaints and protected disclosure. This screening process simply determines whether the matter is a protected disclosure or, in the case of a combination, which issues need to be investigated as a protected disclosure and which issues should be referred back to the complainant to pursue under the dignity at work or other HR policies. You should recommend the form an investigation should take – an informal approach if reasonably straightforward; a detailed and extensive investigation if the wrongdoing is of a serious nature; an external investigation if the matters are so grave; or a report to An Garda Siochána if the matters indicate a contravention of the law. You should set out the terms of reference for the investigation based on your findings of the matters to be investigated. Second, you might be asked to conduct an investigation – for example, as a member of senior management, of the board, chair of the audit committee or an independent external professional. This will necessitate setting up a framework appropriate to the screener’s recommendations and terms of reference. It may involve an informal establishment of facts, or a more formal process to take evidence from the complainant and such other persons as can provide information concerning the matters under investigation. During the course of your investigation, you should give appropriate feedback to the complainant and you should advise him or her when you have completed your consideration, although there is no need to give a complete account or to inform the discloser of any disciplinary action to be taken. Third, you may be asked to undertake a hearing into an allegation of penalisation by the complainant arising from, and attributable to, the protected disclosure. Since such a penalisation is specifically provided for in the 2014 Act, it is possible that the complainant may seek recourse to the courts. And fourth, following the screening and the investigation, the complainant may seek a review of the decision to disclose his or her identity, or of the outcome of the investigation of the complaint, or of the outcome of the investigation into any penalisation complaint. This review must be conducted by a person not involved in the initial screening, investigation or decision and would entail an independent, unbiased review of the policies, procedures followed and outcomes. You may be asked to conduct this review. There is no entitlement to two reviews of the same issues. What skills do I need to deal with a protected disclosure? To handle a case of protected disclosure, the skills and competencies that you should have, in addition to your professional competence, include: Technical skills such as knowledge of procurement policy, payroll legislation, accounting principles, taxation law and so on, depending on the nature of the disclosure; Good emotional intelligence; Listening skills. Often, people who make protected disclosures have been trying for some time to be heard and feel frustrated by the way they perceive they have been treated. They are often very independent and persistent people, but may be disengaged from the organisation and feeling stressed. They need to be heard actively and respectfully; Clear analytical skills. This involves an ability to extract the key details from what can be a lengthy and complex narrative; Good personal ethical values including independence, confidentiality and trustworthiness; An ability to read law and regulation, and apply it to different situations; A deep understanding of the organisation’s essence – its culture and ‘how things are really done around here’; and Patience. Who carries out the work of screening, investigation and review? This work is currently carried out by a range of internal disclosure recipients, supported by legal and accounting professionals. Entities may be nervous of internalising the process and some favour outsourcing it, seeking to protect themselves by putting the investigations into independent, outside hands. For example, the Office of Government Procurement has a list of firms approved for such work. However, although experience is building in the area of protected disclosure professional consultancy, it is still relatively new and many professionals are being very careful and fastidious in their work in this area as they build expertise. It can therefore be expensive, and organisations sometimes find that the amount budgeted and approved for this cost is inadequate to cover the final cost of screening, investigation and possible reviews. Time to review? The 2014 Act made provision for a review of the working of the legislation. The outcome of that review is due in August 2018 and it will prove interesting to see the outcome of the evaluation. In my own humble opinion, I feel that there is a risk that we have taken a very legal and/or compliance-focused approach to protected disclosures, focusing on defined events without really coming to grips with the communication, emotional and nuanced aspects that often underpin protected disclosures. It would probably be better if entities could take as much of this protected disclosure work as possible in-house, building trust in a process that is founded on a clear culture of real openness and respect. This would require shifting the lens from protecting from harm people who speak up to rewarding people who speak up if they unearth toxic behaviour that is contrary to the organisation’s culture. The Financial Reporting Council has urged us to spend time reflecting on our culture and examining how it should be embedded into our organisations. This area of protected disclosure is one festering vesicle that provides evidence of a culture which, while it may look great on paper, is not systemically flushing through the body corporate. An open environment with a strong and deeply embedded culture of doing the right thing should lead to fewer protected disclosures if people are listened to. Where someone spots a need to speak up, the culture should be one of naming and rewarding the early identification of potential wrongdoing. This approach is profoundly to be preferred to one of engaging an overly adversarial, legalistic and compliance-focused approach after the event, hiding the complainant and cushioning him or her from an expected backlash. It would be healthy for us, as a profession that has had some exposure to these protected disclosure cases, to share our experiences (on a no-name basis) with each other and engage with Government in reviewing the whole area. I commend such a debate and a contribution to the statutory review. Prof. Patricia Barker FCA is Adjunct Professor of Accounting at DCU and a former member of Council at Chartered Accountants Ireland.

Aug 01, 2018
Feature Interview

Minister Paschal Donohoe T.D. talks to Accountancy Ireland about tax policy, geopolitical risks and life in politics. Since his election to Dáil Éireann in 2011, when he topped the poll in the constituency of Dublin Central, Paschal Donohoe’s political ascension has been both steady and steep. The affable father of two moved quickly from the back benches to the ministry of both finance and public expenditure and reform with notable milestones along the way, not least his deft handling of the sale of the State’s 30% stake in Aer Lingus to IAG in 2015 as Minister for Transport. Donohoe’s path to Government Buildings wasn’t so smooth, however. Having returned from the UK, where he worked as sales and marketing director for Proctor & Gamble, he engaged in public service, first as a member of Dublin City Council and later as a member of Seanad Éireann. Donohoe then contested the 2007 general election, but was unsuccessful, and again suffered defeat in 2009 when he put himself forward in the Dublin Central bye-election following the death of Tony Gregory. 2011 would prove to be very different. Donohoe was elected on the second count in a predominantly working-class constituency and within three years, secured a seat at the Cabinet table as Minister for Transport, Tourism and Sport. Today, he heads arguably the State’s most important portfolios and is gearing up to deliver his third Budget in October. Donohoe has been consistent in his prudent approach to the country’s finances and believes in the concept of a ‘just society’, as espoused by the late Fine Gael T.D. and Attorney General, Declan Costello, which promotes trade, an open economy and an open society. Economic landscape While the recently-published Summer Economic Statement points to a stabilised financial position, falling unemployment and economic growth on the tenth anniversary of the financial crisis, Donohoe’s sight is set on pursuing policies that improve living standards and ensure that Ireland doesn’t find itself at the epicentre of another such crisis. “The Irish economy has made extraordinary progress versus where we were a decade ago,” he said. To illustrate the point, Donohoe notes the nearly 2.2 million people employed, the improved national finances which, for the second year in a row, are broadly balanced and the country’s steady “and, at times, remarkable” economic progress. “However, a recovering economy is not the same thing as a society that’s healed,” he added. “And we are all aware now of the pressures and needs we have to respond back to, such as housing supply and supporting improvements in public services. So, while I can always point to the progress that has been made, we always have more that we need to achieve. That is the essence of public life.” While politicians are often accused of becoming alienated from the electorate, Donohoe is acutely aware of the impact of austerity in Dublin Central in particular. From constituents whose mortgages are now owned by so-called vulture funds to those who are in arrears, the Minister continues to engage with the often-harsh consequences of economic policy. “All of this has informed my understanding of what we need to do to make sure we have a way of treating people that is fair, that is understood, and that is in line with the needs of our regulators,” he said. “To date, we have managed to avoid the kind of repossessions that many feared at the depth of our crisis, but we need to keep our framework,” Donohoe continued. “We always need to challenge ourselves to make sure that it is as fair and effective as possible.” Geopolitical risks While Donohoe can control the State’s approach to fiscal policy and has established a ‘rainy day fund’ to “build up our budgetary resilience in the future”, Ireland remains susceptible to external geopolitical shocks as a small, open economy. The Government’s Draft National Risk Assessment 2018, which identifies the strategic risks facing Ireland over the short-, medium- and long-term, highlights a number of potential challenges. These include Brexit, instability in Northern Ireland, the future direction of the EU, and the changing distribution of global influence and move away from a rules-based system. Irrespective of what happens in the international sphere, Donohoe’s buoyant optimism leads him to believe that Ireland’s economy will weather the fallout of any challenges it might face. In the context of Brexit, he agrees that the magnitude of the challenge will depend on the severity of the exit. “Clearly, the softer the Brexit the more manageable it will be for our economy but if it is to be a very hard Brexit, it will pose an exceptional challenge for the Irish economy,” he said. “But even if it will be an exceptional challenge, I am confident that – because of how our companies have diversified their trading performance and the improvement that our economy has delivered in our national finances – we will have it within ourselves to respond back.” Beyond Brexit, the one big-ticket item Donohoe is keeping an eye on is the global trade consensus – an issue that has become increasingly topical in recent months. “We are deeply integrated into the global trading architecture. If that architecture changes and the terms of trade shift, that has the potential to have a very significant effect on the Irish trading performance,” he said. “That is therefore a matter I would constantly monitor, but I believe that the kind of changes we have made to date in having a more diversified export model and what we have done to rebuild our domestic sector are the kind of things that we need to do to ensure that we have an open economy that is capable of withstanding the kind of shifts that could occur.” Tax policy Another shift that certainly would occur if France and Germany had their way is a move to a common corporation tax regime across the eurozone. According to a statement from the German finance ministry following the recent announcement of a Franco-German joint proposal for corporate tax harmonisation among EU member states, “Europe needs a common framework in tax policy. This is the only way to prevent unfair tax practices and a harmful tax race to the bottom, and to create transparent and fair conditions of competition for European companies.” Despite criticism from several quarters including Dutch MEP, Paul Tang, who described Ireland and Luxembourg as “tax pirates” and Oxfam, which labelled Ireland a “conduit tax haven”, Donohoe and the Department of Finance have been steadfast in the view that Ireland is not a tax haven, it does not meet any international standards for being so considered, and the 12.5% corporate tax rate is sacrosanct. But is Donohoe’s thinking influenced in any way by the accusations levelled at Ireland? “What is important for me is that we have a tax code and tax policy that is both competitive and that also deals with concerns regarding global taxation and the fairness of global taxation,” he said. “I don’t believe that Ireland gets the credit it deserves for the changes we have made with the elimination of stateless companies, the phased elimination of the so-called Double Irish, the introduction of mandatory disclosure of information and tax planning. These are all big changes that we have made but don’t get credit for. “We need to continue to deliver a balanced approach with a tax code that is competitive while, over time, dealing with issues that are subject to international focus,” he added. “And that’s why the BEPS process for the OECD is so important, because it allows all countries to gradually move together in dealing with issues that are of international concern.” Life in politics With talk of a general election swirling, responsibility for two departments and an endless list of issues to consider, Donohoe has much to balance in his professional life – but he still manages to find time for his personal priorities. “I drop my kids to school every morning and then I work very hard up until the very end of the day... I then read before I go to sleep every night because it is a great way to bring the working day to an end,” he said. “I do have a young family but in that regard, I am no different from many working parents across the country. You do your best to make things work by having clear priorities and organising your time as well as you can during the day.” And as someone who sees himself as just another contributor to the country’s workforce, albeit one with significant responsibility, Donohoe is “relentlessly optimistic” about what Ireland can deliver and what he can do as the man in charge of both offices. “The challenges are many, the pressures are frequently intense, but I am really, really optimistic about what we can do, what we are doing and what we have done,” he said. “And whenever the challenges grow a little bit, I just reflect on the journey that Ireland has come from and it gives me great optimism that we can deal with the problems of today.” Accountancy Ireland expresses its thanks to Brendan Clerkin ACA for proposing Paschal Donohoe T.D. for this issue’s feature interview.

Jul 31, 2018
Personal Development

Our drive to move forward changes daily – sometimes hourly! How do we get a grip on our motivation when it sometimes seems easier to do nothing at all? By Paul Price Last week, it took you one hour to read a thirty-page document, and you easily retained all the key points. Today, a similar document takes all morning and you retain almost nothing. Why? What is it that fuels our concentration? And why, even at times when we know we ‘have to’ perform, does it evade us? This seemingly fickle ‘fuel’ that drives our concentration is called motivation. Coined as the ‘master aptitude’ by Daniel Goleman, motivation is, perhaps surprisingly, the part of EQ that is most manageable. But, before we set about trying to master our motivation, let’s first get a better sense of what it is.  What motivates us? Motivation is a combination of drive and effort; passion and commitment. It is what propels us towards our goals. Plato likened it to a chariot pulled by two horses, one spirited and wild, the other trained and noble. If we are to harness our passions we first not only need to gain awareness of them, but we also need to understand them. This is part of our continuing quest to expand our self-awareness.   We are, of course, also motivated by external factors. The most obvious one being financial reward. At work, salary increases, bonuses, share options, and promotions can be strong motivators until our physiological and safety (survival) needs are fully satisfied. In the long run, however, it is intrinsic motivators, those fuelled by our passions, that will sustain our performance. Positive intrinsic motivators include the six Cs: challenge, curiosity, control, cooperation, competition and commendation. Also, there are negative intrinsic motivators we should watch out for, including: fear, shame, guilt, envy and others. The watch-word for these is: ‘have to’; whenever we notice ourselves saying we ‘have to’ do something, we should examine our motivations.  Know your reasons for doing what you do It’s important to start paying attention to your experiences. Try to gain an early understanding of what inspires you and what makes you happy. These moments will help you discover your core values. Learning what you truly value in life will help you to do things for the right reasons. Simply knowing you’re doing what you want do rather than what you have to do will strengthen your resolve. How to tweak our motivators Let’s look at the simplified maths of motivation and performance:  performance = ability x motivation  where motivation = desire x commitment   and ability = aptitude x learning where learning = cognitive change x motivation. We recognise that the common denominator of almost every aspect of performance is motivation, and motivation we can master. Even aptitude and desire, which seem fixed by nature, can be modified over time by moving to a job that suits us better, a job we enjoy, a job in which we can actualise our potential and find what social psychologists call ‘flow’.  Taking this into account, the motivation equation can be tweaked as follows:  Optimal work performance =  right fit x right attitude. Find the career that fits Finding a job that truly suits requires matching our aptitudes and desires with what we do. Done purposefully, this solves half the motivation equation. But finding such a match will likely require some measured experimentation. Try to discover early what makes you happy at work and create a career plan to maximise those aspects. As a young accountant, I tried insolvency and corporate finance in public practice before a stint in financial reporting finally led to venture capital, where I found a job I loved.  Share your career aspirations with your employers and confide in professional mentors and peers. Let them help you in this process.  Know your passions, stay committed Doing a job you love certainly makes commitment easier. Charles Handy, an organisational behaviour expert, recommended that organisations replace their mission statements with ‘passion statements’. To excel as individuals, I believe we should do the same. However, shaping our career path to align with our values does not ensure that we will stay consistently positive. That requires special discipline and, of course, some self-compassion. Consider yourself a work-in-progress, always noticing, always learning.  Top tips to help keep you motivated Engage fully with tasks, stay emotionally present and open to others; Seek connection, nurture affiliation and celebrate others’ achievements;  Be curious, seek feedback and learn continuously; Pursue information to reduce uncertainty; Notice ways to improve; innovate, be entrepreneurial and take calculated risks; Act purposefully and be ready to make reasonable sacrifice to reach important goals. Celebrate your own successes too and, above all, always retain a sense of humour.

Jul 03, 2018
Careers Development

Join the Leinster Society in CA House on the 5th of July for a complimentary breakfast briefing on the results of the Annual salary survey. Release of annual salary survey findings with an informative session on the importance of digital branding for employers and employees by leading digital marketing speaker. The briefing will also cover remuneration levels, flexibility, work life balance and the impact or the introduction of new technologies to the profession. Book now: https://bit.ly/2I3vdMQ 

Jun 20, 2018
Business law

Jeremy Twomey writes Meeting General Data Protection Regulation (GDPR) compliance requirements has become a top priority for Irish businesses over recent months and accountancy practices are no different. Recognising that GDPR implementation presents both specific challenges and opportunities for accountants in practice, the Practice Consulting team has also been busy both offering advice and providing practical guidance in this area for our members. This guidance can be found at  https://www.charteredaccountants.ie/knowledge-centre/guidance/gdpr/gdpr-resources and includes the following: GDPR 8 Step Guide; Explanation of GDPR terms; GDPR Template Outline Procedures to be tailored and used by an accountancy firm; and Example paragraphs for a client engagement letter addressing GDPR and a template privacy statement. From talking with our members in practice over recent weeks, it is evident that practitioners are at different stages on their journey to GDPR compliance. While it may appear a daunting exercise at the outset, the process of becoming GDPR ready can be broken down into a few key practical steps. With this in mind, in this article, I am going to outline the key points to achieve GDPR implementation from our 8 Step Guide: 1.  Raise GPPR awareness As a starting point on your GDPR journey, the partners and staff at your firm need to be fully aware of the Regulation, the work to be undertaken to ensure compliance, the likely problems that may arise and any budgetary implications. A basic step that can be undertaken in-house at your firm is a GDPR awareness presentation for all the staff. Your clients also have to comply with GDPR, so it is worthwhile checking that they are aware of these changes, to tell them of their GDPR obligations and how your processes may be changing. Such support may be an ‘added value’ opportunity for your firm to assist your clients. 2.  Appoint someone senior to oversee the process & resource this appropriately Your firm should appoint someone internally to take control of understanding GDPR and how it will affect your practice. It is essential that this a senior member of staff who will take responsibility for overseeing the GDPR compliance process at your firm. While it is expected that the majority of the work in relation to meeting the requirements of GDPR can be undertaken internally, a project team may be required, which may include external support and assistance on certain issues. Hence, it is vital that reasonable funding and resources are set aside to achieve your GDPR requirements. It is currently envisaged that most accountancy firms will not be required to appoint a Data Protection Officer (DPO). It is, however, recommended that you still appoint someone to be responsible for data protection within the firm going forward, but give them a title other than DPO (i.e. “Data Privacy Lead”). 3.  Review and update existing information and cyber security measures Having comprehensive levels of information and cyber security is a key step towards building a resilient organisation and ensuring GDPR compliance. It is therefore recommended that members should review their existing security measures and update as necessary. Both controllers and processors are required under the Regulation to implement “appropriate technical and organisational measures” to ensure a level of security appropriate to the risks that are presented by the processing of personal information. Such measures are described as including: Pseudonymisation and encryption of data (The use of secure portals to share documents is also of benefit); The ability to ensure ongoing confidentiality, integrity, availability and resilience of processing systems and services; The ability to restore the availability and access to personal data in a timely manner in the event of a physical or technical incident; and A process for regularly testing, accessing and evaluating the effectiveness of technical and organisational measures for ensuring the security of the processing. Detailed listings of examples of both practical physical and technical security measures to aid GDPR compliance at your firm are included in the full version of our 8 Step Guide as published on the Institute website. It is important to remember that managing cyber risk is not simply about managing data within your firm. Therefore, it becomes necessary to document the security risks from your supply chain (e.g. cloud service provider), as well as your own organisation. 4.  Map your data With the many potential pitfalls of non-compliance to GDPR, taking action to map any gaps in relation to the personal data your firm holds is critical. The first step is to get started by scoping the problem and mapping the data flows associated with your firm. It involves identifying, understanding and mapping out the data flows into and out of the organisation. As the data map evolves, you should be able to identify the flow of data, as well as gaps in required contracts and consents for processing data under the GDPR, and risks in security measures etc. that will need to be prioritised and resolved to ensure compliance. This requirement for data mapping is quite far reaching when you think about it. A typical accountancy practice possesses the following: accounting and tax software, audit software, payroll software, practice management systems, network drives and, of course, paper accounting, tax, company secretarial and audit files. This review will also need to extend to the many individual devices on which information is stored (e.g. laptops, desktops, tablets, phones and memory sticks). Finally, it is important to emphasise that, when completing your data mapping, GDPR compliance is only required for personal data that you hold. Company data is, for example, beyond the scope of the regulation, however your data mapping exercise may have an added benefit of identifying efficiencies that you can implement at your firm for non-personal data as well. 5.  Review your contracts with clients and suppliers As the GDPR imposes new obligations on data controllers and data processors, you will need to make sure you understand your status and your responsibilities with regard to both client data and firm data. At the very least, firm contracts will need to be updated to reflect the requirements of the GDPR. Accountancy firms should review their existing contracts with their clients, suppliers and sub-contractors to identify whether the accountancy firm is the data controller or data processor of any personal data it processes under the different contracts. This involves identifying which party ultimately determines the purpose and means of processing data. It is of vital importance that you satisfy yourself that your firm is correctly assigned the role of either data controller or processor (with matching appropriate requirements/liabilities) before signing any contract with your client or supplier. Remember that entering into a contract on the wrong basis may potentially open both you and your firm to unnecessary requirements/liabilities that may be difficult to overturn. More detailed guidance on each of these areas is included in the full 8 Step Guide, while Section 5 of our Outline Policies and Procedures provides advice on your firm’s likely status as either a Data Controller or Processor for a variety of possible assignments that you may undertake. Both of these documents can be found on the Institute website under GDPR resources. 6.  Employment contracts & information for your employees As with existing legislation in this area, under GDPR, certain information must be supplied to employees before their personal data is collected and processed by your firm. The information will typically be provided in the form of a notice to job candidates, and a further privacy policy will be supplied to successful job applicants as part of their on-boarding induction to the firm (typically included in an Employee Handbook along with other firm policies). It is also important to remember that, for the processing of employees’ personal data, where possible, the employer should rely on performance of the employment contract as the legal basis for processing, rather than consent. Consent is a weaker legal basis for such processing, as it can for example be easily withdrawn by the data subject Finally, do not forget to review (and redraft as necessary) employment contracts to update any data protection references or sections to comply with GDPR. 7.  Draft/update data protection policies and controls to meet the new requirements The GDPR introduces the principle of ‘accountability’. This means that all organisations must not only ensure they are compliant with the GDPR, but be in a position to prove this too. The best way to prove this is to document your data protection policies and procedures. We suggest that your firm’s GDPR policies and procedures should include, but not be limited to, the following (Outline policies in several of these areas are included in “Outline GDPR Policies and Procedures” on our website): Who is responsible for GDPR at your firm and what are the reporting lines? Data Processing Your policies in this area should detail the categories of personal data collected by your firm and the purpose for which it is collected. In addition, these policies should detail your firm’s role as a Data Controller and also instances when you act as a Data Processor, together with your responsibilities in fulfilling these roles. Data Subject Rights Your firm will need to have specific policies and procedures in place to ensure the rights of your data subjects are upheld under GDPR and that you have adequate processes and resources to meet the requirements of the Regulation. Specific subject rights areas requiring defined policies and procedures include: Data Subject Access Requests (DSARs); Right of erasure (Right to be forgotten); The right to restrict processing; The right to object to processing; and The right to data portability Some of these rights may not be enforceable by the data subject where data is held under legitimate purpose.   Data Governance Example areas of data governance to be considered for inclusion in your GDPR related policies and procedures include the following: Data Protection Impact Assessments (DPIAs), Privacy by Design and Privacy Notices, Document Retention, Security and Breaches. 8.  Staff training and ongoing compliance While not all staff will need to understand the GDPR in its entirety at your firm, each of your staff should at least be aware that data protection is an issue for everyone. For staff who do not deal with personal data, training can be limited to an annual (refresher) course on information and cyber security. On the other hand, for staff who regularly deal with personal data, training should focus on security over data, plus an awareness of the firm GDPR policies and procedures on a regular basis (at a minimum annually or more often if the need arises). Again this can be tailored to their particular role and responsibilities. Ongoing testing Testing in the areas of IT Security and other key aspects of GDPR compliance (e.g. audits of records held for constant compliance) should be formalised into a regular ongoing programme of work at your firm, as well as outsourced providers. Cyber security is a rapidly evolving area. Meeting best practice in May 2018 does not mean you will maintain compliance over the months and years ahead; you will need to keep this area under review. Conclusion At first glance, the process to ensuring GDPR compliance may appear to be a massive undertaking and a drain on resources for your firm. It is important to bear in mind that most accountancy firms and small businesses are in the same boat as you, and that by breaking down the required steps into clear manageable stages as above, you too can achieve GDPR Compliance in a timely manner. Should you need further assistance, Practice Consulting has also developed a half day consultation offering. One of our consultants can visit your firm and offer practical advice and guidance on how to tailor your procedures, make progress on your GDPR journey, and meet key compliance milestones. If you have any question in relation to GDPR, please feel free to contact either Conal Kennedy or myself in Practice Consulting.

Jun 01, 2018
Spotlight

To succeed as a true leader, one must embody a set of core traits and behaviours which can be developed through self-awareness and a willingness to grow. It was Mahatma Gandhi who said: “A sign of a good leader is not how many followers you have, but how many leaders you create”. This is worth reflecting on as we consider what we mean by leadership, how we prepare for it, and how we embrace it when, finally, the prize is ours. Technical competence is at the core of the Chartered Accountant – our discipline is an exacting one, and the training we undertake is rigorous and demanding. Rightly so, as many of us embark on careers in which we interpret and apply standards, guidance and codes of governance; we craft disclosures and market statements; we give the true and fair view of financial performance. Those of us who take our discipline into the non-accounting workplace bring with us that technical mindset, which provides a framework for how we approach the situations and challenges we face. Busting the myths How do we navigate the path to leadership? It is rarely something we are called upon to exhibit at the start of our career. Instead, it is something that comes later. My personal experience is of a career that happened in three phases – do, manage and lead. These are very different phases requiring very different competencies and, more importantly, dispositions. The last is perhaps the most challenging for the technically competent as to ‘lead’ is a role, an attitude, a presentation, and a way of being as opposed to a way of ‘doing’. Leadership is formed in the realm of emotional and behavioural intelligence, not in the realm of technical competence. Leading is not about authority, instruction or ordering, nor always being out front. It is a role that you embody by empowering, enabling, influencing, inspiring and impacting. To do this, you need vision and purpose. You need to see something bigger than yourself that others can identify with, believe in and follow. Starting from a technical place, how do we equip ourselves for leadership (assuming that we want to lead and know why we want it)? I will come back to the ‘why we want it’ later, as this is probably the most important determinant of just how good you can be as a leader. Don’t fall for those myths that are peddled about leadership or let some idealised notion of a leader get in the way of developing your inner leader. There is no ‘one size fits all’ – there are as many leadership styles as there are leaders and the circumstances in which you lead play a big part in informing the style you develop and adopt. You don’t have to have all the answers; you just know how to get other people to find them. You do not always have to lead from the front – not every challenge is the Somme – and it’s not all about you. In fact, very little of it is about you; it’s all about the environment you create for others. It’s not all high octane or high action; leadership requires reflection. And no-one is born to it. It’s not some ‘golden spoon’ that some are blessed with. Like a lot of things in life, it is a learnt behaviour and that learning often involves hard work with many knocks along the way. So, having busted the myths, where do vision and purpose start within a person and how do we nurture and develop those traits and behaviours that encourage others to follow us? Finding your inner leader When we are in the ‘do’ and ‘manage’ phases of our lives, we are very caught up in a ‘production’ environment which, on the surface, doesn’t require any great thinking around purpose or vision. But these are the very places where we should start to give ourselves the time and space to think beyond the immediate and ask: what is the end game, and why am I doing this? If you are interested in challenging yourself with these questions, you may well have an inner leader that is trying to get out. Very often, in the depths of doing you find the opportunity to lead – I found that in managing a structured asset finance business. In looking at how to optimise the balance sheet, I had a vision of a different way of managing risk and reward and from that, I lead a European risk syndication business. At first, I had few followers but senior people bought into the vision, trusted me to realise it and allowed me to get on with it.  Vision without purpose and values will not get you very far. I learnt quickly that it is not enough to have messianic zeal and passion – you must articulate a better place if you want people to go there for you – it must make sense, serve a higher purpose, meet a greater need and be supported by values that people can relate to. Now, I am a business person and I wasn’t taking anyone to the promised land but I could see a place where, if we changed what we did, we could do more of it and I knew that was what people wanted. When you take that step into leadership, make no mistake – you are putting yourself out there. You are separating yourself from the crowd and saying “look at me and follow me”. To succeed, I suggest there are a set of core traits and behaviours that true leaders have which can be developed through self-awareness and a willingness to grow. Authenticity and values Oprah Winfrey said: “I had no idea that being your authentic self could make me as rich as I’ve become. If I had, I’d have done it a lot earlier”. It was no doubt said firmly ‘tongue-in-cheek’ but as ever, Oprah was on to something here. Why limit our thinking to assume she just meant money? Consider the influence this woman has and the impact her actions have on thought formation and activism across the world. We feel we know who she is when she speaks. This is because she appears true to herself and has the courage to let people see that self in all its elements. Then we identify, then we empathise because the leader has taken the first steps to demonstrate authenticity and opened themselves up to possible rejection – now that’s putting yourself out there. Values are the soul-mate of authenticity. Without values, authenticity is hollow and people quickly see through it. Values take us beyond the charisma and allure of the person and into the heart of what the person is really about. When we know a person’s values, we can begin to understand their purpose. This allows us to interpret the vision that they are proposing we follow. More wise words from Mahatma Gandhi: “You must be the change you want to see in the world”. Leadership is fundamentally about consistency – who you present; what you present; the values you promote; the purpose you articulate; the example you set; what you say; what you do; how you treat others. If all of these do not connect consistently, you are not authentic. You may get things done, you may make people do things for you, but they will not be following you and you will not be leading. Reflection Making and taking time to reflect is so important. Very often, we are all just too busy ‘doing’ to carve out time to reflect. Ponder that old saying: “If you don’t know where you’re going, any road will take you there” and you will see that purpose and values, the cornerstones of leadership, are impossible to form and articulate without reflection. The phrase “ancore imparo” translates to “I am still learning”. I have a beautiful bronze plaque with this quote attributed to Leonardo da Vinci. When we are open, we are always learning – about the world, about others and about ourselves. Take all that learning and reflect upon it. Do this daily; challenge yourself to rationalise what you are doing and why you are doing it. How does it inform and support your purpose and the leadership that you show? Hear what others say about you, to you, think about you – learn from it. Have the confidence to take the hard stuff on board that will make you better and trust yourself to discard the envious and mean-spirited elements that can get in the way. Trust and respect Trusting yourself and trusting others is something that leaders seem to do effortlessly. This suggests an inner confidence, security and balance. This comes from self-knowledge, authenticity and values which support your vision and purpose. You are not playing at being something or somebody, so you can be free to enjoy leading and trust yourself to do the right thing. You can also trust others and when you do that, you prove Gandhi’s point because as a leader, you make more leaders and create a virtuous circle of empowerment and impact. The ability to trust has never been more important. We live in a mobile, integrated, technology-literate world. You cannot be everywhere, attend every meeting, always be with those you lead. So, share the leadership by creating other leaders. Disseminate your message through others and trust others to be the ambassadors of a shared vision and trust those who will realise that vision. In realising it, they make it their own. As Lao Tzu once said: “A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves”. Finally, respect. This encompasses self-respect and the respect of others, both received and given. Don’t waste your time seeking popularity, it’s a fad, it’s fickle and easily replaced by the next more appealing thing on offer. Instead, earn and give respect. Respect is based on mutual understanding, hearing the voices of others and considering them. It is not earned by being always right. In my own experience, I have earned more respect from admitting to being wrong than I ever got from being right. Do the right thing by others – they may not agree with you, they may not like you, but they will respect you. Mentoring in both directions To be mentored and to mentor is an experience that will enrich your self-knowledge and aid your development and the development of others. Leadership is something that is learnt and what better way to learn than being mentored by a person whom you respect and see as a role model. While doing this, you too can be the mentor to someone who sees in you the character and values that they aspire to. In this relationship, you can discover how in leading you will create other leaders. So, what you gain from one experience is channelled into the other and the cycle of learning turns to the advantage of all concerned. Conclusion Let us go back to the question of why you would want to lead and how that determines the leader you can be. Why you want to lead is derived from your vision and purpose. When people see that your vision and purpose extend far beyond any personal self-interest and speak to something far bigger, they begin to listen; they begin to think about following you to the place you want them to go – to that place you have articulated and you exemplify every day in how you live the purpose that you promote. Lynda Carroll is Head of Capital Allocation and Risk-Based Pricing at AIB.

Jun 01, 2018
Management

If your workplace is being held hostage to a toxic atmosphere, it is time to tackle the issue head on. They notice every minor fault. They dampen a productive conversation with a mean-spirited put-down. They find no pleasure in success and their greatest joy is nit-picking every management decision. Chronic complainers are hard work, dispiriting and difficult to manage. Working with a negative colleague can be depressing yet if not addressed, the constant complaining can infect the workplace with negativity. How do you deal with it? Acknowledge the problem Dismissing a negative colleague as simply somebody who is having a bad day undermines the feelings of those who have to work in close proximity to the negativity. Management must first recognise that there is a problem. One way of doing this is by tuning into the emotional temperature of your office. Is it upbeat and friendly? Is it downbeat and cold? Are people tiptoeing around someone? Attuning yourself to this type of data can give you an insight into the experience of your staff. Are they right? It is easy to place the blame for a toxic office atmosphere on one person. It is more difficult to ask whether they might actually be right. Does the nit-picker have a point? Are they pointing out (albeit irritatingly) a pattern of problematic decision-making or highlighting an office issue that is simply being ignored? Asking this type of question may allow you to view the problem in a systemic context. Sometimes, complainers complain because it is an effective means of drawing attention to what is being covered up or ignored by the wider organisation. In this sense, complaining can be seen as a style of whistle-blowing. If they are not… If you are certain that you have a lone complainer and that they are impacting negatively on the atmosphere in the office, then it is time to take action. Ignoring the mounting tension or trying to rationalise the individual’s behaviour will only damage your credibility in the long run. Here are three strategies to deal with the situation: Create clear expectations for workplace engagement. Make staff accountable not just for reporting what isn’t working, but for contributing to what is. Moaning about the negative co-worker beside the water cooler is contributing to the atmosphere, not alleviating it. Dealing directly with workplace behaviour by discussing it with line managers is a more honest way of addressing the atmosphere; What does your staff member hope to gain by complaining in this way? Complaining is an attention-seeking behaviour that immediately gets results, either informal or formal. Listen for what the complainer is really getting at – it is most likely some kind of unmet need, vulnerability or a sense that they are being ignored or not being heard. There may be a more subtle way of reducing the negativity by focusing on a positive intervention; and If all else fails, refer the complainer to a business coach and set out clear areas for development. It is perfectly reasonable to expect a staff member to complete a course of coaching if you believe their behaviour is having a negative impact on performance or morale. There is rarely a ‘one size fits all’ solution to chronic complainers but everyone is in agreement that a healthy workplace cannot be held hostage to a toxic atmosphere. Hiring the right people may be the first step, but dealing with the fall-out of a negative colleague may be one of the ongoing challenges of managing people at work. Dr Annette Clancy is a Lecturer in Organisational Behaviour at University College Dublin and ran her own consultancy practice for over 17 years prior to joining UCD. 

Jun 01, 2018

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