Regulation

Amid a sea of change, how can insurance entities survive and thrive in 2018 and beyond? The insurance industry in Ireland is undergoing a period of rapid change. How boards and their businesses engage in innovative transformation, on both strategic and regulatory risk management fronts, will dictate whether they get ahead during this transitional period and ensure their sustainability and profitability going forward. This trend extends to the global insurance industry also, which is experiencing technological advances, product changes, increasing consumer demands and increased competition through non-traditional channels. Against this backdrop, the regulation of the industry is evolving with boards now grappling with the implementation of Solvency II, the first annual reporting date this year and the advent of the Insurance Distribution Directive (IDD) and Packaged Retail and Insurance-based Investment Products Regulations (PRIIPs) next year. New products are also on the horizon, such as driverless cars and peer-to-peer insurance, which are being facilitated by price comparison websites, mobile internet transactions and telematics-based services. The domestic landscape On the domestic front, more than 430 international financial services companies operate in Ireland. Together, they employ over 38,000 people, hold €200 billion in assets and generate €32 billion in premium income from domestic and international customers. From a regulatory perspective, Ireland’s insurance sector has a ‘hub and spoke’ structure with 82% of business written by branches outside Ireland. There has been an 11% increase in the number of regulated insurance entities in Ireland since Q4 2015, according to the most recent Central Bank of Ireland annual report. The IMF Financial Sector Assessment Program (FSAP) indicated in July 2016 that Brexit is likely to have a negative effect on the Irish financial system, although it has undoubtedly created opportunities for the insurance industry to grow in Ireland with potential for new market entrants, new business opportunities and even the cessation of current partnerships. Key themes to date 2016 was all about data and most notably, the risk management of cybersecurity. Cybersecurity remains firmly on the agenda of insurance entities as they seek to protect consumers’ data in line with the Central Bank of Ireland’s guidance, issued in September 2016. Insurance entities are required to demonstrate how they manage and mitigate cyber risk including stolen data, lost data, corrupted data and unauthorised use of data. In 2017, the focus remains centred on risk management which is central to the sustainability of all insurance industries. In the words of Sylvia Cronin, Insurance Director at the Central Bank of Ireland, “The creation of long-term value can only be assured by practical and effective risk management which pro-actively anticipates the comprehensive range of risks underlying every business”. From a regulatory perspective, the first annual reporting deadline for Solvency II was May 2017, which included the auditor reviewing parts of the returns for the first time. Insurance entities are now required to ensure that their business models are aligned with their risk management to ensure that adequate capital provisions are maintained. The Solvency and Financial Condition Report (SFCR) required entities to demonstrate effective risk management including classification of own fund items, the ongoing compliance to the tiering criteria, obligations relating to own fund items and the related stress-testing. Boards of insurance entities are also required to approve and monitor medium-term capital management plans. Consumer protection is also a key regulatory theme during 2017. In April of this year, the European Insurance and Occupational Pensions Authority (EIOPA) published a report on its thematic review of issues in the unit-linked life insurance market arising from business links between providers of asset management services and insurers. The Central Bank of Ireland also published a Consumer Protection bulletin in April, which focused solely on the motor insurance industry, and revealed that 62% of personal motor insurance policies are provided by companies incorporated in Ireland and prudentially regulated by the Central Bank of Ireland. The Consumer Protection Risk Assessment (CPRA) guide followed in July of this year and it outlines how the Central Bank of Ireland will assess the consumer protection risk management frameworks in place in all financial services entities. The guide requires that consumer protection not only be part of an entity’s strategy, business plan, policies and procedures, but – most notably – be part of the culture of the business itself. The future Looking to future, insurance entities operating in Ireland will face a number of issues during 2018. The Central Bank of Ireland has established a team to deal with entities considering relocating to Ireland from the UK as a result of Brexit, and it will be interesting to see what entities will relocate here. Looking beyond 2018, geopolitical uncertainty around Brexit and Trump could adversely impact asset values. Insurance entities’ stress-tests will need to be robust enough to ensure that the entity can withstand asset shock. From an economy perspective, the low interest rates experienced for the past 10 years are expected to increase gradually, which will no doubt impact on the investment strategy of insurance entities and ultimately, investment performance. The overall solvency position of the insurance sector remains high but according to the International Monetary Fund (IMF) FSAP, several factors put pressure on long-term non-life sector profits. In the life sector, there is strong resilience to interest rate shocks as few products carry guarantees on principal rates of return. However, the non-life sector is more reliant on investment return for profitability and is facing an increase in the frequency and average cost of claims. The regulatory view From a regulatory perspective, the European Commission is expected to carry out an assessment during 2018 of whether Solvency II should be amended in relation to the prudential treatment of private equity and privately placed debt. The implementation of PRIIPs was delayed in November 2016 and will come into force on 1 January 2018. Some insurance entities which are also MiFID firms will be affected by the implementation of MiFID II and MIFIR on 3 January 2018. The IDD will apply from 23 February 2018, with EIOPA required to submit the final draft regulatory technical standard under Article 10(7), which relates to the adaption of certain amounts in euro to the European Commission. Accounting developments will also have an impact on how insurance companies are required to report their results through their financial statements including IFRS 17, which will replace IFRS 4 from 1 January 2021. Conclusion Insurance entities have faced – and continue to face – an unprecedented level of change. Boards will need to adapt their business models to not only to meet the regulatory challenges, but to also build regulation into their culture. Those that engage in the ongoing innovative transformation of their entity with a focus on risk management will not only get ahead, but stay ahead and ensure their organisation’s ongoing adaptation to the changing nature of the industry and consumer demands. Sarah Lane is Director, Financial Services Risk & Regulation, at Mazars Ireland.

Dec 01, 2017
Regulation

Come May 2018, all businesses within the EU will be required to implement the General Data Protection Regulation. Peter Bolger maps out what you can do to make sure your firm is compliant. Chartered Accountants Ireland has consistently been to the forefront in ensuring the profession it represents remains relevant to business needs in Ireland and abroad. From May 2018, Chartered Accountants in the EU will be required to incorporate new changes, set out in the General Data Protection Regulation (GDPR) and supplemented by the Data Protection Bill 2017 (which is still unpublished), in their businesses.  While the GDPR becomes directly applicable on 25 May 2018, one should be aware that it is already a final form law, having been passed by the EU legislators in 2016. The intention of GDPR finally becoming directly applicable in the EU is that it will lead to greater harmonising of data protection rights and obligations throughout the area.  This lead-in period facilitates awareness about changes GDPR introduces to privacy law and allows businesses to review and update their current policies and practices on processing of personal data so that these are compliant with GDPR, in so far as is possible, by next May. Contrary to much of the hype surrounding the regulation, one should remember it is not a once off event or test for compliance. The GDPR marks the beginning of an enhanced approach by lawmakers to individuals’ privacy rights where those individuals are situated in the EU. From 25 May 2018 onwards, businesses will be required to demonstrate ongoing compliance with these rights. This article focuses on some practical measures accountants in Ireland can take over the next six months to prepare their businesses for changes in data protection law.  Application of GDPR GDPR applies to organisations established in the EU that process personal data, either as a data controller or data processor. In practical terms, this applies to every organisation operating in the EU because of the wide meaning of “processing”. Processing essentially means anything that is done to, or with, personal data (including simply collecting, storing or deleting that data). The meaning of “personal data” is broader under GDPR than it is in Ireland under the Data Protection Acts 1988 and 2003 (DPA). GDPR adds identifying types of data to the definition of “personal data”:  “an identifier, such as a name, identification number, location data, online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that person.”  The wider definition of personal data under GDPR reflects the significant impact of technological changes on individuals’ everyday lives. In fact, this is a primary principle underpinning GDPR; to make data protection rules fit for purpose, taking account of the vast technological developments over the last two decades. These changes in technology also extend to how organisations collect and store personal data. How to the prepare for GDPR Begin data mapping Accountants, whether practising in accountancy firms or acting as Chief Financial Officers in organisations of other disciplines, may be best placed as the ‘go-to’ person to commence a dialogue on coordinating the organisation’s data mapping. Data mapping is a practical prerequisite for any organisation to plan its GDPR compliance strategy. It involves identifying, understanding and mapping out the data flows into and out of the organisation. To be effective, the process requires information to be collated from all departments in an organisation. This is likely to necessitate the input of senior management and IT. As the data map evolves, you should be able to identify the flow of data, gaps in required contracts and consents for processing data under the GDPR, required impact assessments, risks in security measures and whether the organisation should appoint a Data Protection Officer (DPO). Review existing contracts and policies Accountancy firms should review their existing contracts with their customers and suppliers to identify whether the accountancy firm is the data controller or data processor of any personal data it processes under different contracts. The test of data controller or data processor will be determined by the factual matrix and not the terms the parties ascribe to the relationship in a contract. This involves identifying the different categories of data held by your business, the purpose for which you process it, the categories of data subjects, who you share the data with and on whose authority.  If an incorrect entity is designated data controller or data processor, it is recommended that the contracts are amended prior to May 2018 to ensure they reflect the provisions under GDPR. In many cases, accountants will be the data processors of their customer’s personal data but there may be circumstances where they will be joint data controllers. If this is the case, it is recommended further advice is sought.  Get new consents that meet GDPR standards The principle of consent is fundamental to GDPR. GDPR increases data controllers’ and data processors’ obligations to obtain an individual’s consent to process personal data as part of their business activities. GDPR provides, that where consent is relied on for a reason to process personal data, the consent must be “freely given, specific, informed and unambiguous”.  If your business currently relies on consent for processing personal data, double-check if the consent practices comply with the GDPR. Where possible, it is recommended that organisations rely on a different basis to consent, such as compliance with legal obligations or legitimate interests, for processing personal data. However, this exercise cannot be artificial. For example, if your business sends direct marketing material to clients, you will need fresh consent from each client to do this under GDPR. It is unlikely that direct marketing will be considered a legitimate business of an accountant’s practice. It will be important that consents are kept entirely separate from other terms and conditions related to your organisation’s offerings. It is equally important that you are able to demonstrate that the consent was freely given, clear, informed and required an affirmative action by an individual. It is likely that consent will require an audit trail to ensure that organisations’ consent processes can be independently evaluated.  Carry out Data Protection Impact Assessments GDPR makes privacy by design an express legal requirement. Accountancy firms typically have access to their client’s personal data during financial audits. The nature of audits, which may include special categories of personal data, akin to sensitive personal data under the current DPA, means it is highly likely accountants will have to carry out Data Protection Impact Assessments (DPIA).  A DPIA is a process for building and demonstrating ongoing compliance with GDPR principles and only mandatory when the processing of personal data is “likely to result in a high risk to the rights and freedoms of natural persons”. Depending on the circumstances, a DPIA may concern an organisation’s single processing operation, or a single DPIA may be used to assess multiple processing operations that are similar. This latter scenario may arise where the same technology is used to collect the same sort of data for similar purposes.  The Article 29 Working Party, the advisory body on GDPR, represented by the data protection regulator of each Member State, has issued guidance stating the rights and freedoms in question are not limited to privacy and may involve freedoms of speech, thought, movement, prohibition of discrimination and rights to liberty, conscience and religion. One or more of these rights may trigger an obligation to carry out a DPIA for a processing activity.  It is important to be aware that even in circumstances where your organisation is a data controller, and GDPR obligation to carry out a DPIA has not been met, the organisation is still required to continuously assess the risks created by its processing activities and be alive to situations where the obligation to conduct a DPIA is ignited.  Assess your organisation’s personal data security measures Data security has a prominent role in GDPR. Organisations in Ireland will be required to report personal data breaches to the Data Protection Commissioner. However, this obligation does not arise in all circumstances where there will be a breach. The notification obligation is triggered where the breach is likely to result in a risk to the rights and freedoms of individuals. As discussed above, the rights in issue are wider than data protection and privacy rights. GDPR also places obligations on data controllers to directly communicate breaches to affected individuals unless doing so would involve a disproportionate effort. The Article 29 Working Party has stated in its guidance that this risk exists where the breach may lead to physical, material or non-material damage to the individual whose data has been breached. This could be financial loss, identity theft, fraud and reputational damage. To mitigate against breach notification, GDPR also encourages data controllers to conduct a risk analysis of the security measures they implement to assure adequate personal data security. At a minimum, the GDPR requires these measures to include: The pseudonymisation and encryption of personal data; Ensuring the resilience of systems and services processing data Restoration of access to personal data in the event of a breach; and Frequent testing of the effectiveness of the security measures. In addition to being best practice, putting in place the security measures listed above is likely to remove the standard obligation to inform affected individuals. An organisation’s failure to comply with its data security obligations may result in a fine of up to €10,000,000 or 2% of its total worldwide annual turnover. It is much more cost effective for data controllers to review and upgrade their security measures, implement relevant industry best practices and develop and maintain data breach plans.  Decide whether to appoint a Data Protection Officer Under the GDPR, an organisation is only required to appoint a DPO where: It is a public body; It carries out large scale regular and systematic monitoring of individuals as part of its core activities; or It carries out ‘large scale’ processing of special categories of or data relating to criminal convictions and offences. ‘Large scale’ is said to include large-scale processing operations which aim to process a considerable amount of personal data at regional, national or supranational level and which could affect many data subjects, and which are likely to result in a high risk. Most accountancy firms will not be required to appoint a DPO but may choose to do so. The appointment of the person to the role of a DPO should be undertaken with great care. GDPR does not list specific qualifications or credentials that a DPO should possess, but it does state that a DPO should be a person of high integrity, professionalism and have “expert knowledge of data protection law and practice” to be able to carry out his or her duties. The Article 29 Working Party has issued the following guidance for organisations on appointing a DPO:  In determining if a DPO is required, keep a copy of their analysis in their records as this assessment falls within the scope of its wider accountability obligations; Preferably, the DPO should be located within the EU; There can only be one DPO, but he or she can be supported by a team; and Senior managers including HR, marketing and IT individuals are barred from serving as the DPO. GDPR preparation will be a large undertaking for most businesses, but if they take the time to implement some practical data privacy measures before May 2018, ongoing compliance processes won’t be so daunting. Peter Bolger is the Head of Intellectual Property, Technology and Privacy at LK Shields.

Dec 01, 2017
Feature Interview

Charities Regulator, John Farrelly, talks about upcoming regulatory changes and the role Chartered Accountants can play in supporting the sector. The Charities Regulator has just completed an extensive public consultation process on the future governance of charities. This consultation will inform the deliberations of a panel established by the regulator to make proposals for the governance of charities and to support trustees in their duties. These proposals will, in turn, feed into new legislation to amend the Charities Act 2009. The new legislation will mean that, for the first time, all registered Irish charities will have regulations regardless of their legal form. The intention of this new legislation is not to impose an onerous regulatory burden, but to instead support the sector according to Charities Regulator, John Farrelly. “We want the public to be able to have confidence in the good work charities are doing”, he says. “There are good people in charities doing good work in the public interest and they should be protected and encouraged. As a regulator, we aim to apply the law so that good charities can flourish.” He points out that a one-size-fits-all approach will not work for a sector which comprises 8,860 charities with 47,000 trustees at the last count. “Good charities regulation needs to take the diversity of charities into account”, says John. Understanding the challenges Having volunteered and worked as a manager and board member in a number of charities over the years, he is mindful of the varying levels of capacity and capability, as well as the pressures, faced by charities. “As a regulator, we will more effectively deliver on our mandate if we understand the charitable sector and its challenges”, he adds. “This requires engagement and consultation. The international evidence shows that engagement is a key feature of an effective regulator. We have put considerable effort into this.” Indeed, the recent consultation process is an example of this engagement. It would be easy but incorrect to assume that the process is a response to some of the recent scandals which have beset the sector. “I don’t agree that you can look at the failings of a few people in a few charities and say that there are failings in them all,” John argues. “A small number of them are struggling with governance, but they are attempting to do things right. Our role is to support them. There has never been a structure in place before now to support trustees.” Key changes One of the key changes that will be made in the New Year is the introduction of mandatory reporting. “This will be proportionate. It will bring a greater level of transparency in areas such as trustee expenses, related party transactions, salaries and so on, and there will be independent scrutiny of accounts.” He explains that one of the Charities Regulator’s key functions is to ensure that charities are accountable for their funds to donors, beneficiaries and the public. “We see a charity’s set of accounts as playing a vital role in delivering that transparency and accountability,” Farrelly continues. “The new regulations make Charities SORP mandatory for larger charities and this will bring greater transparency in terms of disclosures.” For smaller charities, this will involve an independent examination of accounts while larger concerns with turnover above €250,000 will require a full audit. “An auditor gathers evidence that everything has been done correctly, while an independent examiner will bring to the attention of the trustees issues that they think need to be addressed,” John explains. The role of Chartered Accountants Chartered Accountants will be key players in both areas and have a major role to play in the running of charities, John adds. “We know that there is a strong inclination towards voluntarism on the part of the accountancy profession. We would encourage that. This is a group of people with a significant amount to offer to their local community. Many Irish charities are well-served by trustees who are Chartered Accountants volunteering their time in the public interest.” John believes that adopting and consistently demonstrating high levels of governance, accountability and transparency are essential in helping organisations foster the trust of their donors and beneficiaries. “In fact, I would say that irrespective of regulation, it is the transparent, accountable charity which will command trust and confidence and, therefore, deliver best on their mission.” The role of professional accountants is critically important in this respect. “It is vital that when auditors are planning their charity audits, they first recognise that they are auditing a body that is managing, controlling and expending charitable funds,” he says. “This is crucial. Auditors must test the probity of expenditure in relation to the spending of all income. They also need to raise with the charity trustees matters they find in relation to internal financial control issues. In addition, I see a wider role for accountants and auditors – adding value to their clients in terms of improving governance and financial management within charities.” Increasing public trust Auditors and independent examiners should be seen in a positive light by charities, according to John. “The audit and the independent examination are tools to support trustees,” he points out. “Chartered Accountants are out there doing the work and they understand the needs of the charities. They provide valuable help and advice to trustees.” He welcomes the fact that accounting bodies like Chartered Accountants Ireland are including CPD training days in the area of charity accounting. “I see this as a key step to ensuring that accounting professionals are equipped to conduct charity accounting engagements in a professional and value adding way. We would also encourage Chartered Accountants to continue to volunteer to act as trustees and offer their time and expertise to charities.” The Charities Regulator will play its part as well. “We have developed a new online tool for trustees that explains in an interactive way their duties and responsibilities. We are also putting in place IT systems with the capability to monitor proactively the activities of charities so that we can support people who are doing good work and get involved to help those charities where we identify a risk.” The Register of Charities is another key step towards increasing public trust and confidence, adds John. “The register will provide relevant information to donors, beneficiaries and the general public”, he notes. “It will help to strengthen the accountability of each individual charity and the overall sector. It is a key regulatory tool in transparently connecting the public to the work of charities. The register provides assurance to members of the public that this charity is real and is worth supporting.” The Charities Regulator will use the register to educate the public on how to identify and support a registered charity. “The public will become our eyes and ears and contact us if they believe a person or entity is pretending to be a charity or if a charity is not in compliance with the law,” he explains. “A well-regulated sector is one that assures the public and enables people to give with confidence”, John concludes. “We have been vested by the State, on behalf of the people, with certain powers and we will use them responsibly. We will regulate the charity sector in the public interest so as to ensure compliance with the law and support best practice in the governance, management and administration of charities.”

Dec 01, 2017
Management

As the number of virtual teams grows and the amount of face-time declines, managers must take an innovative approach to trust in their teams and organisations. Teamwork plays an increasingly vital role in organisational life. An impetus behind this development is derived from the ever-growing presence of millennials moving into positions of influence and leadership. Meanwhile, technology is disrupting old methodology fast and creating opportunities to develop new ways of working. This in turn presents new challenges for managers, mentors and coaches – many trained and developed before VUCA (volatility, uncertainty, complexity and ambiguity) times, and perhaps feeling ill-equipped to leverage their skills to good effect within the new paradigm in which they are required to work. The virtual team One significant arrival in the workplace is that of the virtual team, which is defined by leadership development adviser Beth Millar as being comprised of members who are not located in the same physical place but in different cities, states or even separate countries; using technology and specific skills to achieve a common goal. This is all very exciting, but it presents challenges. There are challenges to team members themselves – how does a team based in five different locations and who predominantly use phone, tablet and screen to communicate develop what Prof. David Clutterbuck calls “situational team knowledge”, the almost intuitive interpretation of each other’s cues and intentions? And then there are challenges for their coach – be that an external or internal coach, or indeed their line manager – in helping them develop, harvest, build upon and leverage this situational knowledge for the benefit of themselves and their organisation. Some of the most important work in this field has been carried out by American executive coach, Dr Pam Van Dyke, who concludes that a coach must understand that there is an art and a science to creating a virtual presence both during the session and in between sessions. Having understood this, the coach then needs to pay careful attention to developing both disciplines. Commenting on Van Dyke’s work, UK coaching guru Peter Hawkins argues that elements of this art or science begin with the need for the coach to work in real time with the team when it is working together. This will involve joining teleconferences and web-based discussion, and perhaps establishing a closed web-based workroom, where the coach can meet team members in a place that feels secure enough to allow them to become vulnerable. The essential ingredient Vulnerability is an essential ingredient in the building of trust between team members, which is itself vitally important to the development of a healthy approach to conflict resolution. In a world where online relationships can become almost synonymous with anonymity, pretence and manipulation, one vital role of the coach is to create and hold a space that is contracted to be secure, honest, confidential and non-judgemental. A place where, as Patrick Lencioni put it, team members can share their skills and display their weaknesses without fear of reproach. Other productive areas in which a coach can work with a virtual team include two very helpful ideas from Harvard Business Review, the first of which is to help the team to build its own working rhythm. By its very nature, remote working offers individuals the opportunity to create their own working patterns and behaviours, and the very act of agreeing together to set some clear and mutually acceptable touch-points can be the first step towards a commitment to develop mutual accountability, which is a prelude to high performance. The other suggested area is for the coach to work with the team to create a virtual water cooler. The image of co-workers gathering around a water cooler is a metaphor for informal interactions that share information and reinforce social bonds. In its absence, team meetings can become task-focused at the expense of team cohesion and unity. As an initial coaching intervention with a virtual team, this change might generate some great ideas, create excellent working chemistry and set a very positive tone for the ongoing coaching project. A new challenge Michael Eisner, former CEO of Disney, has said that “the worst decisions I ever made were on conference calls”. However, increasing globalisation, cost of travel in terms of money, time and world resources means that we will need to find ways to build trust with less face-time than we have previously been used to. This presents a new challenge for team coaches and managers, one that will have to be addressed both quickly and effectively if the potentially positive disruptive power of technology is to be fully leveraged into strong bottom line human performances. Ian Mitchell and Siân Lumsen are Partners at Eighty20 Focus, a boutique executive coaching firm.

Dec 01, 2017
Ethics and Governance

With the Gender Recognition Act 2015 now in place, boards must ensure that robust, employee-focused policies are developed. Good corporate governance is now widely recognised as being sited in a sound corporate culture which includes, among other things, real respect for all persons. Most companies have a suite of policies on equality and diversity and although the human resources department is normally responsible for managing these policies, boards have an oversight role in ensuring that written policies are genuinely embedded in the practices, behaviours and reward systems of the organisation. This should include policy and procedures to cover situations where employees are gender transitioning. The Gender Recognition Act 2015 A human rights case in 2007, taken by Dr Lydia Foy, found that Ireland had an obligation to adopt a system to recognise the preferred gender of its citizens. It took until 2015 to introduce such legislation and several unfortunate clauses were removed from the Bill in its slow movement towards enactment. It was originally drafted so that gender identity would have to be established following a “medical evaluation” model. Good sense prevailed and the Act allows for a process enabling trans people over 18 years of age to achieve full legal recognition of their preferred gender and allowing them to obtain a new birth certificate reflecting the change. This preference is based on “self-determination” rather than certification by medical practitioners. It was originally proposed that married people could not apply, which would have required a “forced divorce”, but following the same-sex marriage referendum this requirement was removed. There are very restrictive provisions for persons of 16 and 17 years of age to apply for gender recognition, but there are no provisions for anyone younger than 16 to apply. Although there is no specific reference to intersex persons or to non-binary persons, it is widely assumed that the Act covers such persons. In the period between 4 September 2015 and 31 December 2015, 198 people were legally recognised under the Act, of whom eight were 16 or 17 years old.  At the time of writing, the Government had undertaken to commence a review of the workings of the Act in September 2017 and to report before September 2018. Implications for the person The main implications for a person whose preferred gender is recognised include: For all purposes, his/her gender becomes the preferred gender; She/he shall not be required to produce the certificate of gender recognition (unless by his/her own choice); His/her rights and liabilities and consequences of actions taken in the original gender remain unaffected; There will be no change to his/her parenthood status; There can be no effect on a property to be willed where the will was drawn up before the change; If desired, the marriage status can remain unchanged; and The change cannot interfere with any pursuit of an alleged sexual offence or an attempted sexual offence against him/her. Implications for the workplace Organisations need to enhance their suite of equality policies by having a specific policy covering transitioning by anyone in the organisation. While there may not be many such situations each year, it is important that a policy is thought out, discussed and agreed before a live case is presented. This policy should include: a basic statement of support; a statement of the understanding of the definitions of terms used in the policy; and an agreed procedure to support anyone who is transitioning. Statement of policy The policy should fit with the lived culture within the organisation, but might look something like: “As part of our suite of policies on equality and diversity, the board has approved this policy on gender transitioning to amplify our culture of welcoming and respecting diversity. We undertake to provide appropriate support to any person who is transitioning either with or without medical/surgical intervention. We will not tolerate any behaviour which disrespects or damages the dignity of any such person or engages in any form of bullying, sexual harassment or harassment. “We recognise that, while most people’s gender identity matches their sex assignment at birth, there is a small number of people for whom the sex assignment at birth does not match their innate feeling of being male or female. For those people who wish to transition, i.e. to align their life and physical identity with their gender identity, we undertake to be a safe and respectful workplace in accordance with our culture but also in compliance with the requirements and the spirit of the Gender Recognition Act 2015. The most commonly acceptable term used to describe people who wish to transition is “trans” and that term will be used in this policy. “Just as gay, lesbian and bisexual employees are welcome here, so also are employees who are trans. We recognise that a transitioning employee must come out to us, as his/her employer, so that she/he can live consistently with their preferred gender identity and we undertake to become fully involved to support this process. We recognise that each person will have different needs and so, this policy is as flexible as possible to tailor support as appropriate.” Definitions For the purpose of clarity, the policy should state the definitions of terms that should underpin the organisation’s policy. These might include: Gender identity: this means a person’s innate, deeply-felt psychological identification as male or female. This may or may not correspond to the person’s body or designated sex at birth and included on the original birth certificate. This term is not the same as ‘sexual orientation’, which is the preferred term used to refer to an individual’s physical and/or emotional attraction to people of the same or opposite gender. Gender expression: this refers to the observed signs and behaviours that are socially associated with the masculine or the feminine. So this includes dress, manner of speaking, moving, wearing make-up, hairstyles, social interaction and so on. Of course, this can vary from culture to culture. Some trans people feel very strongly that they need to live in their real identity and this can involve a transitioning journey including steps such as changing their names, having hormone therapy or undergoing surgery. Not all trans people want to transition in this way. Some don’t clearly identify as either male or female, but see themselves as being on a gender spectrum between male and female and would consider themselves as being both. Trans: trans people are those whose gender identity does not match the gender assigned. This is an umbrella term that includes people of different gender identities and gender presentations. It includes people who are transsexual, cross-dressers or gender non-conforming in other ways. Non-binary: again, this is an inclusive term that covers all identities that fall outside the clear male/female identity. This includes people who identify as neither completely male nor female; people who identify as both male and female or in any way between or beyond genders. People in this category may describe themselves by a variety of terms such as gender fluid, or bi-gender or gender neutral. Transitioning: this is the journey travelled by those who wish to change from the gender assigned to the gender with which they identify. It might include social, physical or legal changes. It can involve a range of actions including coming out to family, friends and colleagues at work. It can include changing appearance, changing sex designation on legal documents and asking to be referred to a ‘he/him’ instead of ‘she/her’ or vice versa. It may or may not involve medical and/or surgical assistance. Transsexual: this term is limited in its use as it focusses on the polar identities of male and female. It has been confused with sexuality or sexual orientation rather than gender identity. It is a term we will avoid. Cross-dressers and transvestites: a transvestite or cross-dressing person is someone who sometimes wears clothing, make-up and accessories which are not traditionally associated with his/her assigned gender. Usually, this is not associated with any desire to change assigned gender identity and it has nothing to do with sexual orientation. Intersex people: an intersex person was born with one of a range of conditions whereby their reproductive organs do not fit the typical definitions of female or male. They may have surgery to assign gender (i.e. as opposed to trans people who may have surgery to re-assign gender). Sexual orientation: this is the term used to refer to a person’s attraction to the same and/or the opposite gender. Homosexual, heterosexual and bisexual are all descriptions of a person’s sexual orientation. It is not the same as a person’s gender identity. Transphobia: this is the fear, dislike or hatred of a trans person/trans people. People who experience transphobia assume that there is a normal way for men and women to look and behave and diverging from that is ‘abnormal’. Often, derogative and offensive language can be used such as ‘sex change’. ‘she-male’, ‘gender bender’, ‘hermaphrodite’ etc. Policy In writing a policy suitable for your organisation, it will be important to engage in organisation-wide consultation. There is no template for such a policy, but it might be useful to include the following headings and populate each section with procedures: A basic statement of assurance that trans employees and stakeholders will be treated with respect and dignity; A basic statement that all other employees are required to comply with the policy and failure to comply will result in disciplinary action, up to and including termination of employment; An undertaking to take action should customers, suppliers, contractors or other stakeholders discriminate against our employees because of their gender identity; A statement that the policy is dynamic and will be amended as experience is gained in the area. It should include a hope that trans employees and other stakeholders will assist the organisation in reviewing and improving these guidelines; Guidelines for employees should be included, inviting them to make contact in advance of transitioning to discuss intentions, needs and concerns; Provision should be made for a support team and its procedures; Some consideration of how the dress code will operate and assurance that the gender identity preferred will be respected within the provisions of the normal code for employees of that gender; Procedures around the rights to use gender-segregated bathroom facilities. Where necessary, single-occupancy facilities will be provided consistent with the preferred identity; A statement on the eligibility of a trans employee to all welfare rights available to staff; Clarity around the right to confidentiality and the manner in which the change of identity is to be disclosed to colleagues; Guidelines for managers to whom an employee’s intention to transition is disclosed. This should include all the issues referred to above and practical issues such as name change, pronoun change, email nomenclature and the availability of sick pay, if appropriate; and Guidelines for the process of disclosing to colleagues, taking into account the wishes of the person who is changing. This might include a general meeting or may be done on a person-by-person basis. Overriding requirement The most important issue is to ensure that colleagues who have decided to transition, whether surgically, medically or without such intervention, should know that they are valued in the organisation; that their decision is respected and that they will be supported in the manner in which they would like to transition in the workplace. Prof. Patricia Barker FCA is Adjunct Professor of Accounting at Dublin City University.

Oct 02, 2017
Feature Interview

Enterprise Ireland’s Julie Sinnamon is preparing for a hard Brexit, but that isn’t the only challenge on her agenda.   When Julie Sinnamon assumed the top job at Enterprise Ireland back in 2013, Ireland was steadily crawling out of a recession and the future looked bright. Now, in the aftermath of the UK’s decision to leave the European Union (EU), many of the state agency’s clients have a fight for survival on their hands. Sterling is on a seemingly inexorable downward path, with parity with the euro by Christmas not such an outrageous proposition. Meanwhile, the very terms of the UK’s divorce from the EU remain uncertain, raising fears about possible customs and tariffs on Irish exports to the UK. Unlike previous crises, Sinnamon is clear that this is not simply going to go away. “It’s not a blip; it’s a permanent restructuring of Irish enterprises in global enterprise,” she says, refusing to sugarcoat the challenge ahead. “It’s a massive problem for Irish companies,” she says, adding that with sterling having touched 93p to the euro, “it’s really difficult”.  What Brexit might mean for Irish exporters is as yet unclear; but what it most definitely does mean for Sinnamon and her staff at Enterprise Ireland, the agency responsible for developing and growing Irish companies in global markets, is a sharp uptick in its activities. A perfect storm Sinnamon recalls the day it all changed. On 23 June 2016, she went to bed before midnight with the polls showing a win for remain. Three hours later, she was woken from her reverie with news from her husband that it was going the other way. Born in Co. Down and a graduate of the University of Ulster, Brexit also has a personal dimension for Sinnamon. “I realised it was real, and it was a matter then of looking at what we had prepared... and it’s been hectic ever since,” she said. Indeed, Enterprise Ireland has since recorded a 50% increase in its internationally-focused work. But while Brexit may have all the makings of a perfect storm for Irish exporters, Sinnamon and her team are taking a common sense, practical approach to helping companies weather that storm in the coming years. According to Sinnamon, the approach is three-pronged: first it’s about boosting competitiveness, then working on innovation, and finally helping companies diversify their market footprint. On the competitiveness front, it’s about cutting costs – something many Irish companies have experience of coming out of the most recent downturn. “A lot of the stars of Irish industry would not be here today if it hadn’t been for working on the lean programme,” she says. However, given that this happened in the recent past, it also means that there isn’t much “low hanging fruit” left to be picked as many companies have already removed excess costs. This means that innovation may be even more important this time around. As Sinnamon notes, enhancing the product offering can enable a company to charge a higher price – and this is a “massive part of the solution”. Entering new markets is also part of the strategy, with Sinnamon citing role models such as forklift manufacturer Combilift’s expansion in Germany and animal pharmaceutical producer, Chanelle, working on expanding from the UK to Europe. “We’re working to help companies diversify, but it takes time, particularly the more sophisticated your product is.” Nonetheless, Enterprise Ireland and its client companies are making headway, with a clear goal to boost exports to the eurozone region by 50% by 2020 while exports to New Zealand, Australia and Canada are growing strongly. “Companies are increasingly showing interest in those markets,” Sinnamon says. And even if the UK market has become more challenged, companies are also finding opportunities with Sinnamon pointing to some companies who may have traditionally gone to the southeast of England seeking out more lucrative work in the north of England and Scotland. International markets week, held in early September, is a key part of this approach as all of Enterprise Ireland’s international team comes home to talk to Ireland-based companies about the opportunities around the world, hosting over 2,000 meetings in just two and a half days. Taking action When it comes to Brexit, one problem has been the reluctance of Irish companies to take action. In the aftermath of 23 June 2016, people tended to think that “common sense will prevail”, Sinnamon recalls. With Brexit negotiations in full swing, companies now need to rise to the challenge – even if they don’t know what a Brexit will actually look like.  “Nobody knows where it’s going to end up, but I keep saying – and have said so from the start – that the actions you take are for a hard Brexit,” she says, adding that even if this doesn’t end up being the case, it makes good business sense to be “as competitive as possible”. Somewhat surprisingly, however, given currency fluctuations, Sinnamon notes that while the larger companies are hedging their currency risk, many smaller ones still aren’t doing so. “We’ve had companies saying maybe it will get better; today it’s 92/93p so we’re going to wait till it comes back down.” One way companies can assess their level of preparedness is to check out Enterprise Ireland’s Brexit tool on its website, which takes about 15 minutes to complete. It shows where you might have the biggest issues and by going back to it in three to six months, you can review your exposure. Enterprise Ireland is also offering a consultancy grant for companies who need help in putting a plan together. “If the relationship with the UK changes permanently, then you need to have a plan. Then it’s about innovation, about becoming more competitive, and out of that will come lots of actions,” advises Sinnamon. Government support is also helping, with Enterprise Ireland getting approval for 39 new staff members last year, about half of which have been placed overseas, while the Government also plans to double Ireland’s overseas diplomatic presence. Enjoying the role But it’s not just about Brexit. Coping with the challenges it brings is just one arm of the state agency, which also has other targets on its mind. And bringing companies into new markets has gotten easier with the good reputation Ireland now has at an international level for its economic recovery. “I came into this job in 2013 and we were still talking about the downturn and apologising globally for the issues we had whereas today, if you’re being introduced anywhere in the world, people will talk about the Irish turnaround,” notes Sinnamon. Indeed Brexit is not the first challenge Sinnamon has seen during her years with Enterprise Ireland. She first joined the enterprise agency when it was established back in 1998, having previously spent 10 years on the other side – targeting international companies to move to Ireland through her work with the IDA. For Sinnamon, the joy in her current role is seeing client companies succeed against tough global companies. “It’s seeing companies grow from small companies and seeing the impact of those [companies],” she says. Leading women Of particular interest to Sinnamon is encouraging female entrepreneurs. When the top job at Enterprise Ireland first came, she concedes that she had to think about whether or not it was something she really wanted. “I’m probably no different than anyone else in terms of a lack of role models,” she says, noting that women have to convince themselves that they can make it work rather than trying to emulate readily identifiable role models who they can clearly see have already made it work. Now, Sinnamon is helping female entrepreneurs find the ambition within themselves, and her efforts are starting to pay dividends. Back in 2011, just 7% of Enterprise Ireland’s start-ups had a female founder. Fast forward to 2016 and the figure has jumped to 22% – a figure that compares well to international standards. TechCrunch, for example, found earlier this year that just 17% of start-ups worldwide had a female founder. But there is still a difference that Sinnamon is hoping to erase. “The applications we get in from women are typically smaller projects,” she says. “The lack of ambition and confidence is a real issue, so we put a lot of focus on spotlighting successful ones.” Sinnamon likes to tell female founders that “your projects are important, but at least as important is the impact you will have on female entrepreneurs going forward.” Also of assistance are Enterprise Ireland’s efforts to encourage more females to take the step of starting their own business. This year, for example, Enterprise Ireland has a €750,000 start-up fund for female entrepreneurs with up to €50,000 equity funding available. Scaling up While Ireland has undoubtedly been successful in creating a start-up hub, one area where it hasn’t quite risen to the challenge is in helping start-ups to grow into world leaders. Flotations on the Irish Stock Exchange remain few and far between while companies like Strype, the $9 billion payments service founded by Limerick brothers Patrick and John Collison, have opted to locate in the US rather than Ireland. Sinnamon is aware of the challenges and notes that Enterprise Ireland is increasing its focus on this area and giving targets to get companies to certain thresholds. “One of the big issues we see for start-up companies is when someone comes and offers them a cheque and they sell out,” she says, noting that the people in the start-up have taken the risks – but it is the company that comes along and buys them that makes the real profit. “It’s about having role models and increasing the number of companies who hang in there and don’t sell out too early,” she says. The availability of follow-on funding was one hindrance to growth oft-mentioned in the past, but this issue has dissipated. “More growth funds are now available than at any time in the past,” Sinnamon says. “I don’t think it’s as big an issue as it was”. The very competitiveness of the Irish economy is also an issue. On the day we meet, traffic has snarled to a standstill in Dublin’s city centre on the back of new traffic management measures, while the ongoing housing crisis is beginning to bite foreign direct investment. Sinnamon concedes that both are an issue, with rents of particular concern to some clients when they look to bring in talent from overseas. “It’s linked to infrastructural development that didn’t happen for a while,” she says. Competitiveness is on Sinnamon’s mind, and she’s also looking to the forthcoming Budget to improve the offering for entrepreneurs in Ireland. While the Government has made some moves to enhance the capital gains tax regime for entrepreneurs, Ireland is still “not as competitive with the UK in that space” she says. After all, driving entrepreneurship reaps many rewards for a country. With the pressure on Dublin to cope, Sinnamon notes that 65% of Enterprise Ireland client company jobs were created outside Dublin last year. “There are towns in Ireland that really need to grow, and local business will drive that turnaround,” she says.

Sep 28, 2017
Personal Development

Build trust, gain influence and get meaningful work done with these simple but effective ‘soft skills’ challenges. In the collaborative workplace, soft skills play an increasingly important role – particularly if you’re looking to set yourself apart from your peers. But how do your improve your soft skills? And what are they anyway? Here are four prominent soft skills and some challenges to help you put them into action. Communication When we think about communication, the output often springs to mind – what we say and how we say it. But communication also involves eye contact, posture and active listening. Great leaders are, generally speaking, great listeners so challenge yourself to striking up a conversation with one colleague each day where you focus on what they have to say. Of course, communication works best as a two-way process so there will be an element of give and take, but focus on giving your colleague the opportunity to tell you about their weekend, work project or hobby. Doing so will position you as an approachable and affable colleague and potential leadership material. Influence You might think that influence comes with seniority but in truth, everyone has the ability to influence irrespective of their role or status. This elusive skill is the sole subject of one of the bestselling business books of all time – Influence by Robert Cialdini – but to get you started, try this simple challenge: refer to colleagues by name and offer a little praise. It might sound superfluous but as Dale Carnegie, another famous writer and lecturer, noted: “A person’s name is to that person, the sweetest, most important sound in any language”. Add to this a compliment or two and you will greatly improve your chances of getting what you want – even from distant colleagues. Time and priority management The ability to identify what’s important and prioritise accordingly is an admirable trait, and one your superiors will cherish. In his book entitled Deep Work, Cal Newport defined this concept as the ability to focus without distraction on a cognitively demanding task. If you don’t schedule time for deep work, however, it’s unlikely to happen as you get dragged from one meeting to the next. So leave your smartphone to one side and refuse to allow your inbox to dictate your day; but most importantly, schedule time in your calendar for deep work each week. If you don’t ring-fence time for value-add activity, the likelihood is that someone will fill the void for you. Critical thinking According to the National Council for Excellence in Critical Thinking, critical thinking is “the intellectually disciplined process of actively and skilfully conceptualising, applying, analysing, synthesising, and/or evaluating information gathered from, or generated by, observation, experience, reflection, reasoning, or communication, as a guide to belief and action”. In simpler terms, it’s the process of making reasoned judgements that are logical and well-thought out. To improve your critical thinking skills, begin by asking yourself how a colleague or friend might approach an issue before making a decision. Too often, we approach challenges solely from our own point of view and spring into action in the firm belief that we are doing the right thing. By looking at issues through the eyes of another, however, you will be better placed to bypass your own biases and make more informed decisions. Summary You now have four simple tasks to help you hone your most valuable soft skills: chat to a colleague each day; refer to colleagues by name and add a compliment or two; book time in your calendar for deep work; and push yourself to look at things from the viewpoints of others. If you allow these challenges to develop into habits, you will reap benefits in many areas from productivity to professional relationships.

Sep 01, 2017
Spotlight

Collaboration between the public and private sectors could greatly enhance the lives of those working in Northern Ireland. It is a time of uncertainty for Northern Ireland. It is not controversial to suggest that this isn’t particularly helpful in terms of growing our economy, creating jobs or providing the best possible public services for our people. Key factors are the ambiguity of Brexit and the absence of a functioning Northern Ireland Executive, followed by slow-moving negotiations to reconstitute an Executive. There was hope that after the UK General Election, the Northern Ireland parties could form an Executive and the Northern Ireland Assembly could reconvene and begin to address the questions posed. However, the breakthrough hasn’t happened yet and it now looks like it may have to wait until the autumn – or else we fall back to direct rule from Westminster. We firmly hope that local political parties will be able to resolve outstanding issues to allow a budget, a new programme for government, direction and clarity for Northern Ireland to be put in place. It is important that our business leaders and political leaders work together to find a way through. Of course, the local business community will get on with things and continue to do business – it always has. Imagine, though, how much better it would be if politicians, public sector decision makers and private sector leaders were working together to address the key issues. We need a collaborative approach from business and the public sector. It is the only way we can hope to deliver a sustainable economy and the social, health and education benefits that come with it. We want an approach that displays responsibility, accountability and maturity. Leadership vacuum Brexit is a key concern for the Institute’s members, both north and south of the border. Separate surveys in each jurisdiction found that 80% of members viewed Brexit as a negative factor in their region in the year ahead. 80% felt that Northern Ireland will be more negatively impacted by Brexit than other UK regions, while 87% felt that the Republic of Ireland’s trade relationship with the UK will suffer. The detrimental effect of not having a Stormont Executive to address Brexit planning is hard to quantify, but it stands to reason that we would be better served by a group of elected representatives working together to speak for Northern Ireland and engaging with the business sector. It was noticeable that the EU chief negotiator, Michael Barnier, met with the first ministers of Scotland and Wales in July to “listen to different points of view”. Without an Executive, there was no-one to meet with from Northern Ireland. The clear majority of members, north and south, want free trade in goods and services to be part of the UK’s deal with the EU and are opposed to a hard border on the island of Ireland. No matter what your opinion of the UK’s relationship with the EU, those views suggest that the removal of customs barriers through a Customs Union has been one of the big successes of the EU project. One of Theresa May’s clearly-stated objectives is that the UK will leave the Customs Union as a result of Brexit. That means we could be back in a similar position to where we were before 1993 – a trade border between the Republic of Ireland and Northern Ireland. It will mean considerable change for businesses engaging in cross-border trade. It will require significant investment in planning and skills. So what is the answer? Cooperation. Working together. There will need to be cooperation between business, public sector and political leaders in Northern Ireland, the Republic of Ireland and the UK. There will need to be cooperation between the EU, HM Revenue & Customs and the Irish Revenue. Local businesses, with the help of politicians and customs bodies, will need to work on their customs expertise. Corporation tax The Brexit challenge is just one area where renewed partnerships between the public and private sectors are necessary. Our Institute has been a strong advocate for a reduced rate of corporation tax for Northern Ireland for many years. We first called for it over 10 years ago. The strong cross-border support for such a measure is both notable and commendable. It speaks volumes on the benefits that it could bring. In a recent Ulster Society survey, members identified a reduced corporation tax rate as a key measure in improving the local economy. 63% said that a lower rate would have a positive effect on Northern Ireland’s economic performance. We believe that it represents an investment in the future growth of the economy and would act as a welcome catalyst for growth of the private sector. It is an attention grabber that enables those tasked with attracting inward investment to ‘get a foot in the door’ with potential investors. The potential new rate of 12.5% and operation date of 1 April 2018 was announced as part of the 2015 Fresh Start Agreement. Since then, it has looked increasingly likely that the date will slip. The agreement between the Conservative Party and the DUP following the UK General Election has provided a much-discussed funding deal which will take some immediate strain off the Northern Ireland public sector and will allow for some much needed infrastructure investment. The confidence and supply agreement has also brought focus back onto the prospect of corporation tax devolution, but it is reliant on the restoration of the Northern Ireland Executive and it being able to “demonstrate its finances are on a sustainable footing”. If this can be delivered, it will be a tremendous boost for the private sector in Northern Ireland in an economy which is very much over-reliant on the public sector. If the will is there to make a deal work and to get a local Assembly working, there is potential for closer working between the public and private sectors. Collaborative approach My experience, both in practice and the public sector, has illustrated to me the power of business and the public sector working together. It is not an exclusive relationship; it does require a strong partnership. Perhaps some of this comes down to the public sector adopting more of a private sector attitude – a ‘can-do’ approach. Can the public sector allow the private sector a role in showing how to move away from risk-averse culture? Can those in the private sector be encouraged to ‘put their heads above the parapet’ and deal with the scrutiny that the public sector is so used to? It goes far beyond the economy, however. A sustainable and diverse local economy is vital if we are to deliver on the social, health and education benefits we want to see. A strong economy will help us to provide greater opportunity and the best possible public services for our people. If Northern Ireland is a great place to do business, it will help us to ensure that Northern Ireland is also a great place to live. The island of Ireland has fantastic potential. For a small place, we have a big impact around the world. There is much of which we can be proud but by working together and moving outside our comfort zones, we can achieve more. I believe that our profession has an important role to play in driving a collaborative approach. As leaders and decision-makers within organisations, and with careers and networks that stretch across sectors, we are in a great position to facilitate change. At the inception of our profession, our predecessors were not just leaders within our profession. They were not only leaders of industry. They were leaders within the broader society in which we live. They brought business and civic life together. Many of our members today maintain that connection through their voluntary work – they bring their experience to bear for their local community. I believe that we can expand on this and bring our professional expertise, our experience and ability to forge a strong link between the public and private sectors. This contribution has the potential to improve the lives of all within our communities. It’s a contribution that Chartered Accountants may be uniquely placed to make. Pamela McCreedy FCA is Chair of the Chartered Accountants Ulster Society.

Aug 14, 2017
Regulation

Sarah Lane outlines the top 10 questions that should be on the minds of directors and management teams. In March 2017, the Central Bank of Ireland published the Central Bank Investment Firms Regulations. This document consolidates all requirements for investment firms into one document, which is timely given the imminent overhaul of EU legislation for markets in financial instruments. For example, MiFID II will go live on 3 January 2018 while other ongoing regulatory changes continue to affect the industry. These include European Market Infrastructure Regulation (EMIR), Base Erosion and Profit Sharing (BEPS) and General Data Protection Regulation (GDPR). The regulations supplement existing legislative requirements, most notably MiFID (European Communities (Markets in Financial Instruments) Regulations 2007) and the Investment Intermediaries Act 1995. While the majority of regulations remain the same, there are some new requirements – particularly for fund administrators. Below, we summarise the top 10 questions for directors and management teams of the affected entities. 1. Who do the regulations apply to? The new regulations apply to investment firms, certain investment business firms (excluding retail intermediaries) and fund administrators. 2. What is the application date of the regulations? The Central Bank Investment Firms Regulations (S.I. No 60/2017) came into force on 7 March 2017. 3. What is the background to the legislation? The Central Bank consulted twice in relation to the regulations, first of all in CP 97 (Investment Firms Regulations) and secondly, in CP 100 (Risk Assessment and Capital Planning for Fund Administrators). The regulations are legislated for through a statutory instrument. Therefore, non-compliance may constitute a prescribed contravention under Part IIIC of the Central Bank Act 1942, giving rise to Central Bank enforcement action. 4. Which sections apply to MiFID investment firms? MiFID investment firms are subject to the requirements detailed in Part 2 (including relationship with the Central Bank, internal audit requirements and reporting requirements). Investment business firms that are not fund administrators are subject to the requirements in Part 2 and Part 3 (additional supervisory requirements, including organisational requirements and telephone recording). 5. What topics do the regulations cover for MiFID investment firms? The general requirements for MiFID investment firms can be split into the following broad headings: relationship with the Central Bank; acquisition and disposal of assets; internal audit requirements; change in auditor; and reporting requirements. There are also additional supervisory requirements for investment business firms including: organisational requirements; client borrowing; books and records; and telephone recording. 6. What guidance did the Central Bank issue alongside the regulations? The Central Bank published guidance on the following topics: relationship with the Central Bank; fund administrators outsourcing; and own funds, risk assessment and capital planning for fund administrators. The Central Bank, on the same date, also published the Central Bank Investment Firms Regulations Q&A to set out answers to queries likely to arise in relation to the new regulations. 7. Which sections apply to fund administrators? Fund administrators are subject to the requirements in Parts 2-5 (including requirements around directors, client assets, fund prospectus, outsourcing and capital adequacy). It is important to note that the obligations of fund administrators under the regulations and the guidance apply to both Irish and non-Irish administered funds and also apply equally to intra-group outsourcing arrangements. 8. What topics do the regulations cover for fund administrators? The regulations replace Chapter 5 of the AIF Rulebook entitled Fund Administrator Requirements, and include those requirements outlined above as well as the following: Fund prospectus; Client assets; Directors: residency is now defined as being present in the State for 110 working days; Outsourcing: a new annual return to the Central Bank is required (see question nine below) and certain activities are prohibited from being outsourced (see question 10 below); and Own funds and capital adequacy requirements for fund administrators: similar to the Capital Requirements Directive (CRD), there is a requirement to develop a risk analysis and capital adequacy assessment process which is documented to identify, assess and manage risk. 9. What is the annual outsourcing return requirement for fund administrators? The Central Bank issued a letter to all fund administrators on 7 March 2017, which emphasised that requirements on the outsourcing of administration activities in relation to investment funds are structured so that all fund administrators maintain a consistent standard of oversight of Outsourcing Service Providers (OSPs) and retain ultimate responsibility for the outsourced activities. The letter stated that between 48-61% of fund administration activities were carried out by OSPs as at 31 December 2015, based on the five larger Irish fund administrators they reviewed. To that end, the new regulations require fund administrators to submit an outsourcing return to the Central Bank annually, which contains the following information at the end of the calendar year: All outsourcing arrangements entered into by the fund administrator; The location of the outsourcing service provider; The date from which the fund administrator was permitted to enter into the outsourcing arrangement; and The names of all investment funds in the event that the fund administrator has outsourced the release of the final net asset value (NAV) where permitted (under permission from the Central Bank). It is important to note that governance and oversight of outsourcing remains a key control for the directors in order to ensure they minimise potential risks arising from outsourcing. The Central Bank included observations and recommendations regarding outsourcing arrangements within Irish fund administrators, which should be adhered. The recommendations include a documented, formalised outsourcing policy and the establishment of an outsourcing committee. 10. What activities cannot be outsourced for fund administrators? The Central Bank guidance for fund administrator outsourcing dictates that core management functions shall not be outsourced in order for the fund administrator to exercise adequate and effective control and decision-making. Core management functions include: Setting the risk strategy; Setting the risk policy; Setting the risk-bearing capacity of the fund administrator; Management functions, such as the setting of strategies and policies in respect of the fund administrator’s risk profile and control; Oversight of the operation of the fund administrator’s processes; The final responsibility towards clients and the Central Bank; Maintenance of the shareholder register; and The check and release of the investment fund’s final NAV. Sarah Lane is Director, Financial Services Risk & Regulation, at Mazars.

Aug 03, 2017
Regulation

With less than 10 months to implementation, General Data Protection Regulation should be high on the agenda of every business and board. After many years of negotiation, the General Data Protection Regulation (GDPR) was adopted into European law in May 2016. This new cybersecurity and data protection legislation will affect customers in Europe and also, those around the world who do business with Europe-based companies. It is important to point out that most of the articles in the regulation already appear in the legislation of individual countries. The aim of GDPR, however, is to harmonise data privacy laws across Europe and create a level playing field. EU companies now have until 25 May 2018 to implement and conform to the new regulations, or face large fines. So if you have not considered GDPR thus far, now is the time to act. A parallel directive affecting the processing of data by law enforcement authorities was agreed at the same time as GDPR, so the EU authorities are clearly taking a serious stance on this topic. However, recent surveys of Irish firms concluded that many are significantly unprepared for the new EU data protection law, with over half of organisations surveyed unlikely to detect a sophisticated attack. In this article, we will provide you with strategies and ideas to implement in your own company as you work towards achieving compliance. Major knock-on effects GDPR brings significant changes to how firms must handle and process personal data. Your organisation’s existing processes – which may include collection, retention and deletion, general inputting and so on – must be revised so that they comply fully with the new data protection rules, which are stricter than ever before. When legislation of this nature is announced, one can take a benevolent or malevolent view of the task at hand. If you take a malevolent view, you will see it as more bureaucracy, more cost and so on. If you take a benevolent view, on the other hand, you will view GDPR as a fantastic opportunity to tidy up your data, reconnect with your customers and build better and more solid relationships. Let’s take the benevolent view and state that, first and foremost, GDPR is for all EU data subjects and their protection. Customer data belongs to customers and GDPR makes this clear. You might provide data to a company, but this does not mean that they now own it. They merely borrow it and under GDPR, they will need to protect and explain more clearly why they have it. Your organisation’s internal governance processes should now be reviewed and, more than likely, altered ahead of the GDPR implementation date. For example, if you process data, new data governance obligations will apply and records of how you prepare and keep records of processing activities will come into force. You will also be required to demonstrate how decisions to use data for further processing are reached. Transparency will be more important than ever before. Personal data must therefore be processed in a transparent manner (i.e. collected for explicit and legitimate purposes), limited to what is necessary in relation to the purposes for which they are processed, and must be accurate and kept up-to-date. New rights for data subjects A data subject is the living person to whom personal data relates. Under GDPR, data subjects will have far more control over their personal data and, quite significantly, the right to be forgotten. This means full erasure of their personal data. Data subjects will also have the right to data portability (i.e. the ability to obtain and reuse their personal data for their own purposes across different services) and, if they require more information on their data, organisations must make it easy to request such data and provide a comprehensive response within one month from the date of request. All of this will inevitably lead to a major increase in the administrative burden for organisations, and that burden will be particularly onerous for those companies who store data on paper. New responsibilities First and foremost, consider your new responsibilities from the perspective of protecting people’s digital data. Data protection is not linked to a specific technology, and GDPR is principle-led for the protection of EU data subjects in general. A new concept of joint liability for both data controllers (the entity that determines the purposes, conditions and means of the processing of personal data) and data processors (the entity that processes personal data on behalf of the controller) will come into force under GDPR. The data processors will be jointly liable to data subjects for damages unless they can prove, for example, that a data breach was not their fault. Punishment for breaches will not be extreme and will be related only to how sensitive the data is that you hold, and what steps you have (or have not) taken to protect it. The implication here is that previous contractual obligations may need to be revised and new contracts will require appropriate stipulations. Data controllers will have far more responsibility to provide accurate information on how data is processed. They will, for example, be obliged to detail the retention period for the data and provide information about the legal basis for data processing. So, it isn’t only data controllers who will need to maintain records of their processing activities; data processors will as well. ‘Data protection by design’ is a new phrase in the data protection lexicon. It means that, in each element of designing or compiling a new data-based solution, organisations must demonstrate that the rights of the data subject were considered through encryption or pseudonymisation, for example. Where a security breach occurs, new notification procedures must be enacted. For instance, data processors must report breaches to the data controller. Data controllers must also report security breaches to the country’s supervisory authority without undue delay and no more than 72 hours after becoming aware of it. Furthermore, privacy impact assessments will be required when firms wish to undertake certain types of personal data processing. Transfer of personal data Transfer of personal data provisions remain largely the same as was outlined in the previous Directive. However, data transfers under the mechanisms of ‘safe harbour’ are no longer permissible. The EU/US Privacy Shield agreement was adopted by the European Commission in July 2016 and contains far more stringent rules than the previous ‘safe harbour’ agreement. It will, for example, offer more channels for the data subject to seek redress. Next steps To get your preparations under way, we suggest that you: • Identify the areas of your business that may be impacted by GDPR; • Seek help to design, develop and implement solutions in line with data privacy requirements. You should also take operational, IT and information security perspectives into consideration; • Design systems to detect, address and prevent security breaches through integrated hardware and software solutions. This should include the discovery and classification of sensitive data, vulnerability assessment, activity monitoring, quarantining, the protection of sensitive data and so on; • Ensure that you are compliant in how you process personal data through your internal governance processes and how you keep track of reporting data breaches; and • Design governance structures to build confidence in the way your data is explored and managed, particularly for unstructured data. A force for good The GDPR preparation period is a great time to review your data – not just for the purpose of GDPR, but for business development reasons also. Ask yourself: do you really know your customers? Can you help improve their relationship with you, so that you better meet their needs while protecting the information they have given you? Consent and general usage of personal data must be assessed no matter what. That said, you can turn this requirement into a force for good and build much greater trust with your customers and employees in the process. Look outside Your organisation may need to employ outside expertise to build internal capabilities, next generation threat intelligence systems, and enterprise monitoring and security operation centres. Ask yourself if your company has a robust plan for the management of security incidents. If you are not confident, now is the time to assess that risk and implement the appropriate security measures that will allow you to deal with incidents within your own firm. Conclusion Europe’s new regulatory environment for cybersecurity and data protection is less than a year away. This will offer both opportunities and challenges, ranging from improved governance to securing application and infrastructure. In a globalised and more interconnected business world, being able to navigate the regulatory environment of the future will be a critical success factor for practically all businesses. Your ability to deploy the appropriate security and data protection controls and procedures in a way that can be rapidly demonstrated is now a matter of good governance. The clock is ticking, so there’s no time to lose. Billy O'Connor is Managing Director at The Discovery Partnership and a registered IBM Business Partner.

Aug 02, 2017
Spotlight

While a niche choice for Chartered Accountants, academia offers unique opportunities for career fulfilment. A role in academia after your training contract is not the typical route for most newly qualified Chartered Accountants. However, it does have its attractions. While many Chartered Accountants will seek job satisfaction from closing deals, winning new clients or helping to grow their own or their client’s business, the job satisfaction associated with a role in academia is of a different nature. The ability to follow the development of students from their early days in third level to the completion of their professional exams and onto a broad variety of roles brings a great sense of accomplishment. Add to this the opportunity to engage in research that can provide an input into policy development and make a practical contribution to the business world, and you have a role that provides its holder with a unique sense of contribution and achievement. Creating an appreciation of accounting Although the career path offers a different structure and set of challenges to the more traditional practice and industry-based roles, the training received as a Chartered Accountant in terms of technical, commercial and communication skills remains very relevant. The lecturing aspect of the role involves a variety of accounting topics and student profiles, from introducing basic accounting concepts to first years to focusing on practical accounting methods and tools for experienced managers on Executive MBA programmes. While many students will not specialise in accounting, creating an appreciation of the value that accounting information can bring to an organisation and the role Chartered Accountants play in the broader business environment is an important insight for their development as future business professionals. Rigorous research Another significant part of the role is focused on research and, in the initial years of your academic career in particular, on your PhD. This is one of the unique attractions of a role in academia for many who see the inherent value in undertaking a significant research project that allows you to stand back from the usual task-based nature of the business world to examine in detail how and why certain phenomena occur. For many PhD students, the topic of their research will emerge from their own real world experiences, some of which they may wish to examine more rigorously. The beauty of a PhD is the freedom it gives the student to focus on topics and issues of particular interest to them, which of course is an important point considering many part-time PhDs can run for five or six years in duration. The focus of my own research has allowed me to bring together my experiences in accounting education and agriculture to examine the area of financial literacy in farming enterprises in collaboration with Teagasc. The PhD aims to provide an insight into financial practices at a farm level and will contribute to an evidence-based approach to designing future financial education programmes for farmers. This is an important issue in the agriculture sector with an increased focus on low farm incomes, uncertainty around future EU supports given the forthcoming CAP reform, and increased price volatility all drawing attention to the financial management and viability of farming enterprises. The next generation Accountancy academics also play a key role in the development of the next generation of Chartered Accountants. A significant cohort of students will seek career advice in the first instance from their accountancy lecturers at third level. Talking to students about choosing firms, departments and roles is very much a regular part of this job. Developing a student’s technical skillset is an important objective during their time in third level, but it is not the only objective. The role of the modern professional accountant encompasses a much broader range of competencies than mere technical knowledge. It includes areas such as communication skills, teamwork and commercial awareness, and we focus on developing these skills in all students throughout their studies at third level. Gatekeepers to new areas of knowledge The rapidly changing nature of today’s business world and the adaptive nature of the accounting profession to the needs of business means we must continue to update our course and programme offerings to prepare our students for the demands of 21st century commerce. Emerging areas such as data analytics, social and environmental performance measurement, and tax morality are just some of the new topics that the next generation of Chartered Accountants will be dealing with and where demand is increasing for accountants with such skills. Academics in many ways can be seen as the gatekeepers to these new areas for the next generation of the profession. The hybrid nature of our role as both researchers and teachers places us in a highly influential position as an important conduit of knowledge between the latest research impacting the accounting profession and the current and future generations of the profession. A symbiotic relationship Maintaining strong links between the academic community and the broader profession in practice and industry should be an important objective for the continued development of our profession. The regular dissemination of the latest research in the field to the broader population of Chartered Accountants (for example, via Accountancy Ireland), the incorporation of this research into the educational offerings at both pre- and post-qualification levels, and the active promotion of practice and industry-focused collaborative academic research projects (such as those supported by the Chartered Accountants Ireland Educational Trust, for example) are all avenues to further strengthen this important symbiotic relationship. Pushing the boundaries of knowledge A career path in academia is undoubtedly a niche one in the context of the broad range of accountancy-based roles available. It does, however, offer a unique set of opportunities to a Chartered Accountant in terms of playing a role in developing the next generation of the profession while also making a contribution to policy development and practice in areas of business and society of interest to you. Pushing the boundaries of knowledge in the discipline of accounting and ensuring the effective transfer of this new knowledge to the broader population of Chartered Accountants is an important role within the profession. To borrow a line from Benjamin Franklin, “An investment in knowledge pays the best interest”. While Franklin may have been focused on the individual, his words also hold true for the accountancy profession as a whole. John Nolan is a Lecturer at Dublin City University Business School and Chartered Accountants Ireland.

Aug 02, 2017
Feature Interview

Leading the transformation of the civil service finance function is a challenge, but one worth taking on, explains Connie Costello On 30 September 2016, the Minister for Public Expenditure and Reform announced that the Department of Public Expenditure and Reform had taken a significant step towards the modernisation of Government financial management administration. The Government had just awarded a contract to Accenture to build and implement a new single ‘best in class’ financial management system, based on Oracle technology. This followed the validation of the business case to establish a Civil Service Finance Shared Service Centre, which was approved by Government in January 2016. Forty-eight public service bodies will be serviced by the Finance Shared Service Centre. These include all government departments together with a number of agencies and offices. The introduction of a single finance technology platform will replace 31 existing finance systems across those government departments, agencies and offices. The Finance Shared Service Centre will operate standardised finance processes and common accounting definitions. When fully operational, it will process approximately 625,000 invoices and account for in excess of €50 billion in gross expenditure. Furthermore, the Finance Shared Service Centre will be staffed and managed by civil servants. It will be based in existing shared services offices in Galway, Tullamore and Killarney and will operate under the governance of the National Shared Services Office. When fully established, the centre is expected to deliver annual savings to the Exchequer of approximately 33%, c. €15.4 million per annum. This will be achieved through a reduction in the cost of support for existing finance technology and a reduction of approximately 25% in the number of staff involved in finance processing and administration. These staff will be redeployed to fill vacancies across the Civil Service. In addition, there will be movement of staff from existing’ finance functions into the Finance Shared Service Centre, in particular in Galway, Tullamore and Killarney. The new centre will deliver significant improvements in the efficiency and effectiveness of the government’s finance function. These include: Providing greater flexibility and strategic capability to respond to new and emerging requirements in a more consistent, timely and cost-effective manner. This will be based on a common chart of accounts and the capacity to support e-invoicing and e-procurement; Enabling Government to meet its current and future finance commitments, such as those emerging from the IMF Fiscal Transparency Assessment and EU Standards and Codes for Government Accounting; Improving resilience and sustainability by consolidating capability and building capacity to take advantage of the latest methods and models of ICT delivery, such as cloud computing, in order to drive greater innovation; Providing improved financial information and insights to support informed decision-making within government departments and public service bodies, and across central government; Realigning finance functions within government departments and public service bodies to focus on higher value-add activities; and Reducing costs, improving performance and increasing financial control through sharing processing capacity across collocated resources and standardising processes on a common technology platform. This move will enhance decision making by enabling finance teams with improved analysis of expenditure and public finances, allowing them to focus on strategy. Meanwhile, the Finance Shared Service Centre will espouse a strong service management culture, focused around the needs of the clients’ and their Accounting Officer. The provision of shared services, led by the National Shared Services Office within the Department of Public Expenditure and Reform, is a central principle of the government’s reform programme. There are two existing shared service centres in the Civil Service – within the National Shared Services Office, PeoplePoint provides HR and pensions administration for 34,500 civil servants, while the Payroll Shared Service Centre administers payroll and related payments for over 100,000 payees, including 57,000 pensioners. Transformation and change challenges This is a significant finance transformation programme, moving 48 organisations – all with their own way of working – to a new, standardised world. The challenge for the Finance Shared Service Centre is to build the capacity and capability to process all public service body finance transactions. There has been significant engagement by all public service bodies in the system design and the overall approach has been based on strong collaboration within the finance community. The design of each module in the system (purchasing, accounts payable etc.) has been led by process design working groups, which are composed of experienced civil service finance staff from a range of public service bodies. These process design working groups are facilitated by project team subject-matter experts who consistently apply the key principles of the design process – standardise, simplify and automate. A process design advisory group comprised of finance officers from a number of public service bodies will review the final design recommended by the process working groups. This extensive collaboration is producing a system designed to meet the needs of all clients, while not losing sight of the key benefits to be achieved from standardisation. The 48 public service bodies will migrate in roughly five waves over a three-year period, commencing in 2018. The Department of Finance, the Department of Public Expenditure and Reform and the Office of the Comptroller and Auditor General will be among the first organisations to be served by the new Finance Shared Service Centre. Significant change management support is required to ensure that a public sector body is adequately prepared for the transition to the Finance Shared Service Centre. To that end, each public service body will appoint a project/change manager who will work with the project change management team to support the public service body as it transitions to the new financial operating model. The role of the project change management support team is to ensure that each public service body knows what it has to do to prepare to go live and also to provide support on that journey. There is significant engagement on-going with senior stakeholders in each of the 48 public service bodies. This is to ensure that they have a full understanding of the journey their finance teams and organisation is about to undertake. Finance operating model The establishment of the Civil Service Finance Shared Service Centre will bring about changes to the Civil Service finance operating model. The finance function in each of the 48 public service bodies will undergo a redesign to ensure it is prepared for its new role and is structured to fulfil its responsibilities. The project team will work with a representative group of finance officers from the public service bodies to agree the key design principles and the methodology to be applied in advance of the build of the ‘new’ finance function in each organisation. The ’new’ finance function must be fit for purpose and meet the statutory requirements of the Secretary General or CEO (Accounting Officer) of the public service body. Inevitability, a redesign process such as this will identify gaps in existing staff skill sets which need to be addressed through training and development programmes. However, it should open up opportunities for staff movement across public service bodies. The future scenario is one where the Civil Service finance community will operate one finance model on one technology platform, which will be based on a common Chart of Accounts. This will be supported by one business intelligence system. Staffing As previously stated, the Finance Shared Service Centre will be located in Galway, Tullamore and Killarney. Recruitment is expected to commence across all three locations in late Q3 2017 and to continue annually until the Finance Shared Service Centre is fully established and all client operations have been migrated. The recruitment process will run in conjunction with the Public Appointments Service and will seek accountants at all levels, including qualified accountants with experience in shared services, recently qualified accountants, graduates who would like to engage in further development and non-graduates who are interested in pursuing an apprenticeship programme. Interested persons should register on the Public Appointments Service website in order to receive a notification when roles are advertised. There will be a wide range of roles and career development opportunities within the Finance Shared Service Centre and the wider National Shared Service Organisation, which will be open to both existing civil servants and new recruits. Increasing the number of professionals within the wider Civil Service is a key deliverable from this finance transformation programme. Governance The scope and ambition of this finance transformation programme is significant and therefore requires a controlled delivery approach, the application of best practice programme and risk management methodologies, strong sponsorship, and ongoing commitment from government and departments. The programme is sponsored by the Department of Finance and the Department of Public Expenditure and Reform. Lessons learned from earlier shared service implementations in the public sector and best practice approaches are being adapted to minimise the inherent risks associated with implementing a Finance Shared Service Centre. There is stringent management of scope, and a rigorous focus on adhering to the key design principles of standardisation and minimal customisation. CONNIE’S JOURNEY Connie trained in Deloitte before embarking on a career in financial services, which spanned just over a decade. Her career saw her hold senior management and executive financial and product development positions in a number of large financial organisations including Bank of Ireland, First Active plc and Ulster Bank. A constant theme in Connie’s career has been the delivery of change programmes, which range from cost efficiency programmes to revenue-enhancing opportunities. Connie moved to An Post in 2007, prior to the global financial downturn. Her initial task was to transform the finance function, changing divisional finance teams from traditional finance administration and reporting functions to valued business partners who could identify the management information necessary to inform key business decisions. This role was quickly overtaken by the requirement to lead a significant transformation programme with a target reduction of 2,600 full-time employees, or 25% of the organisation’s headcount. This involved challenging union negotiations, with Connie responsible for delivering rationalisation opportunities in the finance, human resources and payroll divisions, the objective being to consolidate administration activities into centres of excellence. While it was a very challenging environment, Connie is now leveraging her skills to lead this large-scale civil service finance transformation programme. Connie Costello is Director of the Civil Service Transformation programme.

Jul 31, 2017
Personal Development

Sometimes you are presented challenges where you find you cannot cope. While we might not be able to change the amount of work that has to be done in a day, we can change how we react to it. I describe stress as being the scenario where the challenge you are facing seems to exceed your capacity to cope. We can feel threatened, overwhelmed and like we’ve lost control of the situation. While it seems odd to be sitting here writing about stress when it’s a warm, sunny summer’s day outside, stress doesn’t take the summer off. Learning how to deal with stress is a year-round task. The day from hell To illustrate an overwhelming challenge and our difficulty in coping, I thought we’d start with a really difficult day in work – the day from hell. While a small amount of stress can be a good thing – it provides a sense of urgency and it gets us moving – this is bigger than that. It took off like an out-of-control rocket, we are being pulled beyond ‘useful stress’ into a more manic orbit, and we end up in the ‘too much to cope with’ zone for too long.  When this happens, we lose three things: energy, short-term memory and the ability to problem solve or think creatively. We become quite primitive and it feels like we are in survival mode. We just want to survive the meeting, the phone call, or the afternoon. In summary, ‘stress eats energy’. 60-second recovery In reality, there’s very little we can do about the pace of a really hectic work day but we can do something about our response to it. For this, discipline is our most useful strategy. For those days from hell, we need to build ‘recovery breaks’ into the day. It only needs to be about 60 seconds, but – and here’s comes the discipline – the break should be once per hour throughout the day. Discipline eats stress Here’s your challenge: take a deliberate recovery break for one minute out of every 60. This will require a certain amount of discipline and mental toughness. In fact, you should be doing this even on good days. Remember, you’re doing this to ensure that you stay mentally fresh for as long as possible throughout the day. You are also doing this to ensure that you leave work with energy for what’s after work – life! When you create this discipline, and you stick with it for a week, it means you have energy to burn at the weekend. Otherwise, you spend that downtime in survival mode, dreading the return to work the following week. Recovery actions What do you actually do for the 60-second recovery? That depends on what you need. Sometimes it will be something simple that gives you a sense of control back, other times it will be something that slows down your mental traffic, and other times it will be something that energises you. Here are some examples: tidying, filing, reading, chatting, stretching, walking, improving your posture, and, the best one of all… breathing. Increase capacity If you’ve been following my well-being series, you will have come across  references to mental fitness. I am in the fitness business and fitness is about increasing capacity. Stress management is not about reducing stress in work and life, it is about increasing our capacity to cope with whatever is coming next. And when it comes to increasing capacity, discipline is your best friend.   Physical is the new psychological As you can see from the above, almost all of the strategies for stress management and mental health are physical and not always mental. It’s always beneficial to go out do something. Your body has the answer: calm the body and the mind will follow. Stopping is not recovering Leaving work and going home does not count as recovering. If you just crash into bed, you will still feel exhausted in the morning. Doing something that absorbs you – that energises you – is recovering. Finding the discipline to go for a short walk rather than watch television is recovering. Going to your yoga class is mental toughness and recovering. Remember: discipline eats stress. The key to resilience is working really hard, stopping, recovering properly and then working really hard again. Work success So far in this series I have been focusing on an operational level – how to have high self-worth, how to operate on the edge of comfort, how to have great habits and how to manage stress better. In the remaining two articles, I will be taking a more strategic approach.  See you then.

Jul 03, 2017
Spotlight

The Institute’s regulatory and disciplinary function is central to maintaining trust and integrity in who we are and what we do. The regulatory landscape faced by the profession has changed beyond recognition over the last two decades. For Chartered Accountants Ireland, this landscape is made even more complex by the fact that we have regulatory obligations in two jurisdictions, and it is likely that one of those will soon be outside the European Union (EU).  While much of the discourse around regulation of the profession in recent years has focused on implementation in Ireland and the UK of the EU audit reform package, remember also that the Institute’s regulatory functions extend beyond statutory audit to insolvency, investment business, anti-money laundering supervision and ATOL licensing (UK travel agents) – all of which is supervised by a variety of State agencies. And this is all underpinned by various regulations of our own, compliance with which goes hand-in-hand with being a Chartered Accountant. Our regulatory stakeholders in Ireland include the Irish Auditing and Accounting Supervisory Authority (IAASA), the Department of Justice, Equality and Reform, and the Central Bank. In the UK, the Financial Reporting Council (FRC), Financial Conduct Authority, the Insolvency Services (one in Great Britain and one in Northern Ireland) and HM Treasury – all providing State oversight or supervision of the Institute’s exercise of its regulatory obligations. More recently, the role accountants in practice can play in the prevention of money laundering has come under particular scrutiny with EU legislation imposing specific requirements for external accountants/auditors to have in place appropriate measures (client due diligence and so on) to mitigate money-laundering risks. In Ireland and the UK, legislation requires the professional bodies to supervise compliance with this regime. Indeed, in the UK there is likely to be established shortly a State agency – the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) – whose role will be to oversee how the accountancy and other professional bodies supervise their members’ AML compliance. The regulatory field is truly a crowded place. All such regulators have similar but different supervisory requirements and needs; all requiring to some extent regulatory plans, periodic reporting, appropriate processes and procedures. It is not surprising, therefore, that over the last quarter of a century, Institute members and practitioners have witnessed the evolution of a suite of bye-laws and regulations necessary to allow the Institute to carry out these regulatory functions. To say that Chartered Accountants work with a complex regulatory framework is an understatement. Why do this at all? A look back at Institute’s Royal Charter provides an insight into the thinking behind what it means to be a Chartered Accountant. This states that the Institute exists to ensure that there are professional accountants with the integrity, skills, expertise and judgement necessary to support the economy and society. It describes the tasks of the then “public accountant” as “difficult” and “important”, requiring observance of “strict rules” of conduct as a condition of membership. The various rules and regulations now applicable to Institute members are of course unrecognisable when compared to what existed some 128 years ago. Nevertheless, the essence of the message these rules conveyed is equally relevant to today’s Chartered Accountant. Our new president, Shauna Greely, recently captured this succinctly: “Integrity and ethics are right at the core of what it means to be Chartered Accountants”. Maintaining trust and confidence in our profession and having regard to the public interest remain key components of the Institute’s mission. Strategy 2020 reaffirmed our commitment in this regard, stating that a key element of the Institute’s aim is to maintain our role as regulator of all Chartered Accountants, so public confidence in the profession is maintained and enhanced. Our commitment to maintain the regulation of our members as Chartered Accountants holds true in the context of the transfer of the regulation of PIE (Public Interest Entities) auditors to IAASA. It is a principle that in the first instance, regulation should be supportive of members in their day-to-day professional lives, backed with stringent but appropriate discipline. In practical terms, the Institute’s regulation and disciplinary functions are central to providing assurance to members and other stakeholders equally that the Institute takes this seriously. The frameworks governing how these functions are delivered, however, have changed significantly over the years. We are no longer a self-regulating body which supervises the performance of many of the core activities traditionally performed by Chartered Accountants such as statutory audit work, investment business services or UK insolvency work. The Institute’s own regulatory obligations in these areas is overseen by the above-referenced State agencies with significant powers to review, instruct, investigate and sanction professional accountancy bodies. In practical terms, this means that the Institute is regularly reviewed/inspected by such agencies; reports of findings are issued; and recommendations made are followed up to ensure implementation – in many respects, such a process will be familiar to many practitioners. A key difference is that the Institute could possibly be subjected to a number of different reviews/inspections, findings and closing meetings annually. Such change in the regulatory landscape governing our profession is an essential element in maintaining confidence in what we do; the Institute has long acknowledged this. For example, the recent transfer of responsibility to IAASA for the supervision and inspection of audits of so-called public interest entities (PIEs) has been long supported by the Institute as a critical element in reaffirming confidence in statutory audit. To answer the “Why do it?” question above, I do believe that the Institute continues to be well-placed to play an important role in the delivery of regulation and discipline. Current arrangements allow members in practice, in particular, to carry on a range of activities (those regulated by statute) that would otherwise require them to be regulated/supervised separately by a number of different State regulators whereas, at present, in this regard the Institute provides a single point of reference and regulation. Change and challenge Undoubtedly, the most significant change to the Institute’s regulatory framework has resulted from the transposition in Ireland and the UK of the EU’s statutory audit reform package, which took effect from the middle of last year, with Ireland due to complete certain aspects of the transposition later this year via a Companies (Statutory Audits) Act. In transposing this legislation, the UK and Ireland could have put the professional bodies out of the audit regulation business, full stop! Instead, both jurisdictions have opted to avail of a “delegation approach” which permits State competent authorities (IAASA and the FRC) to delegate certain audit regulatory activities back to the professional accountancy bodies, but subject to specific terms and conditions. This regime is now live in the UK between the FRC and the recognised bodies and is currently being discussed in Ireland between IAASA and the recognised accountancy bodies (RABs). In Ireland, while the general consensus may have been that these new regimes will actually mean a certain degree of ‘de-risking’ by the accountancy bodies, given that IAASA has now assumed responsibility for supervision of PIE audits, there are aspects of the current legislative proposals, particularly relating to the supervision and investigation of auditors from other EEA states, which will require further scrutiny. It is also proposed that the RABs will retain responsibility for investigating complaints concerning PIE audits which have not arisen as a result of an IAASA inspection (nobody said this was simple!) Ultimately, as with any scenario where the Institute is being asked to assume regulatory responsibilities, whether by statute or otherwise, Council of the Institute decides on whether these delegation terms and conditions are acceptable, taking account of costs, resource needs, risks to the Institute and advantages/disadvantages to members and firms. The Institute has already signed up to a similar delegation structure in the UK. And assuming it does likewise in Ireland (with IAASA), we embark on a new relationship with our two key regulators in terms of the supervision of statutory audit. And while the scope of responsibilities of IAASA and the FRC differ somewhat, the new regimes provide a platform that will also require positive relationships to deliver on a shared agenda of promoting confidence in the profession, albeit acknowledging the need for a certain degree of healthy tension that, by necessity, must exist between all concerned. The Institute, of course, has an ongoing imperative to deliver its regulatory functions in a manner that is efficient and fair. I would add to that ‘proportionate’ and ‘balanced’. An ongoing challenge for regulators, I believe, is to achieve an approach to regulation which, as well as assuring compliance with relevant regulatory and professional requirements, also adds value and encourages and recognises high standards and quality. Practitioners, in particular, already face significant challenges in serving the needs of clients. So where we can provide assistance in addressing the requirements of what often seem difficult and complex professional requirements, we should. Members in business too are obviously subject to the Institute’s range of bye-law and regulatory requirements, particularly with regard to Continuing Professional Development (CPD). Note that while the quantum of CPD is important (whether input or output-based), a popular misconception that exists is that this must be primarily in core areas such as financial reporting. What is important is that CPD undertaken is relevant to the day job, be that marketing, compliance, HR, IT and so on. CPD in so-called softer skills also constitutes relevant CPD. Of course, where there is alleged misconduct, the Institute is obliged to ensure that this is dealt with in accordance with appropriate processes and procedures. Undoubtedly, the adversarial nature of a regulatory or disciplinary process can be difficult for all parties involved – and it is! The only certainty with regard to the regulatory environment in which the profession operates is that it will continue to change. Revised audit exemption thresholds introduced finally by the Companies (Accounting) Act, 2017 in Ireland may well result in more firms deciding that they no longer require an audit licence. Indeed, where firms are not providing services requiring any form of statutory oversight by the Institute, the need for continued membership may be questioned given there continues to be an inequitable regime in Ireland and the UK on the recognition of the term “accountant” or the provision of accountancy services (although there would continue to exist a requirement for supervision under AML legislation). Recognition of the term “accountant” was one issue raised recently at a meeting between the Institute president and Minister Mitchell-O’Connor. In Ireland and the UK, we may see amendments to the investment business licencing regimes as a result of transposition of the EU Insurance Distribution Directive, due for transposition next year. We can also expect further enhancements to AML requirements. So it’s not just about statutory audit. The Institute’s  regulatory/disciplinary function is one component of the Institute’s key strategic priority of promoting and maintaining trust and integrity in who we are and what we do. As identified in Strategy 2020, our underlying challenge is to perform our regulatory responsibilities in a manner that has the confidence of external stakeholders and our members. Anything else? Did someone mention Brexit? Aidan Lambe FCA is Director of Professional Standards at Chartered Accountants Ireland.

Jun 01, 2017
Personal Development

Anxiety can strike anyone, anywhere and at any time. With exams just around the corner, here are some tips to help you keep anxiety at bay and – should you need to – deal with an anxiety attack when it arises. Words by Dawn Leane “His palms are sweaty, knees weak, arms are heavy; there’s vomit on his sweater already, mom’s spaghetti; he’s nervous, but on the surface he looks calm and ready to drop bombs; but he keeps on forgetting what he wrote down...” Ok, so you’re facing your professional exams, not a rap battle… but under certain circumstances, anyone can be visited by anxiety and panic. A healthy lifestyle and good study practice are essential in the lead-up to the exam. On the day of the exam, however, apart from a few practicalities, your psyche is really the only thing within your control. Anxiety causes cognitive processes to believe negative self-talk such as “I haven’t done enough”. In such a scenario, a cycle of physical reactions and heightened anxiety quickly becomes established. This cycle can be broken with practised interventions and it’s important to prepare these in advance. These strategies can be carried into your future career and will benefit you in interviews, presentations and public speaking. Before the exam On the day of the exam, avoid studying any new topics as this may impair your ability to remember what you’ve learned. Don’t study for the last hour before the exam and most importantly, keep away from other anxious people. Take a bottle of water, some nuts or fruit, and a slow release carbohydrate into the exam. Avoid sugary snacks that will lead to a quick high followed by a slump. In the exam hall It’s natural to feel nerves prior to starting the exam, but excessive nervousness is counterproductive. Give yourself time to settle and use a breathing exercise to calm yourself before you turn over the exam paper. Take time to read through all the questions and instructions carefully. Make sure you get a firm grasp of the questions and what’s required of you. Then, prioritise what needs to be done, divide your time according to the importance of the questions, and answer the easiest questions first. This will guarantee marks in the least amount of time and help build your confidence. Don’t rush through the exam and regularly check the time. When anxiety strikes… If panic sets in or your mind goes blank, close your eyes and take several long, slow and deep breaths. This will help calm your entire nervous system. Then: Identify the feeling and own it; remind yourself that your panic will end; Set aside three minutes to divert your attention away from the panic; think about something unrelated to the exam; Use the mini-relaxation exercises you have been practising; Think positive and repeat coping thoughts such as, “I know I can deal with this”;  Remind yourself of a similar situation which you survived; Remind yourself of your past successes, especially exam achievements; and Visualise yourself feeling more relaxed and able to get through the questions. If you still can’t remember the information, then move on to another question and return to this question later if time allows. If you feel unwell, on the other hand, call the invigilator. They are there to help you and are experienced in dealing with such situations. And remember, it’s only an exam! Of course you want to do well, but it’s not a life or death matter. In fact, resilience is a key component of leadership. Behavioural psychologist, Albert Bandura, suggests that “if people experience only easy successes, they can come to expect quick results and are easily discouraged by failure… the route to high attainments is strewn with failure and setbacks. Success is achieved by learning from mistakes.” If you suffer from anxiety, cognitive behavioural therapy (CBT) can really help. Further information and support is available from Reachout, Spunout and Chartered Accountants Support. Dawn Leane is Director of People and Resources at Chartered Accountants Ireland and Coordinator at Chartered Accountants Support.

May 02, 2017
Personal Development

Accountancy Ireland Extra has partnered with the team at SpunOut.ie to bring you some top nutrition tips for the exam season. Eating well is good for both your mental and physical health. When it comes to exams and studying, you want to be at your best – that means eating the right foods to ensure your concentration levels are where they need to be. We have put together some tips to ensure that you can eat your way to exam success. Avoid skipping meals No matter how rushed you are, try to avoid skipping meals – especially breakfast. Starting your day with breakfast gets your body going and maintains your concentration for the day. Have a look at our article on breakfast for busy people. Eat plenty of fruit and vegetables It might sound like hard work, but try to add fruit or vegetables to every meal if possible. Simple ways to increase your fruit and veg intake include smoothies, adding banana to toast, and adding fruit to porridge or breakfast cereals. Drink plenty of water Try to drink eight glasses of water per day to keep your body hydrated. By drinking enough water, you’re also less likely to be hungry. If you’re not a fan of water on its own, add a sugar-free diluted squash. Opt for healthy snacks It can be tempting when studying to reach for unhealthy snacks. Snack foods such as cakes, biscuits, chocolate and sweets can be high in sugars and saturated fat, and low in certain vitamins and minerals. Instead, keep fruit such as apples, blueberries or bananas on hand for those moments you need a snack. Check out our article on swapping your favourite snacks for healthier alternatives. Wholegrains The brain cannot function without the right energy, and it needs a constant supply throughout the day to ensure it functions correctly. Achieve this by eating wholegrains with a low glycaemic index (GI) such as brown pasta, brown rice or brown bread. Things to avoid… Avoid sugary snacks as they will result in a short-term high that will eventually come crashing down, leaving you feeling tired. Don’t overdo the caffeine. Coffee and soft drinks such as Diet Coke may give you a short-term energy boost but in the long run, it will result in an energy crash that just isn’t worth it. Avoid energy drinks like Red Bull, as they will result in a caffeine and sugar rush that won’t do your body any favours. And lastly, when you’re studying, alcohol is not your friend. It will dehydrate you, disturb your sleep and wreck your concentration the next day. Not worth it! This article was produced by Spunout.ie, Ireland’s youth information website. Five great brainfood-based snack ideas The last thing you need right now is to spend time researching what to eat in the run-up to your exam, so we’ve done the hard work for you! Here are our favourite brain food snacks, all of which are quick and easy to prepare... Hummus and carrot/celery sticks. You could make both from scratch or – to save time – pick up the end-product in your local supermarket. Apple slices with almond butter. The latter can be pricy but you’ll pick up a bag of apples for less than a euro, so it all balances out. Natural yogurt with chia seeds, banana, blueberries and nuts. This can also be a full breakfast, but it’s a superfood bonanza for the brain. Smashed avocado on wholegrain toast. A big snack that’ll keep you going for a couple of hours. Dark chocolate. A daily portion of dark chocolate has been found to improve blood flow to the brain, so treat yourself!

May 02, 2017
Spotlight

Diversity and inclusion initiatives have gained a lot of traction throughout Ireland’s corporate landscape. But do they add tangible value for organisations? EY's Olivia McEvoy reports. Although accountants might not be able to bring themselves to agree, it can seem as though there are countless quotations pertaining to, and definitions of, ‘diversity’. Malcolm Forbes describes it as “the art of thinking independently together”, while others draw on an old Muslim saying that “a lot of different flowers make a bouquet”. Despite the overwhelming number of definitions, common ground is reached in the certainty that strength lies in differences. What is diversity and inclusion? The EY definition of diversity and inclusion is: “Diversity is about differences, seen and unseen. Inclusion is about creating an environment in which people are valued, feel valued and are able to achieve and contribute their full potential.” Creating an inclusive environment improves the way we interact with our people, our clients and our communities. Inclusion is also about leveraging our differences to deliver better business results. In both this definition and much of the recent commentary on diversity and inclusion, the focus is very much on inclusion. Indeed, some suggest we have achieved diversity and now need to concentrate our efforts on inclusion. There is no doubt that diversity is now an aspiration for most businesses in Ireland as well as globally, but many of those same businesses still struggle to attract a diverse workforce in terms of gender, sexuality, ability, age and education as well as personality type and thinking style. We tend to view diversity and inclusion as a journey, and it is important to acknowledge that some businesses are in the starting blocks and some are further down the road. Very few have reached ‘Destination D&I’. It is, however, true to suggest that diversity can be the easier element to achieve; the real test begins in earnest when you are trying to build an inclusive environment and leverage diversity to improve business performance. It is equally true to say that, if you are successful in building an inclusive environment, you are much more likely to attract and retain a diverse workforce. The business benefits Although it is almost universally accepted now that diversity and inclusion is a business imperative and a ‘must have’ rather than a rights-based agenda or a ‘nice to have’, there are some who still question whether diversity and inclusion can actually deliver better business results and contribute to competitive advantage. Again, there is a wealth of research and countless statistics that support diversity and inclusion as a key driver in achieving success in new markets, improving market share and ultimately driving revenue generation and profitability. While many of these statistics are global and depend on variables such as company size, there remains much indisputable evidence. A highly regarded McKinsey study in 2015 entitled ‘Diversity Matters’ examined data for 366 public companies across a range of industries in Canada, Latin America, the United Kingdom and the United States. It found that:   Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians; and Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. More recently, in 2016, the Peterson Institute for International Economics and EY released a study revealing a significant correlation between women in leadership and company profitability. The report found that companies with at least 30% female leaders had net profit margins up to 6% higher than companies with no women in senior ranks. This report is but one of many to find that gender diversity has a positive impact on profitability. As such, there are few businesses that can choose to ignore what automatically increases revenue and profitability, but the benefits of diversity and inclusion do not stop there. It also delivers:   Continuous innovation achieved by harnessing the power of different experiences, knowledge and skills; Enhanced team performance and stronger collaboration; Increased awareness of biased behaviours and their impact, resulting in better decision-making; Enabled leadership to drive cultural change and build high-performing, diverse teams; Increased motivation for employees resulting in better job satisfaction, reduced stress and reductions in absenteeism; and Enhanced reputation in consumer markets. Despite the compelling nature of all of the above benefits, it is the fact that diversity and inclusion is accepted as a key contributor to talent acquisition and retention that sways many businesses to pursue the agenda. No matter the size of your company, the war for talent is a hard one to wage and win. This is particularly the case in relation to attracting and retaining millennials who are the first generation to grow up in the digital age. There are currently more than 500,000 millennials in Ireland and, in just 10 years, they will comprise nearly 75% of the workforce. This elevates the importance of the diversity and inclusion agenda even more, as millennials absolutely expect diversity as a matter of course. Indeed, millennials fully expect to be celebrated for their differences. And how right they are. Cognitive diversity, which is different thinking styles and personality types, is particularly valued by this cohort as it stimulates dynamic ideas and solutions that can drive innovations in a much more effective way. Indeed, research from the Billie Jean King leadership initiative reports that millennials see the concept of diversity and inclusion through a completely different lens and that there is now a trench between the generational mindsets on the issue. Fundamentally, millennials see diversity and inclusion as a necessary element for innovation. The same report emphasises that companies with high levels of innovation achieve the fastest growth of profits, while radical innovation trumps incremental change by generating 10 times more shareholder value. The impact of a lack of cognitive diversity and inclusion hits hard on engagement and empowerment, as well as the ability of employees to remain true to themselves. If any of us are to be fully engaged, we require supportive leadership and a supportive culture. As reported in the Billy Jean King report: “If you want to build a truly inclusive culture – one that leverages every individual’s passion, commitment and innovation, and elevates employee engagement, empowerment and authenticity – you should be willing to break down the narrow walls that surround diversity and inclusion, and limit their reach. If you don’t know where to start, ask your millennials. Every one of them wants to be heard.” What makes for a good diversity programme? There has been an understandable tendency to adopt a strand-based approach to diversity and inclusion, with the need to address gender equality particularly obvious. The referendum on marriage equality brought increased awareness of, and focus on, the LGBT strand in Ireland. Therefore, at this juncture and where strides have already been made, we need to step back and take a more holistic and strategic view of diversity and inclusion and integrate it into our corporate strategy and core business activity. The following is central to any successful diversity and inclusion programme. Diagnostics and diversity and inclusion data: accountants should not need convincing of the importance of knowing the numbers! And they are spot on; it is absolutely imperative to know your organisation. Diversity and inclusion data gives critical insight into organisations. Indeed, even the data we are not able to gather tells its own story. Through diagnostic assessment, data can drive a deeper understanding of the employee experience and where the critical decision points are in order to achieve diversity goals. This might be across any one business component such as talent attraction and retention, performance management and progression or leadership competence and accountability. Detailed data on the likes of recruitment ratios, promotion rates of female employees compared to male employees, or salary-related data allow us to develop tailored action plans to address any specific issue that emerges. As with any other business element, it is vital to ascertain your current state before you can meaningfully set realistic targets and goals and make progress. Once you diagnose the situation, you can establish diversity and inclusion key performance indicator (KPI) frameworks and know how you are going to measure success. One of the challenges for those keen to pursue the diversity and inclusion agenda is that it is sometimes seen as a ‘nice to have’ add-on. Having evidence-based data helps counteract that and allows us to measure progress and resulting growth. Sustainable strategy and good governance: a diversity and inclusion strategy that is incorporated into business strategy and core business activity is central to success. Very simply, diversity and inclusion needs to become an essential component of how we conduct business. Having a strategy really helps align diversity and inclusion with corporate strategy and enables it to become embedded in the overall culture and governance of the organisation. The strategy needs to be goal-orientated, metric-focused and underpin all diversity and inclusion activity. The strategy should also be accessible and include key principles and messages that can be understood by all. Informed, enabled and accountable leadership: any diversity and inclusion strategy or programme needs visible C-suite and executive sponsorship to succeed. Leadership needs to be aware and really understand diversity and inclusion, talking about it with people at all levels, inside and outside the business. As leaders, we also need to live and practise diversity and inclusion in our thinking, recruitment and work practices. In addition to leadership commitment and support, we must also emphasise impact, measurement and accountability. Introducing accountability as part of performance measurement certainly helps to elevate diversity and inclusion from a ‘nice to have’ to a core element of business activity. However, rather than expecting leadership to be automatically familiar with and knowledgeable about diversity and inclusion, we need to enable leaders to drive the agenda. To this end, it is essential to resource inclusive leadership and unconscious bias training that enables leaders to build high-performing teams and facilitate innovation. There are, of course, multiple other tenets of a successful diversity and inclusion programme, including flexible working arrangements that allow for, and support, diversity in the workforce. The visibility of diverse role models should not be underestimated based on the simple premise that ‘you can’t be what you can’t see’. People will naturally seek employment where they see themselves represented in the organisation, particularly at leadership level. Dovetailing recruitment practices with the diversity and inclusion data diagnosis and ensuing metric targets is also a key factor. Diversity and inclusion into the future Diversity and inclusion is a key driver of the future we aspire to, where we equate business in Ireland with risk excellence, sustainable growth and performance as well as cutting-edge innovation. It is also a key tenet of success right now. The first step is to truly value, champion and celebrate diversity, creating spaces where different perspectives are encouraged, from a workforce diverse in ability, age, ethnicity, gender, race and sexual orientation, as well as in thinking style and personality type. With the right strategic approach, leadership support and data analytics, we have the tools to leverage those celebrated differences to build a better working world that is truly diverse and inclusive. It is the right option. It is the business-smart option. It is the only option. Olivia McEvoy is Director of Diversity & Inclusion Advisory Services at EY Ireland.

Apr 01, 2017
Spotlight

Michele Connolly looks at the data behind the headlines about the gender pay gap and explains why reporting on such issues will force companies to act. The title of this article is an interesting one; it highlights from the outset that the issues underlying diversity and inclusion in the workplace are multifaceted. Likewise, the solutions are not necessarily always obvious. Take the issue of the gender pay gap. A report published last month indicated that, in 2015, Ireland had a 14.8% difference in median pay between men and women. That figure has declined steadily from 19.7% in 2000. However, statistics show it hit a low of 8.3% in 2012 before rising to 15.2% in 2014. Does this mean that a significant number of companies pay male counterparts more for doing the same job as women? Not necessarily. The statistics reflect an average salary across each gender in an organisation. To get a true picture, you must go behind the headlines and compare the results at different grades of staff, with different working arrangements and across different levels of experience. Take a typical director grade in practice. The reality is that there are still probably more men in that grade who have been in that position longer, who have more experience and therefore – on average – get paid more. There also tends to be a greater proportion of women in support grades in our organisations, which tend to command lower salaries. On an average basis, a higher number of women in lower paying support grades plays against a higher number of men in more senior, higher paid roles. The resulting statistic will show this simply as a pay gap. So yes, there is a pay gap. That is not discrimination; rather it is reflective of the fact that we have not yet succeeded in achieving better gender balance at more senior levels in our organisations. The real focus should be on how to address that issue. Gender pay gap reporting is coming Gender pay will feature in the UK media more and more as it introduces mandatory reporting on the gender pay gap for all companies with over 250 staff from 1 April 2017. The UK is following a growing trend across Europe, with many other countries boasting similar provisions. The resultant statistics are likely to show that, in headline terms, there is a pay gap. But when you adjust for some of the factors referred to above, such as experience, grades and working hours, the gap narrows considerably. One organisation that voluntarily reported its gender pay gap in the UK reduced the pay gap from mid-teens to less than 3% when adjusted for differing levels of experience. Consider the adage: “what gets measured gets managed”. This principle can apply equally to business situations. It can mean that simply examining an activity in turn changes the activity by forcing you to pay attention to it. It can also mean that producing measurements about the activity gives you a handle on it, a way to improve it. Knowing that they might ultimately have to report statistics should therefore cause organisations to examine their data sooner rather than later, analyse the differences and consider what they can do to improve the gender balance in senior leadership levels in the first place. What about the promotion question? Confidence is key to leadership and driving forward for advancement. Yet it is something that, on average, women struggle with throughout their careers more than men do. KPMG undertook a study to explore the qualities and experiences that contribute to women’s leadership and advancement in the workplace. The findings revealed that there is no shortage of ambition among the women surveyed. Six out of 10 aspired to be a senior leader of a company or an organisation, yet more than half agreed that they are more cautious in taking steps towards leadership roles. The results reveal a critical disconnect: women want to lead, but something is holding them back. Were the women encouraged to lead as children? Did they have a role model? Were they offered appropriate support and development opportunities in the workplace? Such factors play a possible role in whether a woman moves up the career ladder into a senior leadership role. There is plenty of research on the approach taken by males and females in pushing for promotion or a pay rise. Of the women surveyed by KPMG, over 75% did not feel confident in asking for access to senior leadership, a promotion or pursuing a job opportunity beyond their experience. Their male counterparts are unlikely to be as hesitant. There is an oft-cited example of two people looking at promotion criteria for a new role. The male candidate will look at the 10 items, believe he meets the criteria in three or four and go for the job. The female candidate will do likewise, believe she meets eight to nine criteria and not apply as she doesn’t meet all 10. It is not a case of one approach being better than the other. The average female brain simply works differently and approaches such matters in a different manner. However, the reality is that most performance appraisal or promotion systems are traditionally designed to target more male-dominated traits. It is therefore (unconsciously, in many instances) not a level playing field. Iris Bohnet, a behavioural economist at Harvard University, in research for her book entitled What Works – Gender Equality by Design, has found that “companies that use potential, in addition to performance, as a way to evaluate employees are more likely to be gender-biased. We generally find that leadership is associated with men, and potential has something to do with career advancement and climbing up the career ladder. We don’t necessarily associate career and leadership with women”. What can we do to effect change? Many organisations are starting to tackle these differences by introducing unconscious bias training. This was first put forward as a concept by psychologists at Harvard University, the University of Virginia and the University of Washington who created ‘Project Implicit’ to develop hidden bias tests – also called implicit association tests, or IATs, in the academic world – to measure unconscious bias. IAT measures attitudes and beliefs that people may be unwilling or unable to report, which would indicate that most of us are pre-programmed to associate certain roles and traits as either male or female. For example, you may believe that women and men should be equally associated with science, but your automatic associations could show that you (like many others) associate men with science more than you associate women with science. Unconscious bias training simply seeks to raise participants’ awareness of these inherent biases in our thinking so we can start to challenge ourselves more and apply a gender lens (as opposed to positive discrimination) in how we approach performance appraisal, salary reviews, promotion discussions and job allocations to ensure they are appropriately gender balanced. Another key component in the toolkit for addressing gender diversity is mentoring. Whether you are a man or woman, having someone more senior in the organisation looking out for you, acting as a sounding board and being an advocate for you is invaluable in helping you develop the skills necessary to push for advancement to more senior leadership roles. So how do you get a mentor? The same KPMG study quoted above highlighted that nine in 10 women said they do not feel confident in asking for a sponsor and eight out of 10 lack confidence in seeking mentors. Implementing formal mentoring programmes and leadership development programmes aimed specifically at high-potential women in an organisation is an invaluable step on the road to changing the gender balance of an organisation. Is the gender balance improving? The number of females in management roles and at senior leadership levels in organisations is slowly but steadily increasing. The 30% Club’s recent Women in Management study with Dublin City University found that women now hold 40% of positions at the lowest level of management surveyed (three steps down from CEO) and 17% of CEO positions. The statistics do vary by sector and organisation size, with women more likely to feature in leadership roles in areas such as HR and marketing, and less so in finance, sales, operations or IT. Other recent statistics show that in 2015, Ireland had on average 18% female board representation. That is up from 10% 10 years ago and 16% in 2014. These findings are in line with a 2016 McKinsey study on women in the workplace. In 2011, the EU proposed that it would introduce legislation requiring all publicly quoted companies to have 40% representation of women on their boards by 2020. While the council of ministers has failed to get all member states to agree to enact the legislation, it has had an impact. In 2010, when the European Commission first put the issue of women in leadership positions high on the political agenda, only 11.9% of board members of the largest publicly listed companies in the EU were women. This rose significantly to over 21% in 2015. In the UK, the 2011 Davies review recommended that the FTSE 100 leading companies should have at least 25% female representation on their boards. Some investment managers are now mandating this among their investee companies and publicly saying they will vote against board appointments that do not contribute to meeting this objective. 26% of board positions in FTSE100 firms and 20.4% in FTSE250 firms are held by women. There are now no all-male boards in the FTSE100 firms and just 15 all-male boards in the FTSE250 firms. Like the gender pay reporting, a policy initiative is causing organisations to take notice and act. However, there is still a very long way to go if we are to achieve gender balance. As a profession, what else can we do? We know that work/life balance is an increasingly key factor in career choices – at all levels and for both sexes. Initiatives such as intelligent working arrangements, ramp up and ramp down in career planning, and greater maternity supports all play a key role here. Space is too short to delve properly into this area on this occasion other than to say that most of us now work in a very mobile fashion. Does it matter whether we are sitting at a desk, on a train or in our own homes? Should the measure instead not be the quality of the output rather than the location from which it is delivered? However, it does challenge the status quo of the presenteeism concept that still pervades in many areas. As a country, we have made a lot of progress in the past few years. Yes, there is more to do. But by reporting and commenting on the issues, organisations are starting to put in place positive strategies to effect change. We are realising that not only is it the right thing to do, but it makes good business sense too. Michele Connolly FCA is Head of Corporate Finance at KPMG Ireland and a member of the Institute’s new Diversity Committee.

Apr 01, 2017
Spotlight

A lack of exposure is inhibiting the rise of talented women throughout the corporate world. Could sponsorship be the answer? Mark Fenton reports. We’ve heard the soundbites – gender pay equality is 170 years away; only 4.4% of S&P 500 CEOs are women; only 14% of Irish companies have either a female CEO or Head of Operations (and this ratio is diminishing). Meanwhile, an international report by Citi showed that closing the gender gap in labour market participation could add 12% to OECD gross domestic product (GDP). And yet there are many men (and some women) who believe gender equality in the workplace is a zero-sum game. For example, if women are to win, men must lose. Men often feel disengaged from the inequality problem too because issues relating to gender do not concern them. Further, when men do generally get involved, it is to ‘fix’ the problem by encouraging women to behave in the same way that men do in the workplace.With such a high socio-cultural mountain to climb, it is no wonder that progress has been painfully slow towards gender equality at work. Furthermore, the traditional talent programmes (most commonly packaged as ‘mentoring’) have not delivered the necessary results in terms of the recognition, professional development and career progression of women. Why is this, and what can be done to correct it? A mentor can empower a person to see a possible future and believe it can be obtained, but many mentoring programmes fail because the discussion surrounding such empowerment doesn’t generally apply in real life. As E.M. Forster put it, “Spoon feeding in the long run teaches us nothing except the shape of the spoon.” Mentoring is restrictive as it involves talking to just one individual and, more often than not, expectations are not met regarding mentee belief and mentee exposure. Exposure is the recipe; sponsorship provides the ingredients  Studies have shown that there are three principle levers to career success and their weighting is not as you might expect. One’s professional performance (i.e. how you do your job) is important. However, in modern businesses with sophisticated talent attraction techniques, it accounts for just 10%. After all, your company expects you to be excellent – that is why you were hired in the first place. More important is your professional image (i.e. how you present yourself in the workplace). Being assured, trustworthy and open to change is central to your success and this impacts on just under one-third of your success. Perhaps surprisingly, it is your exposure that holds the lion’s share of future opportunity and advancement. It is not what you know or indeed who you know. It is more about who knows you and what you can do. Historically, men have been expert at cultivating their exposure levels through informal and male-stereotypical networking environments. Conventionally, women have less flexibility (and perhaps desire) to embrace these traditions. They also remain more risk-aware of their abilities, whereas men are generally openly confident about their suitability for a new opportunity. In terms of exposure, sponsorship is more involved than mentoring regarding both the sponsor and sponsoree – both are accountable for the process and its outcomes. The best programmes last for at least 12 months, include job-shadowing, resilience-coaching and are supported by clear metrics. Sponsorship takes mentoring beyond the tandem partnership and into the boardroom and/or management meetings. Sponsors talk to and about their sponsorees and therefore increase their corporate exposure and can provide feedback on unseen opportunities for growth. Sponsors also benefit from the learning opportunity that comes with an intense, frank and extensive personal and professional interaction. Sponsorship’s immediate and impressive impact The impact of sponsorship can be immediate and impressive. A recent series of sponsorship programmes within a Euro Stoxx 50 firm doubled the ratio of women at the top layer of management in just two years and demonstrated that an overwhelming majority of senior female promotions were directly linked to participation in such programmes. Sponsorship is not about talking to me; it is talking about me. It is the key to unlocking the main obstacle to women’s career success – a lack of exposure. Mark Fenton FCA is founder of MASF Consulting, a specialist advisory firm focusing on diversity and inclusion.

Apr 01, 2017
Ethics and Governance

The country owes a great debt to whistle-blowers but for a company, a revelation can be a corporate earthquake writes Ita Gibney. Psychologists have a saying that “you are only as sick as your secrets” and psychotherapy has taken off as people deal with their issues through counselling, confessional memoirs, forgiveness and going public. Even the most admired and healthy-looking individuals (Bruce Springsteen, for example) are surprising us by telling us about their vulnerabilities. But that’s therapeutic, inspiring and part of the recovery process. It usually happens when the person is able and ready to face particular issues or problems. But consider this: if someone else – someone within the family, for example – were to ‘out’ your secret or your wrongdoing without warning, how could you then deal with it and the trauma that would inevitably arise? The corporate analogy is whistle-blowing. In any game, it is up to the referee to blow the whistle. Can you imagine if a player on the Mayo team had one of their own team blowing the whistle when he saw a foul by his teammate? It would upend the game. In corporate entities, the act of whistle-blowing runs completely counter to how organisations work – be it a bank, church, police force, or political party. They are all systems where, when something goes wrong, the default dynamic is to close ranks and defend the side. Whistle-blowing turns such systems on their heads. It blows the lid off the game, the organisation, its leader and its entire structure and culture. Exposed and alone Maybe we have reached this stage in corporate Ireland because the various referees have been seen to be silent and blind. The public attitude is therefore akin to “fair dues to the whistle-blower”, recognising the courage it takes to act outside the system but also ignoring the isolation, scapegoating, character assassination, criminal investigation and future unemployability he or she may have to endure. Even the real referee will likely not befriend the guy who blew the whistle. Cheering on the whistle-blower is fine, and the media and politicians do so given the feast of information he or she can provide. Giving legal protection in the form of protected disclosures is progress, but being exposed and alone as the corporate ‘snitch’ when the earthquake happens can be a lonely and dangerous place to be – as history shows. Ireland is too small a country to have a witness protection programme, but maybe we could look at the citizen enforcement action provisions in the US. Whistle-blowers risk retaliation if they challenge abuse of power or any other misconduct that betrays the public trust, and numerous studies have confirmed this. To ensure the effectiveness of a disclosure, the US False Claims Act enfranchises whistle-blowers to file suits in court against illegality exposed by their disclosures. These types of suits are known as “qui tam” actions in a reference to the Latin phrase “he who sues on behalf of himself as well as the king”. These statutes can provide both litigation costs and a portion of money recovered for the government to the citizen whistle-blower. It is the nation’s most effective whistle-blower law in history for the difference it has made, increasing civil fraud recoveries in government contracts from $27 million annually in 1985 to over $1 billion annually since 2000. Cases in point Aside from the WikiLeaks initiatives and alleged hacking that impacted on the most recent US election, consider the most controversial corporate whistle-blower stories. One of the most famous was the Hoffman La Roche case. The company is the world’s largest producer of bulk vitamins for the pharmaceutical, human nutrition and animal nutrition sectors. In 1973, senior executive Stanley Adams discovered documents which suggested that the company was engaging in price-fixing activities to artificially inflate the price of vitamins. He passed the documents to the competition commission of the European Economic Community (EEC) in the knowledge that Switzerland – while not part of the EEC – had a free-trade agreement with it. The EEC failed to keep his name confidential during its investigation, passing documents containing Adams’ name to Hoffman La Roche. Adams was arrested and charged with industrial espionage and theft, and his wife committed suicide when she was told that he faced a 20-year jail term. In the end, Adams served six months in a Swiss prison. Adams later attempted to recover compensation from both the Swiss government and the European Union. In 1985, the European Union agreed to pay Adams £200,000 – about 40% of his total costs. The story of General Motors (GM) in 2003, meanwhile, has echoes of today’s Volkswagen crisis. Courtland Kelley, head of GM’s inspection and quality division, reported faults to management in the Chevrolet Cavalier and Cobalt. The cars had faulty ignition switches, which cut power in moving cars and were eventually linked to a number of fatal crashes. As his reports were ignored, Kelley brought an action against the company. US law allows a private individual or “whistle-blower” with knowledge of past or present fraud committed against the federal government to bring suit on its behalf. This suit was unsuccessful and Kelley was forced out of the company. In May 2014, the company was fined $35 million for failing to recall cars with faulty ignition switches for a decade, despite knowing there was a problem with the switches. Thirteen deaths were attributed to the faulty switches during the time the company failed to recall the cars. A corporate earthquake Undercover news gathering, even by one’s own customers or employees, has become easy with the rise of the smartphone. Of course, most well-run entities with strong corporate governance codes and a culture of doing things right have little to fear. They know and manage the risks to their reputations; they have crisis management plans; their ethos protects them; in their corporate DNA, people know instinctively what will pass and what will not. But if you don’t fall into this category and the whistle is blown, you face a sudden and immediate crisis. It is a corporate earthquake, a test of leadership like no other. It can start with a leak and finish in the High Court or, tragically, with loss of life. All the experts in the world will advise that it is easier to prevent a crisis than to handle one. Do no harm and you won’t have to worry about whistle-blowing. In other words, run a good ship. The corporate governance industry has taken off with this laudable ambition and people are making a good living lecturing on corporate ethics. But as financier Paul Coulson said at a recent Institute of Directors’ event, corporate governance is also good common sense. Whistle-blowing is not the only threat; at least those allegations have to be true. We live in an age of soundbite reporting and blogging, with unverified stories posturing as news on social media. In addition to the normal corporate vulnerabilities for which enterprises have planned responses and action plans (or should have), we now have unprecedented risks from inside information, secrets and wrongdoing – be that through whistle-blowers, data breaches, leaks, hacking or carelessness. Enterprises need to be very assured in their handling of the fallout; their mistakes, thanks to Google, will stay with them forever. In terms of crisis prevention, some wise chief executives now have corporate counsellors, a trusted senior independent person to whom they turn and who acts as their independent conscience before they make a decision to go down a particular path. Their lawyer is not always the one they ask – a decision can be legal but might not be moral or ethical or might not withstand the test of public interest or scrutiny. The road to rehabilitation Some people survived the recent earthquake in Italy by crawling under the bed. That is not a corporate strategic option when a crisis happens. Nor, of course, is recklessly going out in the storm to shout at the gods. Enterprises who deal well with these kinds of issues often come out stronger in the end. Corporate therapy requires honesty and communication as a prelude to full recovery; a lot of work goes into containing the damage, stabilising the situation, restoring normality (maybe even a new normality) as soon as possible and then dealing with the process of repair and rehabilitation which is so often necessary. And in the end, if the enterprise has survived, it can learn the lessons. Sometimes, tragically, the whistle-blower by that stage can often be left alone, whistling in the wind. Ita Gibney is Executive Chairman at Gibney Communications.

Apr 01, 2017

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