Donnchadh O’Neill explains why boards and their advisers will have to tread carefully as they work to recover their foothold in the new landscape.All professional advisers, including Chartered Accountants, are seeking new ways to support their clients. They are helping them navigate unprecedented changes in their workplaces, their financial reporting, their restructurings, and their contracts. In many cases, they are helping businesses fight for survival. Given the heightened risk of missteps in such a turbulent environment, corporate reputation management is now more vital than ever.In the short-term, clients face practical and legal considerations affecting business reopening following a Government-induced coma. Finance functions have been virtualised and governance structures tested. Workforce and workplace transformation has been sudden. Margin sustainability is the new short-term challenge as costs increase, and that is before you consider the looming recession and inevitable insolvencies that will follow.In the last crisis, services and supports to business changed with firms flexing different muscles more suited to the adverse conditions. Liquidators and receivers found themselves in the headlines, sometimes even taking strict precautions to protect their safety by avoiding media attention.Now no one can predict with any accuracy where this crisis will lead in working trends, in accountability requirements, and in ownership structures post-bailouts and business retrenchment as we face into recession. It is easy to foresee the bloodbath on Grafton Street and in specific sectors, which has already begun in terms of liquidations and receiverships. What is more intangible is the effect this long drawn out crisis will have on corporate behaviour, communications, and corporate reputation. Chartered Accountants are on the front line with their clients as these winds blow.I have worked over many years with excellent companies delivering on what they see as their mandate for their various stakeholders. They focus on delivering shareholder value, but also stakeholder value. Following the financial crisis, good corporate ethics, culture, and governance became a priority. Chartered Accountants Ireland shared a leadership role in this arena, with strong educational initiatives to teach and support members, business executives, and even directors. Accountants helped their clients develop risk management processes, including reputation risk, to embed prudence into corporate culture, prevent hubris, and guide decision-making.Regulation increased, especially in the financial services sector. The banking industry set out to address its behaviours by establishing the Irish Banking Culture Board. The EU grew its oversight activity by exercising its muscle to protect consumers. As climate change moved up the public agenda, companies began to include sustainability reports in their annual reports – and this will continue.Over the past number of years, the corporate sector has increasingly had to become more socially conscious, valuing and measuring its societal impact and its corporate reputation. This emergency has put a whole new speed and power behind what was already a growing trend. As harder decisions are taken in the months ahead, companies and clients will need sound judgement as they implement decisions that have a societal, as well as a financial, impact. The climate crisis is upon us and is already forcing its own reset. Failure to make decisions that account for the common good and the public interest can wreak enormous reputational damage and all the attendant costs of that. Great care and balanced thinking will see companies achieve their goals without being forced by political or public opinion to backtrack or revisit decisions ineptly announced or executed. Markets will judge companies ever more so on their ethical behaviour.Look at the public interest trend of late: companies and wages being kept afloat by the State;   companies declaring a pause in dividends (if only to preserve cash); others being mandated to do so (e.g. the banks). More than 300 listed companies in the UK have cut or cancelled pay-outs. Money earmarked for shareholders will be used instead to service or repay debt, or just to stay afloat. The insurance industry was elbowed by the Minister for Finance, while the courts will probably have the final say. Companies such as Aldi pledged to pay their small suppliers early to keep their cash flow healthy.I do not doubt that as governments the world over ultimately face the bill for this COVID-19 bailout, tax and tax avoidance and wealth taxes will move much faster to the top of the agenda. This will feed into director and corporate reputation management, and advisers will have to be aware of the spirit as well as the letter of the law when advising clients.Commentators are already forecasting a shift away from capitalism and globalisation – that will continue. Growing your food locally and manufacturing locally suddenly look like viable ways to manage your own future risk. Brexit and global trade wars are yet to hit, not to mention the effects of preparing businesses for a low-carbon future.Will companies and their financial advisers, expected to act as citizens, focus on protecting and building up their social capital as well as their share capital? Employee health and protection became the top priority in recent months. How do you provide for unknown bottom line impacts for employee illness, absenteeism, or indeed legal claims? Insecure, gig economy, zero-hours type jobs have also been exposed for their human cruelty, and there will be a continuing priority on workers’ economic health (possibly even a universal wage or basic income for all).While capital will naturally only go where it has a reasonable expectation of a return, will investors be forced to rethink what is proper and possible for successful companies in an era of depression? How will directors and boards justify levels of executive remuneration that might look extreme and still manage to retain the permission to operate under a social contract, maintaining trust and enjoying a corporate reputation that underpins value? Apart from taxes, will companies have to become almost philanthropic in some of their behaviours?Corporate activism will grow as companies need to be seen to be responsible; to solve, not just sell. Liquidators and receivers will have to execute their mandates with an assured eye on the public and political impact of their decisions.Will companies build and wield their ‘soft power’ in focusing on purpose as well as profit? We have all admired genuine public service and public servants in recent months. Will the era of State-owned commercial entities come back into fashion by necessity, forced to step in and own hotels (remember Great Southern?), airlines, food companies (remember Irish Sugar and Erin Foods?), shops and insurance companies? We might well be facing an era of “de-privatisation”.In a perfect storm of increased costs, reduced margins, and recessionary outlook, with bankers and receivers taking hard decisions, the need for companies to communicate, to explain, to justify and most of all, to “do no harm” will be right up there among the top commandments. Boards and their advisers will have to tread carefully as they adjust, speak, and act to recover their foothold in the new landscape. Companies will sustain great reputations not just because they have great products and services, but also because they take full account, in advance, of the public impact on – and reactions to – their decisions.Donnchadh O’Neill is Managing Director of Gibney Communications.

Dr Joanne Murphy distils four common themes from the battlefield to help you lead and manage through the COVID-19 crisis and into an uncertain future.The COVID-19 pandemic is frequently referred to as a ‘war’. We hear about the battle for ventilators and the need for collective action against an invisible enemy. But what does the reality of wartime tell us about managing through, and beyond, a system shock like COVID-19? While there is no rulebook to guide our responses, we do know a great deal about the positive behaviour of leaders in other extreme situations, navigating rapid system-wide change, and facing risk and imminent danger.My research on leaders and managers operating in extremis provides some insight into the leadership behaviours and practices that work best in stressful and complicated environments. The individuals I have spoken to have managed to maintain organisational life and direction in contexts of emergency, violence and disruption. These include police and other ‘blue light’ services, those running businesses and public services in Northern Ireland during The Troubles, entrepreneurs in the Basque country during the ETA campaigns and, most extreme of all, those driving organisational activity in Bosnia during the dreadful siege of Sarajevo.The dynamic nature of these environments is akin to the large-scale systems change we are experiencing as a result of COVID-19, and effective responses require a similar set of leadership skills and attributes. Four common themes emerge from these experiences that will help us think about how to lead and manage in extremis, and which are relevant to both these times and the challenges that lie ahead.Organisation is everything.Let go of the old to make sense of the new.One leader is not enough.Be courageous.1. Organisation is everythingMany of us will feel that we understand the role of military leadership in conflict, but what do civilian leaders do in war? In 1984, the city of Sarajevo hosted the Winter Olympics, memorable for the triumphal success of British figure skaters Torvill and Dean. Only a few years later, in 1992, the Bosnian war brought the siege of Sarajevo, which lasted 1,425 days – the longest city siege in modern history. Ismet Kumalic, a director in a state company in the former Yugoslavia, lived in the purpose-built ‘Olympic’ suburb of Dobrinja which, on the frontline of Serb shell and sniper fire from the surrounding hills, was quickly isolated. Ismet became the civilian administrator, accountable for keeping 30,000 people alive under daily bombardment, with meagre supplies of food or fuel. During the siege, he and his team achieved the extraordinary, including the development of a 10km tunnel network to allow people to move between buildings and avoid sniper fire, the cultivation of every inch of available land to grow vegetables, and the management of a school and medical unit. While many residents were killed, Ismet reflects with pride that no one died of starvation (though sometimes food was rationed to just 300 calories a day). He has three messages about leadership in such an extreme environment.The first is about the position of leaders: “In such a situation, you are not that important… you are at the bottom of the pyramid, not the top. You are carrying them on your shoulders.”The second is about management: “Organisation is everything. You cannot succeed without organisation. You must think of everything.”And the third is about decision-making: “You have no time. You have to make decisions. To make decisions without time, you have to be brave.”2. Let go of the old to make sense of the new As in more normal organisational contexts, in extreme environments, it is also important to distinguish between leadership and management. Management relates to how an organisation functions, the implementation of plans and objectives, and the maintenance of a ‘steady-state’. Leadership is different. It relates to change, communication and vision. Leaders are ‘pathfinders’, able to articulate a shared vision and understand strategy as a dynamic process that is always under review.During periods of crisis and threat, people look to leaders to take action. This requires those tasked with leadership to make sense of confusing environments and mixed messages from stakeholders. The ability to let go of existing models in the face of change and embrace new ways of making sense of the shifting world around you is a key requirement. Leaders need to be self-aware and avoid clinging on to old rules or ways of doing things. Successful leaders in periods of extreme change become more receptive to input from followers, more likely to integrate their efforts into teams, more approachable, and less intimidating.When stress is heightened, certain qualities and behaviours become essential. They include the ability to prioritise, understanding the significance of role clarity, and effective communication. One police leader, who had been instrumental in the controversial and emotional transition from the Royal Ulster Constabulary to the Police Service of Northern Ireland, said: “Just because you think you have said something, it doesn’t mean that people have heard it. You need to present the message in multiple forms. The more important that message is, the more mediums you use for distribution.”3. One leader is not enoughIt is not uncommon to perceive leadership as involving charismatic individuals, superheroes who can lead through adversity and overcome incredible odds to succeed. However, in extremely challenging environments, such individual leaders are rarely enough. Instead, we see the cultivation of social networks of leadership.The Basque city of Bilbao features the Guggenheim Museum, an architectural marvel designed by Frank Gehry. This beautiful building is just one aspect of a much broader strategy to revitalise and reframe Bilbao away from its reputation as being polluted by its industrial heritage and scarred by the violent ETA campaign for independence and the equally ferocious security response of the Spanish state. Economic regeneration in such an environment seems almost hopeless.When those who worked for the reimagining of the region and its economic regeneration reflect on their achievements, they speak about two important requirements. First is the importance of teams of leaders operating collectively, and the capacity to navigate troubled waters together with a set of common objectives. This requires collectivisation of leadership, which can be a challenging approach for many.Second, for the revitalisation of Bilbao, it was the primacy of beauty and aesthetics. Change, especially in the aftermath of extreme adversity, requires hard work and a little bit of luck – but also an understanding that there is more to regeneration than the economy. In this case, the creation of a beautiful and authentic cityscape, with pride in the built and natural environments, provided a core motivational dimension.4. Courage in the face of fearThe COVID-19 pandemic is not just a physical health crisis; it also presents a considerable threat to people’s mental health and wellbeing. Anxiety caused by lockdown and isolation, fear of losing one’s job and economic hardship are all overlaid with the danger of ill-health and mortality associated with the virus itself.Those who have managed businesses during conflict often speak about their fear, and sometimes terror. The spectre of having to deal with paramilitaries on the one hand and the police on the other left many feeling isolated and alone. One businessman commented on his investment in a bar and the early days of the business, “We had a door that squeaked, and I thought, ‘sometime in my life I’m going to work in this bar, and that door will squeak, and my stomach won’t tighten. I’ll not have fear in me’… the first year was just like hell”.At times of extreme stress, it is easy to default to task-based decision-making and forget the human element, which is critical to maintaining personal and organisational resilience. The individual courage required to lead, and to keep leading, in such environments should not be underestimated. At an organisational level, keeping spirits up in the worst of times is also a critical leadership skill, one that is often lost in the chaos of rapid change. Others have framed it differently. Irish diplomats tasked with crafting a workable peace process amid the seemingly intractable Troubles spoke movingly of having “a duty of hope”, an understanding of both professional duty and personal emotional response. However it is conceived, it represents the last pillar of leadership for these challenging times.Dr Joanne Murphy is Academic Director of the William J. Clinton Leadership Institute at Queen’s University Belfast.

Dr Annette Clancy explains why a growth mindset is critical to success when faced with relentless, and seemingly endless, uncertainty.COVID-19 forced companies to adapt and change with unprecedented speed. Change is always on the agenda, but the pandemic accelerated it. Right now, organisations are planning to bring people safely back to the workplace. Planning is essential to reassure workers and clients that their safety is a priority but, as COVID-19 has demonstrated, plans are only partly useful in a context where the future is complex and unpredictable. Organisations will need to cultivate adaptability to continue to respond to this ever-changing environment.AdaptabilityCarol Dweck is a Professor of Psychology at Stanford University who researches human motivation. After studying the behaviour of thousands of children and their attitude to failure, she coined the terms ‘fixed mindset’ and ‘growth mindset’ to describe people’s beliefs about learning. A fixed mindset assumes that intelligence or character is limited in the sense that it cannot change. As a result, people see effort as fruitless and obstacles as indicators that they should stop working. A growth mindset thrives on challenges and learns from criticism. It sees obstacles as opportunities to learn and persists when faced with a challenge.Dweck’s mindset theory has been enormously influential in how we think about motivation and adaptability, not only in relation to children but also because of its applicability to people and organisations more generally. Dweck’s book, Mindset, has been a best-seller since its publication in 2006. And it has particular relevance today, as a growth mindset approach to planning amid a pandemic is likely to yield more benefits than a fixed mindset approach.The power of ‘yet’Those with a growth mindset do not view obstacles or challenges as failures. Rather, they view them as challenges to be overcome. Dweck shared the following example in her 2014 TED talk.“I heard about a high school in Chicago where students had to pass a certain number of courses to graduate, and if they didn’t pass a course, they got the grade ‘Not Yet’. And I thought that was fantastic, because if you get a failing grade, you think, I’m nothing, I’m nowhere. But if you get the grade ‘Not Yet’, you understand that you’re on a learning curve. It gives you a path into the future.”The concept of ‘yet’ removes the fear of failure. It suggests that it is possible to achieve outcomes with adaptability or change, thereby increasing the likelihood of increased cooperation and the free flow of ideas. From a fixed mindset perspective, changing direction or re-strategising is a significant problem that may throw the company off direction. From a growth mindset perspective, this may be a challenge, but also an opportunity to adapt creatively.Dweck’s research suggests that the latter framing allows for psychological adaptability, which will yield practical results.The blame gameDweck tells us that blame is part of a fixed mindset, as she explains in this quote from her book: “When bosses become controlling and abusive, they put everyone into a fixed mindset. This means that instead of learning, growing, and moving the company forward, everyone starts worrying about being judged.”This type of atmosphere inhibits creativity because employees will fear being blamed for risk-taking, which is central to adaptability. Leaders who exhibit a growth mindset have a vested interest in developing people and encouraging creativity. They rarely use the company as a vehicle for narcissistic posturing. Their interest is in growing the company and supporting the creative adaptability that will ensure the success of the organisation and its people.COVID-19 is pushing everyone to adapt to new ways of working. Dweck’s research on mindsets offers one perspective on enhancing creativity at a time of uncertainty and change.Dr Annette Clancy is Assistant Professor of Management at the School of Art History and Cultural Policy at UCD.

Although the relentless adoption of technology is not without risk, the audit – and the profession as a whole – stand to be net beneficiaries in the long-run, writes Lynn Abbott.The COVID-19 pandemic will undoubtedly usher in a new era for business. There have already been significant changes, with some businesses creating their first online store or introducing contactless payments. Others, however, have realised that they must introduce more sweeping changes, such as offering staff the ability to work remotely. We have yet to see the impact of these changes, but the world will be a different place to the one we knew previously.The Oxford English Dictionary defines a revolution as “a great change in conditions, ways of working, beliefs, etc. that affects large numbers of people”. This accurately describes the transformation that was already underway in audit before the COVID-19 crisis. With advancements in technology, the use of data analytics, artificial intelligence and machine learning are fundamentally changing how business works. Resistance is not only futile but seems to put companies at a competitive disadvantage. The COVID-19 crisis will only serve to accelerate this process, and professional services firms are no exception.Drivers of the revolutionWhen we hear buzzwords like 'data analytics', 'artificial intelligence' and 'machine learning', it can be intimidating. Many people don’t fully understand such concepts, but in truth, you don’t need to. You just need to get comfortable with them. And you probably already are: familiar services like Netflix or Spotify use artificial intelligence to understand your preferences and make subsequent suggestions based on that knowledge. The level of consumers’ expectations is continually increasing, and the successful companies are those that are advancing with technology. The same is true for businesses and their expectations. In audit, the revolution is underway and the sections that follow highlight the key drivers for this change.Improve the audit experienceThe volume of data available to auditors is astounding, but in most cases, this data is simply not being used. If this were happening in any other industry, there would be questions to answer. Data analytics can improve the audit experience in several ways, for both the audit team and for the client.Improve audit qualityDuring the planning phase of the audit, audit teams must shift their focus away from the old mindset of “what could go wrong?” Through analytics, we can turn our attention from what could go wrong to what has gone wrong. Auditors have access to the client’s complete financial data for the period under audit – if they focus on analysing and understanding the data, they could identify an unexpected transaction or trend in the process. During the execution phase, auditors should also build on the knowledge gained in planning to truly understand the business in question and focus their attention on higher risk transactions. Finally, auditors should move away from a ‘random sample’ approach and, instead, focus on the transactions that appear unusual based on their knowledge of the client, business or industry. These are just a few areas where improvements in audit quality can be achieved using data analytics.Improve efficiencyIn the examples above, the use of data analytics in planning will identify what has gone wrong and any associated unusual transactions. In execution, these transactions will be tested as part of the audit sample. It could also cover some requirements under auditing standards concerning journal entry testing, as the journal entries will likely be the data that highlighted what went wrong in the first place. Again, this is just one example of efficiencies gained without even considering the hours saved by automating processes like creation of lead schedules and population of work papers.Post-pandemic worldThe world will be a very different place in years to come. Firms with the ability to perform in-depth analysis using data analytics undoubtedly have a significant advantage over those that do not, given the efficiencies they can gain and the potential reduction of physical evidence required from clients, among other things. Due to the changes we have all had to endure, auditors may also have additional procedures to perform (e.g. roll-back procedures where they were unable to attend stock counts at year-end due to the COVID-19 closures of businesses). Such procedures have the potential to be automated, saving even more time and effort for audit teams.Improve engagementRather than spend time performing mundane tasks such as testing large randomised samples, data analytics allows audit teams to jump into the unusual transactions. This will make the job more interesting to auditors and cultivate a curious and questioning mindset, which will, in turn, lead to improved scepticism and audit quality.Improve client experienceThis might happen in two ways. First, the time saved by the client’s staff (who, in theory, will have fewer samples for which to provide support) and second, through the value the audit adds to the business. As an example, consider an audit team performing data analysis on the payroll for their client. As payroll is a standardised process, the audit team has an expectation around the number of debits and credits they would see posted to the respective payroll accounts each month. As part of their analysis, however, they find an inconsistent pattern. This can be queried as part of the audit and the client will be better able to understand a payroll problem, which they were previously oblivious to.Client expectationsGiven the level of data analysis that occurs daily in the life of anyone using a smartphone, a consistent, high quality is understandably expected in people’s professional lives, too. Audit clients, like all consumers, want more. They want a better and faster audit. They want an audit that requires minimal interference with the day-to-day running of their business, without compromising the quality of the auditor’s work. With troves of data now available to auditors, such expectations are not entirely unreasonable. Audit firms have access to vast amounts of financial and related data – in some instances, millions of lines of information – that, if analysed robustly and adequately, would improve their processes, their clients’ experience, and the quality of their audit files.Aspirations of professionalsAudit professionals can often struggle with work-life balance. Though most firms are getting on top of remote working, the hours in busy season are long. In a time of continuous connectivity, the time frame around ‘busy season’ is also becoming blurred. Through the use of technology, we will one day make auditing a 'nine to five' job. Many will scoff at that idea and, although I do not expect this to happen in the next five years, or even ten years, it is possible. By automating mundane tasks and continuously upskilling our graduates, we can transform how an audit team completes work. There will be more scope to complete work before clients’ financial year-ends, thus moving much of the audit out of the traditional ‘busy season’. Machines can complete specific tasks overnight so that auditors could arrive at their desk, ready to work on a pre-populated work paper that needs to be analysed by a person with the right knowledge. With appropriate engagement by all parties (i.e. audit teams, senior management, and audit clients), we could significantly reduce the hours spent on audit engagements and give this time back to auditors. Along with attracting high-calibre graduates, we will retain high-quality auditors in the industry while also avoiding mental fatigue and burnout, which will again lead to better quality audits.Graduate recruitmentGraduates joining firms in recent years have particular expectations of the working world. They want job satisfaction, flexible hours, remote working, and an engaging role that will challenge them. Professional services firms have to compete for the very best graduates, and no longer just against each other – a host of technology-enabled businesses are attracting talent on an unprecedented scale by meeting the needs listed above. Technology, and data analytics, in particular, can offer the solution to the graduate recruitment challenge – by making the work more efficient and automating mundane and repetitive tasks, graduates can instead focus on analysis. When people find their work challenging and interesting, they will feel more engaged.ChallengesThis move towards technology is not without its risks to the profession. Automating basic tasks removes the opportunity for graduates to form a deep understanding of these sections of the audit file. The onus is therefore on the current cohort of Chartered Accountants to take the reins, both to drive technology advancement forward and also provide practical, on-the-job coaching to ensure that this knowledge is not lost for the generations that follow.Lynn Abbott ACA is an Audit Inspector and Audit Analytics Expert in the Audit Quality Unit at IAASA.

John Kennedy explains how Chartered Accountants can help their clients break free from the shackles of their current challenges and, instead, work towards a brighter future.As we continue to deal with the implications of the untamed coronavirus, we have all been forced to pause and take stock. Many things we historically assumed can no longer be taken for granted. We, therefore, need to learn new habits, develop new routines, and adopt new ways of thinking.At the core of that change is the need to secure our future by identifying, and wisely investing in, our most precious assets. Take a moment to pause and think of the most valuable assets your practice holds – what are they?In my opinion, there are two: attention and energy. Your future success will be determined by your ability to take control of your attention and energy and, in turn, by how you guide your clients to invest their attention and energy where it is most productive and provides the greatest return. You and your clients must stop wasting your attention and energy on unproductive, corrosive thinking.Corrosive and constructive thinkingThe world is flooded with corrosive thinking right now. And, like anything with massive oversupply, it has no value. Corrosive thinking keeps you in a closed loop of negativity, consuming your attention and energy by focusing on the missteps, the problems, and how costly they will be. You will get no positive return on the attention and energy you invest in corrosive thinking.Constructive thinking, on the other hand, is entirely different. It is scarce and, therefore, has an unusually high value. Constructive thinking moves you away from worrying about how you and your clients reached this difficult place and, instead, focuses your attention and energy on reaching a better place. To move from A to B, however, requires the wise and judicious investment of your vital resources.The key is to take control of your future decisively. This is not an invitation to undertake some form of positive thinking or encourage you to merely wish or hope for better times. It is quite the opposite. It is a specific and practical skill that will enable you to create a clear image of a better future and identify the steps to reach that destination.The kitchen testNeuroscience has helped us understand how to harness the power of our brain and use our capacity to think more effectively. If you don’t take control of this capacity, your brain can easily work against you or steer you off-course. But when you know how to harness the power of your brain and focus it on success, profound change is possible.Achieving the success you seek always begins with creating a clear image of that success. Let us put it to the test.Take a moment to think about a room you are familiar with. Your kitchen is a good place to start. As you develop a clear and vivid image of your kitchen, your mind will work with you and help you set out in great detail the many specific aspects of your kitchen. You will be able to give this image real substance – the colour of the walls, the type of floor, or any paintings, pictures or posters on the walls, for example. You can create an image that is clear, vivid and substantial – and that is a very useful talent.The kitchen test shows that you can harness your thinking to work your way through the recent crisis and create a clear image of a better future. This is key to your investment strategy, as you can create an image of future success that has the same level of detail and clarity as to the image of your kitchenWhy is this important in terms of your future success and your success with clients? Left uncontrolled, your mind will come up with detailed and comprehensive images of the difficult situation you are in. It will default to wasting your much-needed energy by placing too much emphasis on the worries of the present. However, the troublesome present is where the problems lie. You want to be in a better place, but you have – at best – a vague and hazy image of that destination.The difficulties of your current reality will appear more potent than any possible future success. And since the mind values clear and detailed images, it will be drawn to where clarity and detail already exist – in this case, on the difficulties of the present situation. This is why the strength and scale of your problems seem to grow and grow. The more you focus your attention and energy on your current difficulties, the more vivid they become to the point that you may not be able to discern a successful future at all.This is where your investment strategy can provide its most significant return.The high-return investment strategyIn taking active control of your thoughts, you can switch your attention and actively invest your energy where it can deliver a more valuable outcome. This is not a trivial skill – it is scarce, of high value, and the vital key to future success for you, your practice, and your clients.To get full value from this insight, you need to establish a new habit. From this point on, every time a client falls into the routine of talking about the worry and stress they face, take active control of the dialogue and help them create an image of a better future.Don’t waste their attention and energy on vague or wishful thinking. Instead, guide them to create a clear and vivid image of a better place, an image that is as clear and real as the image of your kitchen.Rather than dwell on familiar problems, set them on a quest to establish what a successful future would be like. Your client has already built a business that is successful enough to need your accountancy expertise. Now, you can use your insights to help them leverage their knowledge and experience to create an image of a successful future.Research has conclusively shown that this ability is central to the success of the very highest achievers, those who achieve great success and prevail at times of stress or uncertainty. By helping your clients invest their attention and energy in creating a clear and specific image of future success, you are providing them with an immediate and powerful resource. They turn their thinking, attention and, therefore, energy to what they want to accomplish.For more than three decades, I have encountered a habitual pattern of clients focusing on current problems rather than investing actively in future success. Ironically, this habit can be most pronounced at the very time when it is least useful – when the problems seem so large and so vivid and are the cause of significant corrosive stress.When managers, groups or teams spend their time thinking about their most challenging problems, they tend to become dispirited and demotivated. When you help your clients do the opposite, however, you will become a scarce resource: the route to a better place.John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

David Lucas explains how businesses can access funding and trade through the COVID-19 crisis.The COVID-19 pandemic has impacted businesses throughout the country. Cash flow is scant, debt is mounting, and many companies have yet to resume trading in any meaningful way. Those that are trading again have returned to a desolate and unfamiliar environment. Shops and high streets are empty, many stores remain shuttered and, with further restrictions in the pipeline, dented consumer confidence in certain sectors looks unlikely to rebound fully until a vaccine is developed.SME supportsWithout access to significant cash reserves, liquidity and cashflow are critical concerns for many small- and medium-sized enterprises (SMEs). Fortunately, SMEs adversely affected by the COVID-19 crisis can access a range of Government supports. The schemes listed below have been well-received by business owners, but preparation is the key to a successful application.SBCI COVID-19 Working Capital SchemeThis scheme offers loans from €25,000 to €1.5 million at a maximum of 4% interest to SMEs and small mid-cap enterprises. Applicants must meet at least one criterion related to the impact of COVID-19 on their business and one innovation criterion as per the European Investment Fund’s (EIF) standard conditions. No security is required on loans up to €500,000.Future Growth Loan SchemeThis scheme aims to make up to €800 million in loans available for terms of seven to ten years to SMEs and small mid-cap businesses. Loans range from €25,000 to €3 million per eligible company, with loans up to €500,000 available without security. The initial maximum interest rate is capped at 4.5% for loans under €250,000 and 3.5% for loans more than or equal to €250,000 for the first six months. The rates after that are variable.Sustaining Enterprise FundSupport of up to €800,000 can be provided to eligible companies that have been negatively impacted by COVID-19. Funding will be provided for five years using repayable advances, grant aid, equity, or loan note, comprising a combination of repayable and up to 50% non-repayable support. Administration fees on repayable support will be 0% over the first six months and 4% per annum after that. Repayments will be due in years four and five.Restart Grant PlusRestart Grant Plus is an expansion of the Restart Grant scheme. It provides grants of €4,000 to €25,000 to businesses with 250 employees or less, turnover of less than €100,000 per employee, and a 25% reduction in turnover as a result of COVID-19.Trading Online VoucherGrants of up to €2,500 (with 10% co-funding from the business) are available to companies with ten employees or less seeking to build an online presence. The voucher is targeted at small businesses with little or no online presence, turnover of €2 million or less, and at least six months’ trading history.Business Continuity VoucherBusinesses employing up to 50 staff are eligible to apply for a Business Continuity Voucher to the value of €2,500 towards third-party consultancy costs to assist with developing short- and long-term strategies to deal with the COVID-19 pandemic.Pandemic Stabilisation and Recovery Fund (PSRF)The PSRF is set up to invest in large- and medium-sized enterprises employing more than 250 employees or with annual turnover of over €50 million. Enterprises must be able to demonstrate their business was commercially viable prior to the COVID-19 pandemic, and that they can return to viability and contribute to the Irish economy. Investments are made on a commercial basis and they will seek a return for this and can invest across the capital structure, from equity to debt.Temporary Wage Subsidy SchemeBusinesses have also relied on the Temporary Wage Subsidy Scheme (TWSS), which was replaced by the Employment Wage Subsidy Scheme (EWSS) in September. The main elements of the EWSS are as follows:A €203 flat-rate subsidy per employee per week for businesses with a decrease in turnover of 30% or more;Employers in all sectors may qualify, subject to meeting certain qualifying conditions; andThe EWSS will expire on 31 March 2021. The legislation, however, provides that it may be extended beyond that date.CashflowThe measures above can provide critical relief and cash support to businesses. However, there are other proactive and straightforward ways in which companies can meet their liquidity needs before repayment moratoriums expire in Q4.Businesses can optimise by selling slow-moving stock to generate cash, for example. Also, debtor management might sound obvious, but assets can become tied up and the longer a debt remains unpaid, the less likely it is to materialise.Debt fundingMany people talk about loan-to-value and property, but at the end of the day, cash repays debt. Property and asset values are significant from a security perspective, and the banks draw comfort from having this as security. However, in recent years, cashflow (and its recurring nature as the first port of call in servicing debt) has been increasingly analysed. Banks are not in the business of selling companies or property unless they have to, but they do need to see cash being generated to service the existing debt quantum.In this volatile business landscape, SMEs may need to renegotiate covenants or restructure debt. Many businesses will find themselves over-leveraged and unable to make their debt repayments as they fall due. Banks expect this in cases where COVID-19 has hit businesses hard, but the key to success is open communication with the bank or funder.Think of it as a partnership approach. Businesses must be extremely well-prepared as approaching a bank can be painstaking and time-consuming. That said, they do understand the position you are in; all business owner/managers want to be able to pay down debt and keep their businesses alive.The standard suite of bank covenants comprises leverage (net debt/EBITDA), interest cover, and debt service cover ratio (DSCR), with the latter often proving the most difficult to manage. As a result of existing trading circumstances, all three may have been breached or be approaching a breach. The banks have provided moratoriums in many cases, but they will need to be looked at and renegotiated as they expire later in the year.The amortisation or repayment profile on debt may also need to be readjusted to match the company’s ability to repay. COVID-19 has devastated many businesses, and some may never return to the same trading levels as before. This outcome would, therefore, require a re-calibration of amortisation; back-ending or reducing it may be the only option. Banks will likely begin to pursue ‘cash sweep’ mechanisms to reduce debt positions in a restructure. Cash sweeps can be administratively cumbersome but show the bank that you intend to work with them to pay down debt.Meanwhile, businesses seeking access to further funding must become familiar with the various options available. Alternative lenders can be less onerous in terms of covenants. They tend to lend a little bit more than the traditional banks and offer increased flexibility, but they also charge higher interest, often as high as 7%.Invoice discounting, where banks lend based on an entity’s debtor book, has also become a popular form of lending from a working capital perspective. It gives the lender increased security, as they have direct access to the debtor book. The facility limits can also grow concurrently with business growth.Private equityEquity is another potential option for SMEs in need of a capital injection. This route has become increasingly popular in recent years, as investors provide experience and growth potential as well as capital.Many business owners are apprehensive about trading a piece of their business, but it is always better to own 70% of a thriving venture than 100% of a failing one.ConclusionOpen communication is crucial at this uncertain time. Lenders understand the position many businesses are in and will expect requests to pay down debt at a slower rate, given that earning profiles may have changed. The key to success, however, is organisation and planning.Seven tips for approaching a bank during a crisisSeek expert advice. A skilled and experienced adviser will know what the bank and its advisers want and will be able to communicate this effectively.Accept the situation. Look for the positives and work with the advice given to you to identify areas for improvement in the business. Listen to recommendations and have robust discussions about solutions.Be honest. A bank likes certainty and predictability. These are uncertain times, so work with the bank and do your best.Prepare a deliverable plan. Create a budget that is real and deliverable, with actions and assumptions clearly laid out. Communicate. Deliver the information clearly and precisely to reduce the potential for misinterpretation and confusion. Don’t ignore the bank and hope that the problem will go away.Prepare. Talking to your bank can be a very confronting and stressful process. Be prepared for hard questions, and don’t take it personally.Have back-up plans. Speak to your adviser about alternatives in the market, be it a direct lender or private equity investment.David Lucas FCA is Corporate Finance Partner at PKF O’Connor, Leddy & Holmes.

Developments of interest this week are outlined. UKThe UK Financial Reporting Council (FRC) has published two thematic reviews to help companies improve the quality of their corporate reporting in relation to IFRS 15 'Revenue from Contracts with Customers' and IFRS 16 'Leases'. The UK Stewardship Code 2020 sets high expectations of those investing money on behalf of UK savers and pensioners in 12 Principles for effective stewardship. One of the important changes is the introduction of the new annual Stewardship Report. The recently issued Review of Early Reporting seeks to help prospective signatories in their planning by reiterating the expectations for high quality disclosure published in the Code.The UK Endorsement Board invites preparers of financial statements to participate in a survey on IFRS 17. EuropeanThe European Intellectual Property Office (EUIPO) and Accountancy Europe have come together to provide guidance and promote the benefits of Intellectual Property registration to SMEs.The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published the Final Report on the MiFID II/MiFIR transparency regime applicable to non-equity financial instruments.InternationalThe IASB has updated its work plan, which has been analysed to see what changes have resulted since it was last revised in August 2020.The Technology Working Group of the IAASB has released non-authoritative support for using automated tools and techniques when performing audit procedures.      

John Convery discusses the important elements when creating a start-up and how you can improve its chances of success.Entrepreneurship is actively promoted and regularly encouraged. Being a business owner can be very fulfilling but starting a business is no easy task. This is a journey where you will meet a rollercoaster of highs and lows. It is a challenging, demanding, frustrating, testing, isolating, lonely, long road on the way to – hopefully – profitability and success.Research suggests 20% of start-ups fail in year one, just under 50% make it to year five, 66% have failed by year 10, and by year 15 only 25% are still surviving. Some businesses deemed to survive merely limp along for years, often referred to as 'the living dead'. However, with the right planning, mindset, and funding, improving start-up survival rates is achievable.Why start-ups failThere is a myriad of reasons why start-ups fail. In my view, it is usually due to a combination of factors rather than just one. Figure 1 summarises the most common reasons start-ups fail. They are broken into four areas:  market, founder, finance and other.Improving your chances of successTo improve your chances of having a successful start-up, you must get some fundamentals right.Sell a product/service that customers want A key reason start-ups fail is because there is an insufficient market need for the product or service. This can be mitigated through focus on the customer from the start. You must be customer-centric before you build, design, or develop anything. Take the time to put your ideas down on paper, and then go out to customers.Talk to potential customers or users, listen to them, try to identify their biggest pain points or struggles. Do market research.Build a basic, early version of the product.Go back to some potential customers, get their views and feedback.Refine, modify and enhance your product based on the feedback. Go back to potential customers again, get their views and any further changes or improvements needed.Enhance your product again.It is only with constant feedback and user reaction that you can improve the product and arrive at a point where it can begin to appeal to potential customers. It is a test and feedback loop. After the testing is done, you will begin to get a feel for a business model and pricing.Create a balanced teamFind good people with complementary skills who gel with one another – preferably a designer, engineer and marketeer. Teams build companies, not individuals. Investors also want to see a team, not a single founder.Control cashflow tightlyIt’s the job of the main founder or appointed finance person to make sure the company does not run out of money and to control finances tightly.Write a business plan The process of writing a business plan is not an academic exercise, it is a validation exercise on the product and overall business. The business plan should corroborate whether the product and overall business has potential. Appoint a savvy external business mentor or adviserTheir role is to ask hard questions, challenge you, objectively evaluate progress against targets set and hold you accountable. This person should not be a close relative or friend.Is entrepreneurship right for you?Creating a start-up is not for everyone. Like any career choice, not everyone is cut out for certain roles. It may not suit your interests, temperament, passion, or skills. The requirements or skillset for an entrepreneur are not specified, yet the skills required to be successful are rarely discussed other than in academic textbooks.Your character and resilience will be severely tested in a start-up, especially in the early stages. Delays, disappointments, criticism, rejection, frustrations, travel, endless presentations, knockbacks and 80-hour weeks with little pay is what a founder is facing. Fundraising is arduous, where it can take six months of meetings, calls, presentations and visits to secure investment. This takes a toll on you mentally and physically, and your ability to face these knocks and challenges while remaining optimistic is difficult. Successful entrepreneurs show some essential personality characteristics such as patience, an ability to listen, learn, accept criticism, and stay positive. They are a people person, and able to get along and deal with all types of individuals. Failure does not defeat them, and they learn from mistakes. They can take things in their stride and are willing to adjust or pivot when required. Successful entrepreneurs possess drive, ambition, and determination.Anyone who might be considering creating a start-up should do some self-examination as part of the planning. They need to ask themselves honestly if they have some or any of the requirements that an entrepreneur needs to have. Ask yourself questions such as:Do I have that entrepreneurial drive and determination?Am I cut out for this?Why do I want to start a business? You should only start a business for the right reasons. Self-indulgence, fulfilling a dream and pleasing someone else are not valid reasons.You fail and you learnThe aim of a start-up is to solve a problem for a customer. The customer comes first. Your starting point is talking to customers, discovering their pain points, and then using that feedback.If you are not getting good market traction, be prepared to pivot and change. If the business is still struggling to get off the ground, be prepared to disengage. This can be a difficult decision but necessary. You can always start again. Remember: you will pass failure on the way to success. A failed start-up is a valuable lesson. You fail, you learn, you start again and you do things better.I believe it is possible to improve start-up survival rates with good planning, the right mindset, and a funding plan. If your product/service is good enough, you will always secure funding. While the risks of failure in a start-up are high, the entrepreneurial spirit will nevertheless always be alive.John Convery FCA is a business adviser to start-ups and small businesses.

2020 has been a year of expected and unexpected change for the pensions industry, but even more change lies ahead, argues Elma Fox.When looking forward to 2020, the pension industry anticipated a year of change and development. We have certainly experienced much change, unfortunately, much of it from unanticipated events. We can learn a lot from our response to these events, which will inform how we deal with future changes and developments.When looking forward, we expected change to arise from the usual sources – legislative changes mainly from the EU, and both domestic and international political developments. Anticipated changes included:The transposition of the IORP II Directive into Irish law;The implementation of the European Union Anti-Money Laundering Beneficial Ownership of Trust Regulations 2019 requirement for a beneficial ownership register for pension trusts;Clarity on the application of the European Union Supplementary Pension Rights (Outgoing Workers) Regulations 2019;European Central Bank Statistical Data Reporting requirements to the Central Bank of Ireland;Guidance on, and increased use of, master trusts;Preparations for the increase in the state pensions age to 67 in January 2021;Further consultation on, and development of, the structure and system for auto-enrolment pensions for roll-out in 2022;The impact of a new government with potentially different pensions objectives, following a general election;The ongoing impact and fallout from Brexit; andPotential market volatility during the US presidential election campaign.These issues have, and will continue to have, an impact on the development and future of the industry. This will be covered in more detail later in this article.Amid this hectic period of change and development for the pensions industry came the global COVID-19 pandemic. The first restrictions and lockdowns in March coincided with a significant drop in investment markets. The pensions industry, along with every other industry, faced challenges and circumstances it hadn’t dealt with before. The immediate impact and response fell mainly into two areas:Providing essential services while facilitating work from home practices across the board. In normal circumstances, such a change in working arrangements would take months of planning and implementation; andEnsuring that benefits continued to be paid and assets kept secure while ensuring contributions could still be paid and invested.Immediate considerationsOnce the immediate actions were taken to ensure that services could be provided from homes around the country, several items had to be considered for the short- to medium-term operation of pension schemes and the provision of benefits. They included:The Pensions Authority’s announcement on 27 March and its subsequent update on 24 April. These announcements covered several topics, such as:o The prioritisation of pension and other benefits payments, and the collection of contributions;o Making immediate investment decisions, which was cautioned against unless necessary;o Dealing with requests to cease or suspend contributions, obligations to pay what has been deducted, checking contracts of employment, scheme rules (and, in some cases, legislative requirements), funding commitments for defined benefit schemes, and interaction with the Temporary Wage Subsidy Scheme (TWSS); ando Obligations on disclosure requirements (annual reports, member benefits statements, communicating changes etc.)The Emergency Measures Act, which didn’t mention pensions. The TWSS payment could not be reduced, so it was assumed pension contributions could not be deducted from it;Business continuity plans for service providers, employers, and pension schemes had been implemented and needed to be reviewed, updated and, in some cases, documented;The ability to hold meetings, both in terms of hardware/software and the power or authority to hold them. Meetings had to be held to deal with the usual cycle of trustee meetings, which covered administration, service, compliance, and investment. COVID-19 response meetings were also necessary;Employers’ and members’ current circumstances in terms of employment, remuneration, and contributions;Notwithstanding the Pensions Authority’s caution against making immediate investment decisions, trustees needed to consider the implications of the fall and subsequent rebound in asset values, the impact on their investment strategy, and the performance of the funds against their benchmarks and expectations. Were changes required? Would the funding of the scheme be affected? Was there a need to communicate with the employer and members? The results of Mason Hayes Curran (MHC) and Irish Institute of Pensions Management (IIPM) survey found that 71% of schemes had not adjusted their investment strategy as a result of the pandemic;The ability to maintain risk benefits for members and employers where employment or contributions are temporarily suspended. Insurance companies were supportive in providing cover in most cases; andThe information to share with members to reassure and assist them and how to issue those communications.COVID-19’s impact on pensionsThere are also longer-term impacts and associated economic and employment effects to consider, arising from the COVID-19 pandemic. They include the effect on valuations of changing and volatile liability and assets values, and the potential for lower contributions (e.g. the suspension of employer and employee contributions, reduced salaries, and/or reduced contribution rates). Other potential impacts include changed membership (e.g. temporary or permanent layoffs, reduced working hours, phased returns to work) or changed employer status, which may impact on the employer covenant, the ability to pay, and on benefits and pension budgets.The general outlook for pensions provisionThe outlook for the pensions industry, taking into account the changes anticipated for 2020 but filtered through a COVID-19 lens, leads to the following conclusions:There will be an increased focus on governance and risk management. The crisis may highlight the strengths and weaknesses of the current system;Timelines for IORP II implementation will be needed, given the number of other challenges in play;The changed economic outlook may impact the planned timelines for auto-enrolment. The results of the MHC/IIPM survey found that 66% of respondents expect the roll-out to be delayed due to the current crisis;Concerning the state pension age, employers and employees need to know what they are planning for. The current Government deferred the planned change from age 66 to 67 pending a report on the issue by a Commission on Pensions, which will be established to examine various issues related to the sustainability of, and eligibility for, the State pension; andIn terms of ECB/EIOPA reporting, one wonders if outputs or feedback will be provided to the Central Bank, when we might expect clarity on EIOPA reporting requirements from the Pensions Authority, and whether the reporting requirements will be coordinated.The effect of 2020’s expected and unexpected changesThe impact of both the expected and unexpected changes on the pensions industry – and the broader political, legal, and economic environment – places enormous demands on those involved in providing pensions to respond and adapt to changed outlooks for schemes, sponsors and members. Professionals should also expect increased governance and compliance standards, increased reporting requirements, and the need for new functions, including internal audit and risk management.The increasing professionalism of trustees to meet these growing requirements and expectations will also be a point of sharp focus, resulting in a need for upskilling, training, and qualifications for new roles and requirements – not to mention knock-on implications for service providers.The pensions industry has proven that it is resilient and capable of adapting to the changes and challenges presented by COVID-19. We must continue to learn, develop and innovate to ensure that we are ready to deal with the immediate and longer-term challenges and can continue to provide stable, reliable, and sustainable pensions for members.Elma Fox is President of the Irish Institute of Pensions Management.

 Stress and anxiety are often mentioned together, but they’re not the same thing. In fact, anxiety can be caused by stress – it’s what you feel when you’re uneasy about something, when you worry or when you’re afraid.Most people experience some level of anxiety from time to time. In many situations, feeling anxious is perfectly normal – if you’re taking your driving test, for instance, or going for a job interview. But once the situation has passed, your anxiety should disappear too. It becomes more of an issue when you feel overwhelmed by anxiety on a more frequent basis – or all the time.Anxiety can cause a range of physical and emotional symptoms, such as:Faster breathing or shortness of breathIncreased or irregular heart rateFeeling tired but not being able to sleepLight-headedness or dizzinessHeadacheFeeling restless, unable to concentrateSweating or having hot flushesFeeling constantly on edgeFearing the worst (having a sense of dread)Feeling that other people are looking at youNot being able to stop thinking about negative thingsNot being able to motivate yourself Anxiety levelsMild anxietyGenerally speaking, mild anxiety is the type that most of us experience on a day-to-day basis during certain situations. You may have an uneasy feeling in your stomach, and you may feel your pulse increase slightly. But anxiety at this level can also be beneficial, as it can help you to focus and increases your alertness.Moderate anxietyModerate anxiety is similar to mild anxiety but can become more severe and overwhelming, making you feel more nervous and agitated.Moderate anxiety can mean you place your complete attention on the thing or situation that’s making you feel anxious and ignore everything else around you. You may start to experience stronger physical and emotional anxiety symptoms such as muscle tension, sweaty palms, a shaky voice, back pain and changes in your sleep pattern. Emotionally you may feel more sensitive and excited than normal, and you may also feel less confident.Severe anxietySevere anxiety is the highest level, when you stop being able to think rationally and experience severe panic. You may feel afraid and confused, agitated, withdrawn and you may also find it difficult to think clearly. Your breathing may quicken, and you may start to perspire while your muscles will feel very tense.Anxiety disordersThere are also several anxiety disorders, including generalised anxiety disorder (GAD). Unlike being anxious about a specific thing or situation, GAD is when you feel anxious about lots of different issues, often for no good reason.Post-traumatic stress disorder (PTSD)Post-traumatic stress disorder (PTSD) is a specific type of anxiety, where you feel very stressed or fearful about something traumatic that’s happened to you.Panic disorderPanic disorder is when you have panic attacks on a regular basis. A panic attack can make you feel nauseated, sweaty, shaky and lightheaded, and you may feel your heart beating very quickly or irregularly (palpitations). They may not be harmful in a physical sense, but panic attacks can be very frightening.PhobiasPhobias are also a type of anxiety disorder. You may have a phobia when you have an overwhelming or exaggerated fear of something that normally shouldn’t be a problem. Depending on what type of phobia you have, it can seriously affect your daily life as well as cause a great deal of distress.Social anxiety disorder – or social phobia – is a type of phobia where you have an intense fear of social situations.If you think you may have the symptoms of an anxiety disorder or if anxiety is a constant issue in your life, it’s important to get the advice of a qualified healthcare professional. CA Support has a confidential listening service and is here to support our students, members, and their families. Contact the CA Support team on mobile: (353) 86 024 3294 or email:  casupport@charteredaccountants.ieThis article was kindly provided by CABA

The new auditing standard on estimates will have a significant impact on management as well as auditors. Brian MacSweeney reports.The revisions to ISA (Ireland) 540 (Revised) will have important implications for chief financial officers, financial controllers and management responsible for financial statement preparation and the determination of accounting estimates. Its impact may be felt outside finance functions where others contribute to the calculation of estimates – for example, valuation specialists, taxation teams or pension specialists. It will also give rise to additional considerations for audit committees recommending financial statements for approval.What are the implications?The new standard requires the auditor to perform additional understanding and risk assessment procedures over estimates, along with other new requirements. This means that:more time is needed from management to help the auditor perform these procedures;management will need to articulate their processes and controls around estimates better;there will be more dialogue between auditors, management, and those approving financial statements about the critical aspects of estimates; andthere will be a better and more robust audit approach to auditing accounting estimates in the forthcoming financial reporting cycle.Why was the standard revised?The preparation of financial statements involves many different elements, but the preparation of estimates is perhaps more complex than others. Estimates are monetary amounts (recognised or disclosed), which are a fundamental part of entities’ financial statements. They are subject to estimation uncertainty due to inherent limitations in knowledge or data, and as a result, there may be a wide range of measurement outcomes for any estimate. In forming estimates, management apply methods or models where they make assumptions and use data. They exercise judgement involving complexity and subjectivity when measuring the estimate. Due to the nature of this process, estimation is susceptible to material misstatement, and for the users of financial statements, they are the main focus.Over time, accounting estimates have become more prominent and visible in financial statements, garnering additional scrutiny from readers. This is caused by increasingly complex business environments (now made more complicated due to the COVID-19 pandemic) and the introduction of new accounting standards over the last number of years. The previous version of the ISA 540 standard was written before these changes and they, along with challenging audit inspection findings, meant that a new framework was needed for auditors to robustly audit estimates. In response to these challenges, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued ISA (Ireland) 540 (Revised).What is the aim of the new standard?The new standard aims to:address changes in financial reporting standards and business environments that make estimation more difficult;enhance auditors’ professional scepticism, considering recurring audit inspection findings criticising the quality of audits of accounting estimates; andRealise public interest benefits through better two-way dialogue between the auditor and management concerning estimates.What is new?Enhancements contained in the new standard include:Enhanced risk assessment: the standard requires a robust risk assessment of estimates. The aim is to heighten auditors’ understanding of processes and controls around the identification of estimates and the determination of the related monetary amounts. This risk assessment is performed at a granular level and focuses on the models, assumptions, and data used to determine the estimate. The assessment is made with reference to inherent risk factors, including the complexity of the estimate, its subjectivity, and estimation uncertainty.Scalability of testing approach: the testing approach options in the old ISA 540 are maintained. These include testing management’s calculations of the estimate, developing an independent estimate, or using events after the year-end as audit evidence for the estimate. However, the new standard focuses on aligning the level of procedures performed to the assessed risk. This gives the standard scalability, where the level of audit effort is dictated by the complexity and risk associated with the estimate.Professional scepticism: ISA (Ireland) 540 (Revised) has several provisions designed to enhance the application of professional scepticism. These include:o A requirement to design and perform further audit procedures in a manner that gives more focus to evidence that may be contradictory.o A requirement to evaluate the audit evidence obtained regarding the accounting estimates, including both corroborative and contradictory audit evidence.o Changing the language in the standard to use purposeful words like 'challenge', 'question', and 'reconsider', thus reinforcing the importance of exercising professional scepticism.Disclosures: there are enhanced requirements to assess whether the estimate disclosures are “reasonable”.Communication and representations: there are new requirements to consider when communicating with those charged with governance. There is a requirement to request written representations regarding the reasonableness of methods, significant assumptions, and the data used.What is the impact on management?Table 1 sets out the key changes required by ISA (Ireland) 540 Revised and their impact on auditors and management. This summary was prepared by Chartered Professional Accountants Canada and was adopted by the IAASB (International Auditing and Assurance Standards Board) for its client briefing document dated November 2019.What happens after implementation? The standard-setters intend to undertake a post-implementation review after the effective date of ISA (Ireland) 540 (Revised) to see if the revised standard has achieved its intended objective. They will focus on whether the standard is sufficiently scalable and whether it enhances the exercise of professional scepticism.First impressionsHaving read the new standard and prepared illustrative audit work papers to see it in practice, it is clear that this is a significant change to how auditors will approach the audit of estimates. The key message is that auditors will need to prepare early to perform a detailed understanding and risk assessments procedures. Management will have more to do to help the auditor in their risk assessments, but early communication and engagement between the auditor and management will ensure successful adoption.In addition to the above, due to the COVID-19 pandemic, developing estimates for expected credit losses, going concern analysis, and related disclosures, in particular, is more challenging. A focus on the audit of estimates is therefore paramount. Overall, in a financial reporting environment that is evolving due to changing business environments and accounting frameworks, ISA (Ireland) 540 (Revised) provides audit practitioners with a good basis to audit estimates and to serve the public interest by fostering audit quality.  Brian MacSweeney ACA is a Director at KPMG Ireland.

Dr Aideen O’Dochartaigh provides an accountant’s introduction to natural capital.Concepts such as carbon budgets, natural capital, and carbon taxes illustrate the increasing interaction between accounting and environmental issues. While nature and the biodiversity crisis are often overshadowed in public discourse by the climate crisis, awareness of the economic and intrinsic value of natural ecosystems is growing, highlighted by issues such as pollinator loss and the spread of zoonotic diseases like COVID-19. One of the most useful tools to account for the human impact and our dependency on nature is natural capital accounting.This article offers an introduction to the emerging thinking and methodologies in this area, exploring its applications and benefits for organisations and considering how accountants can engage with natural capital accounting.What is natural capital accounting?Natural capital has its origins in the concept of capital as a stock that can give rise to goods and/or services. In the case of natural capital, the stock is natural resources or ecosystems such as forests, water, grassland or air, while the goods and services (known as ‘ecosystem services’) that flow from the stock include raw materials for production and consumption (fuel or food, for example), the absorption of wastes from production and consumption, and the fundamental life-supporting services provided by nature.Historically, goods and services flowing from ecosystems have been accounted for, or rather not accounted for, as ‘free gifts’ from nature. The depletion of natural capital has, in turn, been accounted for as income (the sale of forestry products recorded as income, for example) with no recording of the loss of the services provided by the forest, such as the absorption of carbon dioxide.Mounting evidence indicates that human activity is increasingly threatening the stability of natural systems and the ability of the earth to provide a safe space for humanity, and economic activity, to flourish. Four of the nine planetary boundaries identified by scientists have now been transgressed due to human activity, including two core boundaries, climate change and biosphere integrity, with significant impact on the stability of earth systems. We must, therefore, rapidly develop tools to account for our interactions with natural capital and incorporate the calculations into decision-making at management and policy levels.Natural capital accounting frameworks have largely been developed at country and company level. At country level, the most widely used framework is the UN System of Environmental-Economic Accounting (SEEA). The SEEA methodology measures the scale of the asset, the condition of the asset, the services flowing from the asset, and the benefits to humans. Four thematic accounts are commonly developed: carbon, biodiversity, water, and land, with the valuation of stocks and flows accounted for in both physical and monetary terms. Multiple research institutions are applying this approach in Ireland through the Irish Natural Capital Accounting for Sustainable Ecosystems (INCASE) project, which is funded by the Environmental Protection Agency.Corporate natural capital accountingThe SEEA methodology translates at organisation level to the corporate natural capital accounting (CNCA) approach. The Natural Capital Coalition has developed the Natural Capital Protocol to offer companies a roadmap for implementing natural capital accounting, which is a useful initial resource for accountants interested in applying CNCA in their organisations. Natural capital accounting interacts with several other reporting frameworks, such as the Global Reporting Initiative (GRI) Guidelines and integrated reporting, and is also directly related to several UN Sustainable Development Goals (SDGs).In practice, corporate natural capital accounting requires the entity to set up accounts for assets, maintenance costs, and physical and monetary flow. A simple illustration of the process and the accounts required is shown by the assessment approach adopted by Northern Ireland Environment Link (see Figure 1). Two reporting statements are generated:The natural capital balance sheet, which presents the asset values and the related liabilities (i.e. the costs of maintaining the natural capital). The asset value must include both the value accruing to the organisation and the value for the rest of society in terms of ecosystem services.The statement of changes in natural assets, which reports the gain or loss in asset values in the reporting period. An example of the reporting statements is shown in Figure 2 and a comprehensive guide to CNCA, which includes these statements and examples of all the supporting accounts, is provided by the 2015 EFTEC et al. report cited in the figure. In Ireland, Bord na Móna, Coillte and Bord Iascaigh Mhara already apply this approach to accounting for their peatland, forest and marine assets.  Who should use natural capital accounting?The Natural Capital Coalition stress that their Protocol can be applied to any organisation in any industry, and it is recommended that all entities consider their impacts and dependencies on nature and integrate a nature-centred approach into decision-making. Adopting comprehensive natural capital accounting is typically most relevant in the categories summarised in Figure 3:Sectors that are directly dependent on and/or own large natural capital assets and have a direct impact on these assets (e.g. fossil fuels, forestry, farming, and fisheries).Sectors where raw materials in the supply chain are directly dependent on, and have a direct impact on, natural capital. For retailers in the food and beverage sector, for example, their supply chains are dependent on natural capital such as fresh water or healthy soil.Sectors that rely directly on infrastructure that requires significant land use and/or with significant impacts on natural capital (e.g. energy, transport, and communications).Sectors that are indirectly dependent on large infrastructure through their supply chains (e.g. the technology sector, which relies on energy-intensive data centres). Why use natural capital accounting?There is an increasing focus on accountability for environmental and social interactions in the supply chain, and natural capital accounting can help organisations understand where their impacts and dependencies lie. For example, luxury goods group Kering has used natural capital accounting to develop its environmental profit and loss (EP&L) account, which illustrates that 90% of the group’s environmental impact relates to its supply chain, largely through raw material production and processing.More nuanced cost-benefit analyses can also be supported by natural capital accounting. In the Netherlands, for example, analysis of peatlands converted for dairy farming revealed that due to the cost of maintaining the land, plus the cost of controlling carbon emissions and water levels, it was not cost-effective to continue to farm the lands. They will instead be converted back to natural ecosystems.Natural capital accounting completed thoroughly and transparently can support reputation management. However, it is important to ensure that information is communicated transparently and consistently to avoid the risk of ‘greenwashing’.Finally, natural capital accounting can help organisations manage nature-based risks such as supply chain disruption, scarcity of raw materials, and new regulatory requirements. The Task Force on Climate-related Financial Disclosures (TCFD) has developed a framework to support organisations in accounting and reporting on climate-related risks and plans to establish a similar task force on biodiversity-related risks.Table 1 illustrates how accountants can engage with natural capital accounting.Future directionsAs natural capital accounting develops, it is important to be cognisant of risks and critiques, and for researchers and practitioners to work to address them. As Kering’s EP&L reveals, many organisations will find that their nature-based impacts and risks are largely associated with the supply chain. To date, however, the potential for accounting and reporting on social and environmental issues at supply chain or sectoral level has not yet been fully explored. Inherent in natural capital accounting is a recognition of interconnectedness between ecosystems, species, and human (and business) activity. In this way, the natural capital approach of looking at impacts and dependencies can help us to link organisation-level activity to sectoral and supply chain activity and, ultimately, to global indicators such as planetary boundaries, including vital climate change and biodiversity targets.It is also crucial to be aware of the risks of instrumentalising nature by reconceptualising it solely as natural capital, rather than seeing it as intrinsically valuable. Financialising nature in this way can encourage the use of ‘trade-off’ arguments to justify environmentally and socially destructive activities, which also privilege some actors over others. For example, corporate natural capital accounting could be used to support a decision to harvest forestry in the Amazon, or kelp on the Irish coast, which privileges the company’s valuation of the natural capital asset over both the intrinsic value of the related ecosystem and the value it holds for local or indigenous communities. Natural capital accounting must be accompanied by a holistic approach to performance measurement and decision-making, characterised by community engagement, accountability and transparency. Accountants are encouraged to work with multiple actors in a participatory way as we develop new means of accounting to support a sustainable future.Dr Aideen O’Dochartaigh ACA is Assistant Professor in Accounting in  DCU Business School.

Brendan O’Hora reports on the findings of the 2020 All-Member Survey.For more than a decade, Chartered Accountants Ireland has surveyed its members every two years to track levels of satisfaction and identify their needs and perspectives. This summer’s survey was markedly different. Reflecting the challenging social and economic circumstances across the island and beyond, this survey focused on members’ experiences of COVID-19 and how members have been coping in their business and personal lives, while also recording views on the Institute’s performance in serving its members.The survey was conducted in June by independent research agency, Coyne Research, and built on other flash surveys undertaken in the wake of the lockdown. All members who had provided an email address to the Institute were invited to participate. Almost 1,900 members completed the survey, a 10% increase on the last survey in 2018. This is much appreciated as this level of participation helps us build a much more accurate picture of member experience.The survey was launched just a month before the publication of the Institute’s new strategy, Strategy24. Many issues of importance that emerged in members’ responses also resonate through our new strategy, reflecting the level of member contribution to the strategy development process.Impact of COVID-19 on membersMembership of Chartered Accountants Ireland means being part of a network of professionals, working in support of each other. Therefore, it is now vitally important that the Institute understands how members have been managing during the COVID-19 crisis so we can respond with new initiatives and services.The survey included several questions assessing the impact of the pandemic on every aspect of members’ lives, and members engaged openly and candidly with these questions.Economic uncertainty is evident in every part of the economy, and it is clear that our members are in no way inured. One in five members expect some changes to their current role because of the pandemic.WellbeingWhen questioned as to the impact of COVID-19 on various aspects of members’ daily lives, 40% responded that it had had a negative effect on their physical health. In contrast, one in three members claimed that the pandemic led to a positive impact on their physical health. More than half of members report that their mental health has been negatively impacted.Around half of all members report that COVID-19 has had a negative impact on their financial security, with members in practice more likely to agree with this statement.CA SupportAwareness of the Institute’s member support service, CA Support, stands at 80% with awareness higher among males and those aged over 40. Of the services provided by CA Support, respondents indicated that they were most interested in accessing support in the areas of mental health and resilience, retirement planning, and financial planning.Impact of COVID-19 on firmsThe survey asked members to compare the financial position of their business or practice before the start of the pandemic with the present day, and the contrast was stark. For members in business, 83% said that their organisations had been either stable or expanding before COVID-19, dropping sharply to 38% post-lockdown. For firms in practice, the contraction was more acute. 93% of members in practice considered their firms to be stable or growing at the start of the year, but 63% changed their description post-COVID-19 to being somewhat impacted or struggling.Over half of all members stated that returning staff safely to work is one of the top three challenges facing their business/organisation over the next 18 months. A higher proportion of members in practice were concerned with liquidity/cashflow (45%) as well as meeting spikes in demand (25%).Economic recoveryMembers were also asked to estimate the length of time before our economies return to 2019/early 2020 levels. The average answer was just under two years, subject to subsequent twists and turns in the public health crisis.Satisfaction with the InstituteLooking at Institute-related results, the standard benchmark questions on satisfaction and relevance were once again included. Satisfaction with membership of Chartered Accountants Ireland remains high and consistent with 2018, and there has been a 4% decrease in those claiming to be dissatisfied. Results were consistent across business and practice, though Republic of Ireland satisfaction levels surpassed their Northern Ireland equivalent.The perceived relevance of membership scored highly, and scores for lower relevance dropped by nearly 10%. More than two in five members said that membership represented good or very good value for money, similar to 2018.In terms of the relevance of communications received from the Institute, encouragingly two in three members described themselves as satisfied. This represents an increase of 24% since 2018, with those dissatisfied with how we communicate down significantly by -14%.Net promoter scoreThe net promoter score (NPS) is a widely recognised measure to assess members’ likelihood to recommend the qualification. This is an exacting metric, and even for brand leaders, NPS sometimes tends towards single-digit results. It was, therefore, encouraging to see the Institute’s NPS increase to +44%, an uptick of 3% since 2018, with over half of members regarded as promoters. NPS ratings from members in business shaded those in practice, while the Republic of Ireland figures slightly exceeded the Northern Ireland equivalent.Members servicesMembers were invited to rate a range of Institute services based on their experience and degree of satisfaction. Accountancy Ireland and our suite of electronic newsletters ranked most highly, but the standout results were for the new suite of webinars and online CPD, developed and launched to satisfy members’ professional training requirements during the lockdown. The new COVID-19 hub on the Institute’s website also received a strong reception from members.The 2020 All-Member Survey points to a profession that is coming to terms with the harshest economic and personal challenges in decades and is already planning for future recovery. Over recent months, teams across the Institute have responded rapidly to member needs with new online professional development platforms, consistently effective and targeted advocacy and representation on behalf of members, and enhanced communications and webinars.Chartered Accountants Ireland is of its members and for its members, so member satisfaction is the most critical measure of our performance. Member satisfaction remains consistent with 2018, and there is also a high level of satisfaction with communications to members. Our recently launched Strategy24 will help us grow these figures even further, with a strong focus on optimising member experience and further strengthening the relevance and reach of the Institute’s voice. While the overall research findings are very positive, specific challenges remain for individual segments of our membership, and these will receive a particular focus. The Leadership Team has begun to address some of the immediate issues, and we will work with the Members Board to bring these insights into the 2021 business plan and our implementation of Strategy24.Brendan O’Hora is Director, Members, at Chartered Accountants Ireland.

Enda Gunnell FCA had a successful career in corporate advisory but the entrepreneurial impulse was always there. When the opportunity to start his own company presented itself, he couldn’t turn it down, writes Barry McCall.There aren’t many successful companies based on a business model of selling less product to its customers, but that pretty much sums up the Pinergy strategy. Established in 2013 to provide electricity on a pay-as-you-go basis to budget-conscious households, Pinergy has evolved to become a purpose-driven business with a mission to help customers reduce their electricity consumption by providing them with ‘energy with insights’.Founder and CEO Enda Gunnell began his career as a Chartered Accountant with Mazars but entrepreneurship was probably always in his DNA. “My family had a shop and filling station on the outskirts of Roscrea,” he explains. “I was raised in a business environment and we all had to put our shoulders to the wheel to help out.”The varied and challenging life of a Chartered AccountantBut his pathway to accountancy was certainly not mapped out from an early age. “I was surprised when I was accepted for a place in UCD Commerce,” he says with a degree of self-deprecation. “I was the first member of my family to go to college. I got in because my matric maths mark got me a few extra points. When I went to UCD, I did work experience with a local accountant in Roscrea during the summers and other breaks. I gravitated towards the Chartered Accountancy route.”He says he got a bit fed up with the ‘milk round’ recruitment interviews but was still offered a training contract with Rawlinson Hunter which went on to become Mazars. “I stayed with them for 23 years and ended up working with the then-Managing Partner Joe Carr in the consulting team doing corporate advisory work. That was always my type of work; I enjoyed it more than audit. I really liked working with SME owner/managers. You get a chance to form a relationship with them. They might have 50 employees but no one to talk to.”He also worked on some major projects during the years, including a strategic review of the GAA and a review of Irish banks’ loan books for Blackrock which was working on behalf of the Troika at the time.Interesting though these projects were, they couldn’t really compare to an assignment in Lithuania on behalf of the World Bank. “It was just after the country had gained independence from the former Soviet Union. One night, I was approached in the office lobby in Vilnius by an armed man who asked me to value some uranium for him. His English wasn’t very good, and my Lithuanian was even worse, but I managed to say thanks but no thanks. When I think about that, I always remember something that Joe Carr said about the varied and challenging life of a Chartered Accountant.”The start of PinergyHe believes the entrepreneurial impulse was always there to one extent or another. “When I was working with owner/managers, helping them take their businesses to the next level, it was always in the back of my mind that I would like to do it myself. I was open to the opportunity for a long time, I just didn’t know what it was. I knew I wanted to get out of the dugout and onto the pitch and try it.”As often happens, the stars aligned to create the opportunity. “A set of circumstances came together,” says Gunnell. “The funding was available, the market conditions were right, and the idea was there. I figured someone would give me a job if it didn’t work out. I had come across the pay-as-you-go electricity space a few years previously and then met someone in the electricity market and another person interested in funding a start-up in the space. I put the three together. Everyone needs electricity; the country was on its knees. The regulator was telling electricity retailers that there must be a better way to provide the service. Pay-as-you-go already had 15% of the UK market but had almost no share here.“The technology was there in a box ready to roll out and we had the other elements in place. We weren’t reinventing the wheel. The technology and the model were already being used around the world. It was of its time, and we were introducing it in a recessionary market. It took a little while to get going. We had to do a lot of work before we could sell a single kilowatt. We had to integrate the technology with the existing market and systems. It’s a regulated industry so you can’t just do it your way.”The next stage was to go out and sell. “We got a sales team together. As an accountant, I liked the idea of variable costs. We had the sales team knocking on doors and we paid them if they made a sale. We didn’t have fixed overheads. We were rewarding success. Back then, we sold everything through the Payzone platform. I remember driving around Dublin going into shops buying Pinergy credit to make sure the platform worked. Our original plan didn’t have TV ads or brand ambassadors, but we had to do that in the end. We had to learn how to build a brand and I found myself on sets watching TV commercials being made. Today, Pinergy supplies businesses and homes with clean energy as well as insights to give clarity and knowledge to help them change how they use energy.”Creating a sustainable futurePinergy is now a purpose-driven brand. “I believe everyone has a role to play in creating our sustainable energy future,” says Gunnell. “The energy market in Ireland hasn’t really changed in years. The market has not been responding nearly enough. We realised five years ago that the whole industry was fixated on price. It was a bit conflicted in how it approached sustainability. The traditional business model in the retail space is getting paid for kilowatts used and wasted. There is no incentive to encourage customers to be more sustainable and reduce their consumption.”Pinergy was the first company in Ireland to use smart meters. “We showed that by using smart technology, consumers could reduce their electricity usage. We began to view the smart meter as an energy-saving device. Then we started looking at LED lights. They use 80% less electricity than incandescent bulbs, but they were very expensive back then. We knocked on people’s doors and offered to sell them at the wholesale price and use the smart meter to recoup the cost over the next two or three years.”While innovative offers like that won the company customers and admirers, it was all too easy for those customers to switch to another provider with a discount offer. “The regulator’s main mandate is to look after consumers. That makes it very easy to switch.”That saw the company evolve its strategy to look beyond domestic consumers. Initially, the focus was on apartment blocks to get the contracts to supply the common areas as well as gain access to residents. After that came the move into the commercial market. “We were in the electricity sales business, but we wanted to sell less electricity to individual customers. The way we see it, if we can partner with a new customer to save 30% or 40% of their electricity consumption that still means we are selling more electricity overall. When we moved into the commercial market, we realised SMEs could be paying 20% more for their electricity than a householder across the road. We took our smart meter technology and pricing model and sought to apply the same principles to the commercial market.”The energy with insight model gives customers the ability to analyse and understand how and where they use electricity in their business. “For example, a retailer with five branches gets the data from the smart meters on a single portal and they can compare and analyse the usage patterns in the different locations and get insights to help them reduce energy consumption. One of our customers owns a warehouse which closes at 6pm every day, but was still using half as much electricity in the evenings as it was in the daytime. They found that equipment was being left on and were able to make immediate savings.”Immediacy is the key. “Rather than wait for a bill two months after the event, we put real-time data in customers’ hands and give them the ability to take control of their consumption. After that, we can talk about other technologies like LED lighting, microgeneration and heat pumps and so on. Instead of selling a commodity, we want to create an advisory relationship-led business. It’s the same principle as when I was in practice, helping customers to meet their business objectives.”But competitive advantage is fleeting. “All of our electricity comes from renewable sources. This is now taken for granted by our customers,” says Gunnell. “That’s a lesson in business, the market keeps changing and customer expectations change, and you’ve got to keep taking it a step further or others catch up.”The impact of COVID-19The business is now strongly profitable. “We started with a single product in 2013 in an intensely competitive business. The ability to generate a return in the electricity space is all about gaining critical mass. We have installed around 60,000 smart meters around the country but have about 30,000 domestic customers now. The cost of customer acquisition is very high. 2018 was a turning point for us. Our financial performance in 2018 was a negative EBITDA of €3.3 million. Then we transitioned into the commercial space and in 2019 that changed to a positive EBITDA of almost €300,000. For this year, we were projecting €3 million before COVID-19.”While COVID-19 will have had an impact, the business will emerge from the year in a very good position. “We don’t want to supply everybody. Our only interest is in those who want to be more sustainable and efficient, and we will have a significant share in particular sectors.”The COVID-19 impact could have been quite severe though. “The government had said the lights would stay on,” Gunnell points out. “That meant electricity suppliers couldn’t cut people off. We were worried that people would be slow to pay their bills or wouldn’t pay them at all. The way the wholesale market is regulated, we would have had to pay for electricity even if it wasn’t used. Fortunately, that situation was addressed. Working capital was a concern for us but we had been approved for a loan under the government Credit Guarantee Scheme early in the crisis so that helped. Other government and Revenue schemes helped our working capital.”Despite the challenges, there have been positive aspects. “It’s been a really intensive period. We had to respond with quick decision-making and really good staff communications. I enjoyed it, to be honest. COVID-19 has changed how business will be done forever. We told people to continue to work from home if they wanted to after we reopened in June. Even when we do go back fully, 80% of our staff have said they would like to work from home one or two days a week and some of them would like to work from home all the time. We have to look at how we care for the welfare of our people. That will be much more challenging when we don’t have daily contact and those water cooler conversations.”For the immediate future, the company is introducing a number of new innovations for customers. These include Lifestyle, a billing offer for families which guarantees discounted energy prices at the times they use most.Another is a smart charging product for electric vehicles which will allow the vehicle to communicate with the grid and select the cheapest time to charge. “Ultimately, there will even be times when there is excess power on the grid when users will be paid to use electricity,” Gunnell adds.“Instead of ‘there’s a bill two months later and pay it or we’ll cut you off’, we want to change the nature of how consumers are treated and continue the journey towards a sustainable, carbon-free electricity future.”

Rachel Hussey asks whether gender quotas really do their job in bringing equality to the workforce and boards.Sometimes change needs help and, in the world of business, what gets measured gets done. So, like many advocates for change, I joined the debate as to the merits of gender quotas or targets as an effective means to address the lack of gender balance on boards and at senior decision-making tables. Quotas provoke strong responses, both in favour and against. Unlike most debates, however, we are all agreed on where we want to go, we just disagree on how to get there. There is a subtle difference between quotas and targets. Quotas are generally mandated by an external force, such as government or regulatory bodies, and they operate on a pass/fail basis with penalties for failure to reach the quota. Targets are voluntary in nature and are typically set internally by the business or industry. While there may be internal or external peer pressure to reach the target, lack of progress has less punitive consequences.There is a considerable amount of evidence that gender quotas for boards may not bring about systemic and sustainable changes. Quotas tend to drive short-term changes that are reversed once the quotas are lifted. For example, Norway introduced a 40% quota for boards of listed companies in 2006. The quota was reached by companies, but the side effects were counterproductive. A number of companies delisted before the legislation was introduced, thereby dodging the requirement. However, the biggest problem was that in the rush to meet the quotas, companies no longer focused on the pipeline of women in their businesses, which is the key to sustainable success. The Norwegians’ own studies show that eight years after the quota was introduced, there were no women CEOs in the country’s 60 largest companies. There was also no evidence of higher pay or more career-advancing opportunities for the vast majority of women in the workforce. Having more women at board level did little to benefit women. On the contrary, it failed to attract more women to climb the corporate ladder and it failed to open up more mid-career opportunities and better pay.By contrast, in the UK in 2011, Lord Davies set a target for FTSE 100 companies to have 25% women on their boards by 2015 (from a starting point of 12.5%). Lord Davies may have had the threat of quotas in his back pocket, but the target set was reached and exceeded. The percentage of women on the boards of FTSE 100 companies by the end of 2015 was 26.5%. Today, across the FTSE 350, the percentage of women on boards is 33%. In contrast to the quota approach in Norway, there was no reduction in the number of listed companies and no reductions in the numbers of women moving up the corporate ladder. The more recent Hampton-Alexander review has now extended the idea of targets to C-suite roles to drive similar progress at the top table.In Ireland, the 30% Club’s goal is that women should make up at least 30% of boards and senior management, and we believe that this should – and can – be achieved by voluntary means. We do not support the idea of quotas and, instead, our members drive accountability for their own progress through target-setting, leading to a greater focus on pipeline talent and more sustainable progress. In 2018, the government established Balance for Better Business, which has set targets for Irish companies. Its first target, 25% of women on the boards of Irish plcs, has been reached. Likewise, the government’s own target of 40% of women on State boards has resulted in a substantial increase in the percentage of women on those boards.And finally, there’s still the question of targets versus merit. For me, there no debate on this question. Targets focus on greater diversity in appointments, but never at the expense of the potential to do the job. It is easy to dislike the idea of others being selected solely on the basis of their status, and if merit-based criteria are not emphasised, people assume that they are non-existent. This is both unfair to appointees and to the wider employee population. It is our job as leaders to show that targets and merit are inextricably linked and there is no place for the perception or reality of a free pass.Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

Cormac Lucey explains why, after decades of deflation, we could be on the cusp of a financial regime change.Falling interest rates have been the constant backdrop to my adult financial life. In late 1981, US 10-year government bonds yielded an annual return in excess of 15%. Since March this year, they have been yielding less than 1%. UK and Irish bond yields have followed suit, with gilts now yielding less than a third of 1% and Irish Government bonds offering a negative yield meaning you must pay for the privilege of lending to Micheál Martin, Leo Varadkar, Eamon Ryan et al. This development was not some mere technical development on arid financial markets. They have propelled property prices upwards – as a given rental stream is worth an even-greater capital sum if its cost of capital keeps falling. The same logic has pushed equity values higher and higher. The US stock market’s cyclically adjusted price-earnings ratio now exceeds 30. That level was only previously seen in the years around the tech bubble peak of 2000.I fear that we are now on the cusp of financial regime change. A recent study by Man Group, a London-based investment management firm, contends that prevailing economic regimes “reach their apotheosis, and then change, when the extreme conditions they have created lead to permanent policy change”. It then predicts that current extremes in deflation, inequality, debt levels and globalisation may lead to four major transitions in the next decade.There will be a switch in policy emphasis from monetary to fiscal. With central bank interest rates already at or about zero, there is little scope for further reductions as negative interest rates would only further weaken the commercial banking system without yielding generation of significant economic stimulus.The owners of capital have pocketed huge gains over the last four decades while the share of national income going to labour has steadily decreased. As inequality here in Ireland may have diminished over that time, it has increased in other states, especially in the US. That has helped breed seething political discontent. One way to abate that agitation is for politicians to favour labour over capital, the second big transition that Man Group predicts. The third shift that the report expects is one from globalisation to localisation. It has passed by almost unnoticed, but global trade as a percentage of global output peaked back in 2007/2008. Superimpose that on a trade war between the US and China, trade blocs seeking self-sufficiency in personal protective equipment and a scramble to pre-purchase possible COVID-19 vaccines and you can see why this prediction is already unfolding before us. The final prediction is a consequence of the others: it is a move from deflation (or, strictly speaking, disinflation) to inflation. According to the Institute of International Monetary Research, broad money has grown by 26.7% in the US over the last 12 months, a record in the US’s modern peacetime history. That is an international outlier, but strong money growth has also been evident in India (12.1% growth over the last 12 months), China (11.4%), the UK (11.3%) and the euro area (+8.9%). Nominal national output closely tracks broad money. Real national output has been hit by the pandemic and the consequent recession. Fast-growing nominal income combined with slow-growing real income suggests a noticeable (above 4%) rebound in inflation in 2021 and 2022.If Man Group’s four predictions come true – and I think that there’s a very good chance that they will – it will represent a complete regime change for financial markets compared to what has prevailed over the last four decades. Get ready. Cormac Lucey FCA is an economic commentator and lecturer at Chartered Accountants Ireland.

Des Peelo explains the one pertinent question business leaders should ask before making any major decision.Better information means better decisions, which, in turn, means better outcomes. The critical point here is that understanding what the information is, and what it is not, makes for a more informed decision.Concerning major decisions, what is the most dangerous word in the vocabulary of politics, economics, or business? Most people would say ‘risk’, meaning that the result could go wrong, have a poor outcome, and/or have an unexpected adverse effect.Major decisions arise in many circumstances. Directors consider a significant business acquisition or seek to confront a crisis; a politician is pressed on a problematic public issue; an economist is asked to advise on substantial infrastructure spending. All involve risk. The human instinct is to avoid risk or at least minimise it.There is a more dangerous word than ‘risk’, however. That word is ‘assumption’. I have witnessed several difficult circumstances or court hearings where the evidence, written or verbal, involved statements like “I assumed…” or “the assumption was…” In other words, something has gone wrong in using an assumption. As Albert Einstein said: “Assumptions are made, and most assumptions are wrong”.Assumptions are higher up in the decision-making tree than risk. In fact, assumptions create risk. Decisions are made to create an outcome in the future. That purpose, by definition, means making assumptions as to the components necessary to make that decision. An understanding and assessment of risk, therefore, means evaluating the validity of the assumptions.There can be a pyramid of underlying assumptions in a situation. Take, for example, the view that investment in an improved rail network is a ‘given’ good idea (an assumption in itself). Assessing the viability of such an investment necessarily involves assumptions as to passenger volumes, fare prices, capital costs, timescale to completion, availability of finance, and so on. It is instructive to witness the debates about the development of public transport around Dublin, such as an underground rail service and airport link. On differing assumptions, any such capital expenditure can be justified or debunked.Assumptions are not facts, though often presented as such. Indeed, most assumptions are reasonably benign and have a historical comparison or rational basis. But assumptions are made by people and often reflect perceptions, prejudices, and biases. They are seen as valid if they conform to already held views or experiences.Even further back in the assumption analyses are demographics (i.e. the breakdown of the population as to age, location, birth rates, and so on). Almost any significant political or economic decision necessitates knowing and understanding the influence of underlying demographics. The three phases of life – education, work, and retirement – have evolving characteristics and interpretations. Statistics are endless and often challenging to interpret as to trends and reasons why, yet they likely influence significant decisions.Back to the decisions. An insistence on knowing and understanding the key assumptions is the obligation of those tasked with making decisions. For instance, the avoidance of subsequent large cost overruns in capital projects can only be addressed through a prior rigorous assessment of the underlying timescales, cost estimates, comparisons with similar projects and, most critically, a testing of the individuals and/or firms on their capabilities in making the assumptions.The history of major business acquisitions is littered with casualties. The cause is often later identified as being a lack of informed reasoning in making the acquisition in the first place, the underlying assumption being that it must be a good idea because the advisers said so.The pertinent question to ask before a major decision is, therefore: please list in order of importance or risk the top ten specific assumptions in making the project/circumstance work. But remember: vague assumptions (such as a “buoyant economy” or “no change in interest rates”) do not count as specific assumptions.

Annette Hughes discusses the root causes of Ireland’s housing affordability and supply problems, and the possible solutions.Successive governments have had housing and the restoration of a properly functioning housing market as a priority for many years. Despite numerous initiatives, policies, and reports highlighting the persistent problems in the market, EY-DKM’s new report, Putting Affordability at the Heart of the Housing System, has found that the issues are many and complex and there is no single, quick fix.The report, which was prepared for the Irish Home Builders Association (IHBA), highlights the structural defects in the market that have led to rented accommodation costing more per month than a mortgage. Our analysis also shows that there is a significant affordability gap for first-time buyers (FTBs), as their income is insufficient to purchase the median FTB property in 13 mainly urban areas out of 34 areas examined.The report also finds that the deposit required is a significant barrier to homeownership. The average deposit paid by FTBs is 14% of the property price, with many getting support from parents. The cost of the average deposit varied widely, however, as did the time taken for first-time buyers to save it. Saving periods ranged from nearly two years in Kilkenny to more than 15 years in Galway City, Wicklow, Waterford City, Cork City and Dublin City due to differences in income, expenditure, and house prices.36,000 new homes are required each year over the next 21 years to meet housing demand in Ireland but this is unattainable if urgent action is not taken to address affordability issues.A series of measures could reduce the delivery cost of residential development. These include direct financial supports for FTBs, a root and branch reform of the planning system, waiving development levies, accelerating the servicing of zoned lands, actions to address the cost of funding for builders, a full assessment of the impact of new regulations, and the introduction of tax incentives to stimulate development in key locations.The increased tax relief for the ‘Help to Buy’ scheme announced in the July Stimulus should be extended to 2025 and a State-backed shared equity scheme for affordable units on private lands, supported by a Government-funded equity loan of 25-30% of the price, should be introduced.The State takes an estimated 20% of the average delivery cost of a new home. The report, therefore, suggests that consideration should be given to reducing this component for FTBs.A key recommendation is restructuring the planning process to enable, where appropriate, outline planning permission to be obtained early in the process. This would reduce the time frame for delivery, which could, in turn, reduce the cost of financing. The cost and availability of development finance are also covered, with the suggestion that Home Building Finance Ireland (HBFI) should consider accessing EU loans to provide funds at more competitive rates.The quality of new homes in Ireland is much higher than in the past, reflecting new regulations and higher building standards – all of which have a cost. Estimates suggest that these policy-imposed costs account for around 20% of the total delivery cost of a new home. The report recommends that any new regulations under consideration should be carefully evaluated against their impact on the viability of residential construction and subject to a cost-benefit analysis.Under tax considerations, the Government is urged to consider expanding the scope and duration of tax relief available under the Living City Initiative to include newly constructed apartments in designated urban areas to provide a buy-side incentive to encourage their construction.This report is intended to support the Government in achieving the stated objective of putting housing affordability and homeownership at the heart of the housing system. The solutions, while varied, need not be complicated. The early adoption and implementation of even a small number of the recommendations could make an almost immediate difference to many homebuyers and developers, and set Ireland on the road to meeting its housing requirements for the next two decades and beyond.Annette Hughes is Director at EY-DKM Economic Advisory.

Economists may have a plethora of letter-named predictions for the post-pandemic recovery, but Chartered Accountants are depending on a ‘B-shaped’ comeback. Dr Brian Keegan thinks we need to look to Brexit and the US general election for any real answers.Professions are notorious for using jargon, and different professions have preferred styles for their jargon. Doctors tend to abbreviate the ailments they treat, like the “flu”. Accountants tend to prefer acronyms such as IAASA, IFRS and FRC. Economists, on the other hand, use labels, often with reference to the chief protagonist within the economic phenomenon, hence “Laffer curve”, “Keynesianism” and, even at a stretch, “Pope’s children”.Creeping into the commentary at present is an alphabet soup of labels to describe the nature of the post-pandemic recovery. At the outset, we all hoped for a “V-shaped” recovery, denoting a rapid fall-off in activity matched by an equally rapid recovery. Then, more creative economic types, possibly channelling medical concerns over a second surge of the pandemic, started talking about a “W-shaped” recovery. This way, things will start to get better, lapse again and then recover more fully. The latest commentary talks about a “K-shaped” recovery, whereby some sectors of the economy will recover quite quickly, but others will continue to decline. However, judging from our most recent members survey, there is an expectation among Chartered Accountants of what could be termed a “B shaped” recovery, whereby over time most sectors will loop back to their level of activity post-pandemic. Almost all of our respondents thought that business activity would eventually get back to something resembling pre-COVID-19 days. The main area of disagreement was the amount of time this might take, with our members in the Republic of Ireland expecting a quicker recovery than our members in Northern Ireland. The expected difference in recovery time between the north and south of the island is borne out by the ultimate truth serum of economic status, which is the analysis of tax receipts published each month. Counting money will always give a more accurate picture than counting questionnaire responses. Not only that, because of the recurring nature of tax payments, it is possible to trace a coherent and reliable set of comparisons. Tax receipts in Ireland overall have remained remarkably stable, despite the impact of the pandemic. Yet, tax receipts in the UK are showing a serious decline year-on-year. One reason for the difference is down to timing. Ireland counts tax receipts from 1 January; the UK from 6 April by which time, of course, the pandemic was in full surge. However, the differing financial years do not fully explain the disparity. Consumption has fallen in both countries, as evidenced primarily by VAT receipts, but production, as evidenced by income tax and corporation tax receipts, has not shown the same decline in Ireland as in the UK.Resilience in production over consumption could prove to be critical in the coming months since coronavirus is only the first international crisis of 2020. Despite the behaviour of the respective governments, we are all paying too little attention to the impact the end of the UK’s transition period with the EU in December will have on Irish business. There is also insufficient attention being paid to the economic policies of the two main contenders in the US presidential election, nor much being discussed on how the outcome of that election could shape US trade, international corporation tax policy and foreign direct investment because of the focus on the country’s civil discord.The recovery prospects on the island of Ireland will indeed be B-shaped in 2021, but not because of the shape of the economic trajectory. Think instead about the impact of Brexit, and whether or not there is a Biden presidency. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

When I failed SFMA and Financial Reporting, it felt like an unexpected break-up. I hadn’t anticipated failing. All that time invested in study and now I had to start all over again!Work smarter, not harderBut that’s just it- you’ve already put in the hard work and laid the foundation. You are not starting from scratch. This time round it’s about working smarter, not harder. Use your time and energy wisely.Take a few days for yourself if you need to. It is a form of loss and can be a very lonely time. Talk things through with supportive people, indulge in some self-care and do things that make you happy.I remember the Partner in my Department calling me at the time and encouraging me to “get back up on the horse!”. That’s what I did and know that you can, too.Ways to get back on trackCapitalise on the time and energy you’ve already invested studying by preparing for the repeat in the following ways:Boost your confidence. It’s helpful to write down all of your achievements to date, as far back as you can remember. Look at them- aren’t you proud? Reflect on your study routine and exam technique. Be honest with yourself:-What do you need to do more of? What do you need to do less of?-What should you do differently?-What can you start doing?-What must you stop doing altogether?  You know best! What resources are available to help you?You are not on your own with this challenge. Utilise the resources available to you, which include:-          Role models- Senior colleagues may surprise you by sharing their stories of failure with you. When I realised that others ahead of me had failed, I felt less alone and also realised that I could still advance in my career even after this set-back. You can learn from others how they achieved success when it seemed impossible. -          Additional classes and grinds-Taking additional classes run by Chartered Accountants Ireland was really valuable. A group of us who were repeating also arranged a day of grinds which was very beneficial. -          Help from colleagues and peers- Reach out to people who have sat exams recently. I received a great deal of support from colleagues the year ahead of me when I struggled with past paper questions. Don’t be afraid to ask for help and advice. Most people will be happy to assist, as they’ve been there too! You might also arrange calls and study sessions with others who are repeating where you can share thoughts. -          CA support- CA Support are here to assist you and can be contacted on email at casupport@charteredaccountants.ie or on 01 637 7342 or 086 024 3294.  There are also other video supports and articles available on our site.  Ease back into study by reading relevant articles that make the subject come to life for you and keep it interesting. Make it an activity that you enjoy and build your confidence back up this way! While the process is still fresh in your mind, going through as many sample questions and past papers as you can may be easier than immediately going back to the text books.  Take time for you every day. Your well-being is more important than anything else, so do something that you love daily. Prioritise yourself and make sure that you eat well, get enough exercise, fresh air and rest. It sounds simple, but it’s easy to have tunnel vision when in study-mode.And finally…This experience is a tough one to go through. It might feel very unfair, stressful and worrying. Please know that even if it doesn’t seem like it right now, it will all come together in the end and although it sounds cliché, you will be stronger. You may become a future specialist in an area because of the additional time you’ve had to spend studying it! Opportunities can come from the most surprising places. As you continue your studies, celebrate the results that you have already achieved in your life!By Charlotte Keating. Charlotte is a Chartered Accountant and the founder of Act On It Coaching, www.actonitcoaching.comCA Support is here to support our students, members, and their families. Contact the CA Support team on mobile: (353) 86 024 3294 or email:  casupport@charteredaccountants.ie